At Abode Advocacy Group, we understand that buying a home, especially in today’s market, can be a challenging goal for many Victorians. For first-time buyers, saving for a deposit is often one of the biggest hurdles. That’s where the Victorian Homebuyer Fund comes in as a game-changer. Launched in October 2021, this shared equity scheme by the Victorian Government is designed to help aspiring homeowners get into the property market with a lower deposit and the government as a co-investor.
Here’s a detailed look at the Victorian Homebuyer Fund, how it works, and who it’s designed to help.
What is the Victorian Homebuyer Fund?
The Victorian Homebuyer Fund (VHF) is a $500 million shared equity program created to assist eligible Victorian homebuyers in purchasing a home sooner. With the Victorian Government contributing up to 25% of the purchase price as an equity partner, buyers can potentially access the property market with just a 5% deposit. This initiative is particularly valuable for people who might otherwise be priced out due to high deposit requirements.
The Fund’s aim is to reduce the financial barrier to home ownership by reducing the loan size required by buyers, lowering the amount they need to save, and, in some cases, helping them avoid lenders mortgage insurance (LMI).
How Does the Victorian Homebuyer Fund Work?
Under the VHF, eligible homebuyers partner with the government as a co-investor in their property. Here’s a breakdown of how it works:
- Government Equity Contribution: The Victorian Government contributes up to 25% of the property purchase price. This amount is in addition to the buyer’s 5% deposit, which significantly reduces the loan size required from a lender.
- Shared Ownership: As a shared equity scheme, the government essentially owns a portion of the property. For most buyers, this equity stake is 25%, but for Aboriginal and Torres Strait Islander participants, the government’s contribution can be up to 35%.
- No Lenders Mortgage Insurance (LMI): With the government as a co-investor, buyers can avoid LMI, which is usually required when borrowers have less than a 20% deposit. This can save buyers thousands of dollars.
- Repurchasing the Equity: Over time, homeowners have the option to “buy out” the government’s share in the property. There’s no set timeframe for repurchasing the government’s stake, so homeowners can do so gradually as their financial situation improves or as they see fit.
- Eligibility and Location Limits: The scheme has specific eligibility requirements (such as income limits and residency status) and applies to properties within certain price caps, varying depending on the location.
Eligibility Criteria for the Victorian Homebuyer Fund
To qualify for the VHF, applicants must meet several criteria, including:
- Residency: Applicants must be Australian citizens or permanent residents and intend to live in the property as their primary residence.
- Income Limits: Individual applicants must earn less than $125,000 per year, while joint applicants (such as couples) must earn less than $200,000 per year.
- Property Price Caps: The program is only applicable to properties within certain price limits, which vary by region. For example, higher price caps apply to Melbourne and certain regional centers, while lower caps are in place for other areas.
- Loan and Deposit Requirements: Buyers need to contribute a minimum 5% deposit and secure financing for the remaining amount, typically through a participating lender.
Benefits of the Victorian Homebuyer Fund
The VHF offers several key advantages for first-time homebuyers:
- Lower Deposit Requirement: By requiring just a 5% deposit and adding government support, the VHF reduces the financial burden for many buyers, helping them enter the market sooner.
- Reduced Loan Size: With the government covering up to 25% of the purchase price, buyers need to borrow less from lenders, which can mean lower monthly repayments and increased affordability.
- No Lenders Mortgage Insurance (LMI): Avoiding LMI can save buyers thousands of dollars, making home ownership more achievable.
- Flexible Equity Repurchase: Buyers aren’t pressured to buy out the government’s share by any specific deadline, allowing them to repurchase the equity when it makes the most sense financially.
Things to Consider
While the VHF can be highly beneficial, there are a few things buyers should keep in mind:
- Shared Ownership: Homebuyers must remember that the property is partly government-owned until they repurchase the equity share. This means that if they sell before buying out the government’s share, the government will receive its portion based on the property’s current value.
- Eligibility and Price Caps: The program’s strict eligibility criteria and price caps mean that not all properties will qualify, and not all buyers will be eligible.
- Equity Repurchase: While the timing is flexible, homebuyers should consider their long-term plans for repurchasing the government’s share. Owning 100% of the property ultimately provides more financial freedom and flexibility.
How We Can Help at Abode Advocacy Group
At Abode Advocacy Group, we’re here to support our clients through every step of the home-buying journey. For those considering the Victorian Homebuyer Fund, we can help:
- Understanding Eligibility and Process: We guide you through the eligibility requirements and application process, making it easier to understand what’s needed and how the VHF can work for you.
- Property Search and Selection: We assist in finding properties that not only meet your needs but also qualify for the VHF. With our in-depth knowledge of Melbourne’s property market, we help clients find homes in areas with strong amenities, transport links, and long-term growth potential.
- Negotiation and Purchase Support: Once you find the right property, we support you through negotiations, securing the best price, and finalizing the purchase.
The Victorian Homebuyer Fund represents an excellent opportunity for eligible buyers looking to break into the market sooner and reduce the financial stress of high deposit requirements.
If you’re interested in learning more about how the VHF could help you, reach out to us at Abode Advocacy Group. We’re here to provide expert guidance and make your journey to home ownership as smooth as possible.
