Victoria’s state government unveiled its Victorian Homebuyer Fund (VHF), a new program that will help more buyers enter the market.

The scheme is based on a share equity arrangement. In exchange for equal equity, the state will assume 25% of the purchase price for the home loan.

The $500m program, which expands the HomesVic Shared Equity Initiative to assist more Victorians, will offer greater eligibility and help them reach their full potential.

Eligible borrowers need only a minimum of 5% deposit to purchase their property. They will not have to pay Lenders Mortgage Insurance.

Tim Pallas, the State Treasurer, said that this new initiative would assist many Victorian home buyers in reducing the time it takes to save money for a deposit.

“This will make it easier to secure your own home and we’re proud to play our part in helping Victorians realise this dream — because there’s no place like home and we want every Victorian to know that feeling,” he said.

Eligibility requirements for VHF

Victorian homebuyers must meet these criteria to be eligible for the scheme.

  • They must be an Australian citizen, permanent resident, and at least 18 years of age.
  • For the home loan deposit, they should have saved at most 5% of the price of the property. The minimum deposit required for eligible Aboriginal and Torres Strait Islander homeowners is 3.5%
  • The annual gross income of applicants must not exceed $125,000 in the case of individuals, and $200,000 for couples.
  • They should make it their main residence.

The scheme also established rules regarding the nature of property purchases.

  • Home buyers cannot purchase property through an organization, a company or trust.
  • They are not allowed to transact business with vendors they are related to.
  • They are not allowed to own any interest in any land they purchase at the time, even as trustees of trusts or beneficiaries under trusts.
  • They shouldn’t be shareholders in any other corporation than a public one that owns land.

Eligible properties

Property in metropolitan Melbourne, Geelong or other eligible regions are eligible.

The state government has been taken out eligible metropolitan and regional locationsYarraville, Melbourne, Seymour and Warrnambool are all part of the.

The scheme allows for the purchase of existing or new properties like houses, townhouses, or units. This scheme is not available for vacant land.

The maximum property price is $950,000 in metropolitan Melbourne and Geelong and $600,000. In other regions, the limit is $600,000.

It is important that properties are vacant at the time of purchase. Lease agreements that were signed within 12 months must be canceled.

Buyers of homes must have a certificate proving their occupancy before the date of the contract.

Transactions outside of the plan are not eligible for VHF.

How to apply for VHF

Home buyers who are interested in buying a home should use the VHF’s eligibility toolCheck to see if they are eligible.

If they’re eligible, they will receive an email that will instruct them to prepare documentary requirements such as identification documents, proof of income, and details of expenses, liabilities, and assets.

For the scheme to be available to home buyers, they will need to contact their selected participating lender.

Current members of the scheme’s lender panel are Bendigo Bank and Bank Australia.

For the scheme to be approved, home buyers need to ensure that they meet the eligibility criteria of these lenders.

VHF Interest can be purchased

Homebuyers can opt to make extra payments in order to begin repaying their state government share.

If each repayment reduces VHF’s interest by at least 5 percentage point (from 25% to 20%), and is not less than $10,000, they can do so.

To pay the full amount of state government share in the properties they purchase, buyers must get approval from VHF.

Payments that reduce the interest rate to below 5% require approval.

Buyers of homes will be required by law to repay the interest of state government on their property if their gross annual income exceeds that threshold for two consecutive reviews.

These are some other conditions that buyers must meet to begin repaying VHF interest on their property.

  • If they are awarded a windfall of more than $10,000, such as an inheritance.
  • If they have paid a mandatory amount and their gross income at the next reporting period has increased by more than 10%,
  • If approved by the lender, they can increase their home loan.

The State Revenue Office will not allow eligible Victorians to sell their property in the first two years following settlement.

Notify the lender and VHF team within 45 days of the property’s sale.

The proceeds of the sale of the property will be divided among the following entities: the bank to repay the loan balance; the VHF, to pay its interest in property; any person with an equitable interest such as council rates or the owner/seller.

Frequently Asked Questions

  • What does the share equity agreement refer to?

This scheme is based on a share equity agreement. The state government will receive a proportional interest in the property to the amount it contributed (up to 25%).

  • What about other banks?

No. The scheme is not available to home buyers who are interested.

  • Can the deposit exceed 5%?

Yes. The minimum amount they must contribute is 5% for most applicants, and 3.5% if they are Aboriginal and Torres Strait Islander customers.

  • Is it possible to still receive the First Home Owner Grant

Yes. A buyer’s eligibility to the First Home Owner Grant will not be affected by the VHF.

  • Is there interest when you buy back VHF equity?

The VHF contribution does not earn interest. Its value will fluctuate depending on the overall home’s value. Any capital gains made by the property will be reflected in the repayments required to purchase back VHF equity.