In the 2020-21 Budget, from 1 July 2021 the Victorian Government has announced that a $500 million Victorian HomeBuyer Fund, will operate as a new shared equity scheme. It will be an expansion on the HomesVic Shared Equity Initiative.
To be eligible for the Homes Vic Shared Equity Initiative you must satisfy the following:
- Be buying the property as your 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; and
- Buy a property that meets the requirements for property type and location; and
- Be in 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.
Critically, the scheme applies to new and established homes.
The fund contributes to the sale price of the property in exchange for a proportionate equity interest, meaning that a 5% grant of the purchase price will be registered as a 5% interest. This will in turn reduce the amount of deposit required and, subsequently, the amount of money required to be borrowed.
When the property is sold, the government will receive its share back and the Victorian Homebuyer Fund.
John wants to save up for his first house, however he does not have a deposit and does not earn enough to qualify for a home loan of the value of the property that he desires.
The HomeBuyer fund gives John $115,000 in exchange for a 25% proportional interest in the property.
John now has enough of a deposit saved and can qualify for a home loan for the property that he desires using the Homebuyer fund.
After a few years when John has enough money, he can pay out the government’s proportional equity interest in his property. The same would apply if John were to sell the house. He would need to pay out the Government’s proportional share first.
The scheme is still in its infancy and it will be interesting to see how it operates from a practical perspective and what stamp duty implications (if any) it may have. Once the scheme is more established, we will provide a further legal update. If you are interested in learning more about this scheme, please contact one of our Real Estate Lawyers at Burke & Associates Lawyers.
Insight written by Stewart Davis and Tamara Maksimovic