The State Revenue Homebuyer Fund and What’s in it for You?

Conveyancing

Aug 9

The Victorian Homebuyer Fund (VHF) creates an opportunity to get into the housing market by sharing equity in the property with the Victorian Government. Equity is simply another way of labelling the ownership share in the property. By entering into this scheme, you will need to view your home buying journey with a different mindset. In effect you are purchasing a portion of your property now and purchasing the rest of it later from the Government.

Is it relevant to you?

The VHF comes with a host of eligibility criteria to determine if this scheme applies to you. You will need to meet all of the criteria in order for you to be able to successfully apply. Some of this eligibility criteria includes:

You will be required to live in the property as your principal place of residence following settlement;
You cannot own property in Australia or overseas;
Your gross individual annual income must be $130,485 or less or, if you are applying jointly then, all applicant’s gross annual income must be collectively $208,775 or less;
Depending on where you are purchasing the property the value of the property at the time of purchase will need to be less than a given amount; and
More which can be found at: https://www.sro.vic.gov.au/homebuyer/am-i-eligible-homebuyer-fund#1

What you need to know before you consider “buying in” to the property market

Following the settlement of your property purchase:

You will jointly own the property with the Government;
You will need to annually complete a review with the Victorian Government to retain your eligibility;
Hardwired into the scheme are a number of different potential events which may require you to begin to payout the Government’s share in the property earlier than you may wish;
As the property value changes, the amount you will be required to pay to the Government will increase or decrease;
If the property gets sold you get paid out last; and
More which can be found at: https://www.sro.vic.gov.au/your-ongoing-obligations

What’s in it for you?

The short answer is that you can buy a property now and not later. If the property you want to buy is likely to go up in value, then potentially you are now able to purchase a property which down the road may be unaffordable to you. Or, maybe it’s simply your dream property which is up for sale and this is your one chance to jump in and make an offer. Once it’s all said and done you will stop paying rent and you will start paying off your property.

The main difficulty first home buyers typically face is the capacity to save their deposit towards their new home which can delay how long it takes to purchase their first property for years. Through this scheme you can purchase property now, without paying Lender’s Mortgage Insurance (LMI) instead of waiting until you have a larger deposit. In essence LMI is something you pay for, to insure the bank, in case you can’t repay your loan and it can be quite expensive.

At the end of the day

This is not a one-size-fits-all scheme. There are benefits to the VHF but there are serious restrictions which will continue to affect the way you want to live well passed the date of Settlement. We recommend that you have a chat with your preferred broker to find out all of your options from a financial perspective and then reach out to us to discuss the rest.