In October 2021, the Victorian State Government launched the Victorian Homebuyer Fund. The Fund is a shared equity scheme aimed at assisting eligible Victorians to purchase their first property and applies to the purchase of both new and established homes.

The scheme operates by contributing up to 25% of the purchase price of a property in exchange for an equal registerable interest in the equity of the property.

The scheme allows eligible homebuyers to structure their financing arrangements for the purchase of a property as follows:

    • 5% – Deposit
    • 25% – Victorian State Government
    • 70% – Chosen Lender

The purpose of the scheme is to reduce the deposit amount required by homebuyers, eliminate the need for homebuyers to obtain Lenders Mortgage Insurance (LMI) and in turn, reduce the amount of money a homebuyer may otherwise be required to borrow.

The scheme is open to homebuyers who meet the following eligibility criteria:

    • Be buying the property as their principal place of residence;
    • Have a deposit of at least 5% made up of savings that have accumulated over time;
    • Not have other loans or debts that add up to more than $10,000;
    • Be a natural person and not a company;
    • Buy a property that meets the requirements for property type and location; and
    • Meet the income threshold: Singles must be earning an annual income of $84,555 or less and couples must have a combined household income of $107,105 or less.

As the value of the property changes, so too does the value of the government’s interest in the property, meaning the Homebuyer Fund shares in any increase in property value overtime.

Homebuyer’s participating in the scheme also have the option of repaying the Fund’s share in the property overtime which can be achieved by refinancing arrangements, using personal savings and from the proceeds of the sale of the property.

On the sale of a property, the Victorian government’s share in the property will be paid back and reinvested into the Fund.

Where a property is purchased by a Homebuyer in conjunction with the Fund, homeowners must comply with the following ongoing obligations:

    1. Annual review – Participating Homebuyers must comply with annual review requirements by providing supporting information to provide evidence of their ongoing eligibility for the Homebuyer Fund.
    2. Insurance – Participating Homebuyers must maintain building insurance over the property and provide a Certificate of Currency during each annual review period.
    3. Property Maintenance – Participating Homebuyers must also maintain their properties by keeping things in good working order and fixing any defects.  Homebuyers must also seek approval before making any structural changes to the property or making any modifications or renovations that exceed the value of $10,000.00

At this time, the scheme remains in its infancy and the impact of its operation from a practical perspective is not yet known, however the scheme will no doubt have stamp duty and consequential impacts. Once the scheme is more established and widely accessible, we will provide a further update.