Unlocking homeownership with the Victorian Homebuyer Fund
The Victorian Homebuyer Fund: it’s a game-changer in the world of homeownership. This innovative program is set to empower thousands of Victorians to realise their dream of owning a home. If you’re eager to step into the realm of homeownership but facing the challenge of a limited deposit, the Victorian Homebuyer Fund could be your answer.
In this comprehensive guide, we’ll dive into the details of the Victorian Homebuyer Fund, explore who’s eligible, discuss property price caps, and shed light on your ongoing obligations once you become a participant in this scheme.
What is the Victorian Homebuyer Fund?
The Victorian Homebuyer Fund is a shared equity scheme, tailor-made to make homeownership more accessible for Victorians. The fundamental principle is simple yet powerful: if you have a 5% deposit, the Victorian Government could contribute up to 25% of the purchase price in exchange for an equivalent share in your property. This strategic move can result in substantial savings by reducing your mortgage burden and eliminating the need for costly lenders mortgage insurance.
Moreover, the Victorian Homebuyer Fund extends its support to Aboriginal and Torres Strait Islander participants, requiring only a 3.5% deposit while offering an impressive 35% shared equity contribution.
Your path to homeownership: eligibility criteria
To embark on your homeownership journey with the Victorian Homebuyer Fund, you need to meet specific eligibility criteria, which include:
- Citizenship or residency: You must be an Australian or New Zealand citizen or a permanent Australian resident.
- Age requirement: At the time of settlement, you should be at least 18 years old.
- Minimum deposit: You must have saved a minimum deposit, which is 5% of your property price, or 3.5% if you’re an Aboriginal or Torres Strait Islander participant.
- Income limits: Your gross annual income should not exceed $130,485 for individuals or $208,775 for joint applicants.
- Principal place of residence: You must intend to occupy the purchased property as your principal place of residence.
- Natural person: The scheme is open to natural persons, meaning it’s not applicable to organisations, companies, trusts, or other entities.
- No related-person vendor: You cannot purchase your property from a vendor who is a related person.
- No existing land ownership: At the time of purchase, you should not own any interest in land in Australia or overseas, including as a trustee or beneficiary under a trust.
- Shareholder status: You cannot be a shareholder in any corporation (except a public company) that owns land in Australia or overseas.
- Approved loan: You must secure an approved loan from a participating lender and have sufficient funds to cover all acquisition costs associated with the purchase.
These eligibility criteria are paramount and must be met in their entirety.
Property price caps and locations
One of the remarkable aspects of the Victorian Homebuyer Fund is its flexibility regarding property location. You have the freedom to choose an eligible property in any location across Victoria. However, certain conditions apply:
- Property types: The property must be a standard residential property, including houses, townhouses, units, or apartments (vacant land is not eligible).
- Purchase price limits: The maximum purchase price should be $950,000 or less if you’re in Metropolitan Melbourne or Geelong. In regional Victoria, it should not exceed $600,000.
- Off-the-plan limitation: Off-the-plan property purchases are not eligible. The property must either be an existing property or a new property with a certificate of occupancy issued before the contract of sale date.
- Property status: The property must be either vacant at the time of purchase or under a lease with the lease set to expire within 12 months of the acquisition date, and any tenants must vacate the property.
Your ongoing obligations
- Annual review: Each year following your home purchase, you’ll need to complete an annual review. During this process, you’ll provide supporting information to ensure you continue to meet the scheme’s eligibility criteria. This may include submitting a certificate of currency of insurance and other documents like payslips, tax returns, home loan statements and utility bills.
- Insurance: You’re required to maintain insurance coverage for your property, providing a certificate of currency during each annual review.
- Property maintenance: Keeping up with property payments, such as council rates, utilities, body corporate fees, stamp duty, and home loan repayments, is vital. It’s also your responsibility to maintain the property, ensuring it remains in good working order, and addressing any defects.
- Modifications and renovations: Seek approval before making any modifications or renovations that exceed $10,000 or involve structural changes or require authorisations, such as council approval.
- Refinancing and property sale: Approval is necessary if you plan to refinance your property, sell it, or make voluntary payments that would result in exiting the Victorian Homebuyer Fund within the first two years.
Repayments to the Victorian Homebuyer Fund come into play under specific circumstances:
- When your gross annual income surpasses the applicable threshold for two consecutive annual review reporting dates.
- When you receive a windfall gain, such as an inheritance or a lotto win of $10,000 or more.
- When you’ve made a mandatory payment, and your gross annual income increases by 10% or more by the next reporting date,
- When you are approved by your lender to increase your home loan. This loan increase should enable you to make a payment to reduce the Victorian Homebuyer Fund’s share by at least 5 percentage points (e.g., from 25% to 20%), and it must amount to at least $10,000.
Voluntary (extra) repayments can be made, provided each repayment reduces the Victorian Homebuyer Fund’s share in your property by at least 5 percentage points and amounts to at least $10,000. Gaining approval from the Victorian Homebuyer Fund team is necessary if you wish to pay back the full amount within the first two years or reduce the State’s equity below 5 percentage points in the same period.
Property sale proceeds
In the event of selling your property, the distribution of funds follows a specific order:
- First, your bank receives the proceeds to pay off your remaining home loan.
- Second, the Victorian Homebuyer Fund reclaims its share in your property.
- Any remaining funds are then distributed to other entities with a legal or equitable interest in the property, such as council rates.
- The remaining balance, if any, goes to you.
How to apply?
Before taking the plunge into the Victorian Homebuyer Fund, here are the steps you should follow:
- Check eligibility: Begin by confirming your eligibility and ensuring the property location aligns with the list of eligible areas where you can purchase a property.
- Gather documentation: Prepare the necessary documentation required for a home loan application. This may include payslips, bank statements, tax returns, and other relevant financial documents.
- Consult a participating lender: Speak to a participating lender to discuss your eligibility and explore your home loan options.
The Victorian Homebuyer Fund is administered by the State Revenue Office, and all information shared with participating lenders is managed in strict accordance with privacy policies.
The Victorian Homebuyer Fund is not just a scheme; it’s a beacon of hope for aspiring homeowners in Victoria. It offers a unique opportunity to step onto the property ladder, even with a limited deposit. By understanding the eligibility criteria, property price caps, and ongoing obligations, you can embark on your homeownership journey with confidence.
If you’re ready to turn your dream of homeownership into a reality, the Victorian Homebuyer Fund is here to support you every step of the way.
We are a team of experienced property lawyers who can help you understand the implications of all aspect of property transactions in Victoria. Contact our team on (03) 8590 8370 to obtain legal advice from our expert property lawyers and conveyancers. We are an online property law and conveyancing firm that can assist when buying or selling property.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.