Homebuyers Fund
With house prices soaring, saving the standard 20% deposit has become increasingly difficult for many hoping to enter the property market. However, light might be at the end of the tunnel.
If you live in Victoria, you may be able to receive up to 25%* of the purchase price from the Victorian Homebuyers Funds. This means that you can potentially buy a house with a 5% deposit without paying lenders mortgage insurance.
What’s the catch?
As you may have suspected, this isn’t a “free lunch”. It has been described as an equity share scheme which means that in exchange for the contribution, the Homebuyers Fund (the state government) will have a proportional interest in your new home. In simple terms, for the 25% contribution, the Homebuyers Fund will own 25% of your home.
As your property increases in value over time, the value of the Homebuyers Fund’s share will increase proportionally.
The scheme is still worth looking into if you have been finding it difficult to get into the property market. It enables those who have been unable to save the deposit to access the required funds.
Example – Purchase price $800,000
Deposit (5%) $40,000
Homebuyers Fund (25%) $200,000
Loan (70%) $560,000
Currently, only two lenders are participating in the scheme – Bendigo Bank and Bank Australia. Therefore your loan for the 70% portion of your purchase must be approved by one of these lenders.
The Homebuyers Fund can be repaid over time using your savings, refinancing or when the property is sold. You will also need to start repaying the Homebuyers Fund once your income exceeds the relevant thresholds.
Who is eligible?
This scheme is only available to Australian citizens or permanent residents over the age of 18.
Other eligibility criteria include:
- A minimum deposit of 5%*
- Gross income of $125,000 or less (or $200,000 or less if a couple)
- Occupying the property as your principal place of residence i.e. you cannot rent it out
- Purchasing in your own name i.e. not in a company or trust
- Purchasing the property from an unrelated vendor i.e. you cannot buy from a family member
- Not having any other interest in land at the time of the purchase (including as trustee or beneficiary of a trust)
- Not be acting as trustee of trust
- Not be a shareholder in any private company that owns land
Use this Tool to work out whether you are eligible.
What type of property can I buy?
You can buy any standard residential property eg. house, townhouse, unit up to a maximum price:
- Melbourne and Geelong – up to $950,000
- Regional Victoria – up to $600,000
Check out the eligible locations.
Note that vacant land is not eligible under this scheme.
What are the other rules and restrictions?
As the Homebuyers Fund is effectively a co-owner of your property, other obligations will be imposed on you such as an annual review. You will be required to keep your property insured, to maintain it in good working order and to pay all outgoings on time (utilities, mortgage repayments etc) and may require approval for renovations orre-financing. Compliance with all your obligations as participant of the scheme will be verified at the annual reviews.
For full details on how the scheme works including case studies and conditions, refer to Victorian Homebuyers Fund at the State Revenue Office’s website.
* Different rates apply if you are Aboriginal or Torres Strait Islander
