It’s a fact of life too many Victorians are painfully familiar with; saving up a 20% deposit for a home is akin to climbing a tree that won’t stop growing. Since 2012, the median house price in Melbourne has risen by 34% in less than 3 years, and in the 2016 census home ownership rates in Victoria had dropped to less than 70%. As house prices soar, the requisite 20% deposit needed by prospective homeowners to avoid lenders mortgage insurance has increased in tandem by the tens of thousands of dollars. The federal and state government have introduced a range of measures to try and ease the burden on prospective home owners, including the ‘First-Home Buyers Grant’, the ‘Family Home Guarantee’ and the ‘First Home Super Saver Scheme’ as well as stamp duty exemptions.

Now, under the newly introduced ‘Homebuyer Fund’, the Victorian government is offering the opportunity to purchase a home with a deposit as small as just 5% (avoiding lenders mortgage insurance) with the government contributing up to 25% of the purchase price in exchange for holding shared equity in the property. In simple terms, a percentage of your home would be owned by the State government. Homeowners will be able to buy back this share from the government or pay out the proportion owned back into the homebuyer fund if they go on to sell the property. The scheme, to which $500 million has been allocated, will aim to help 3000 Victorian households onto the property ladder.

The scheme echoes a similar scheme introduced by the federal government in 2020. Applicants must be 18 or older and must be Australian or New Zealand citizens, of an Australian permanent resident. The property can be a new or existing residential premises (where there is a certificate of occupancy), must be occupied as a principle place of residence, and be located in metropolitan Melbourne, Geelong, or one of the listed eligible regional locations. Notably, new off-the-plan properties (those without a certificate of occupancy on the date of sale) are excluded from the scheme. A limited number of lenders are involved under the scheme, including Bank Australia and Bendigo Bank.

The fund repayments must commence if any of the following occur:

• Your annual income exceeds the eligibility threshold for two consecutive years in a row (participant income is capped at $125k/annum, or $200k/annum for joint applicants); or
• You receive a windfall gain of $10,000 or more (for example, as an inheritance or in prize money); or
• After making a mandatory repayment, your annual income increases by more than 10%, and you are approved by your lender to increase your home loan.

Notably, where your income has exceeded the income threshold, or where a mandatory payment has been made, the fund requires you to seek out an increased home loan from your lender. If you wish to make voluntary repayments on the interest held in your property, the minimum repayment amount is $10,000 and the payment must reduce the interest held by at least 5 percentage points.

Successful applicants will have a number of ongoing obligations, including yearly eligibility reviews where you will be required to provide proof of income, tax returns, home load statements, utility bills and other documentation. You must maintain and demonstrate proof of insurance and are required to seek approval before making any modifications or renovations to the property where those works would be valued over $10,000. You must also seek approval before refinancing or selling the property, and approval is needed if you seek to exit the homebuyer fund within the first two years of property ownership.

Applications for the scheme can be made directly through the State Revenue Office.

Nothing in this article is intended to be taken as financial advice. You should always seek financial advice from a registered financial advisor prior and with full consideration of your own personal circumstances.