A comprehensive guide to Victorian Homebuyer Fund

Buying a home in Victoria can be challenging, especially for those who are struggling to save for an initial deposit. To support its residents, the Victoria State Government is offering a shared equity scheme designed to help eligible property buyers purchase a home with a smaller deposit. 

In this article, Mortgage Professional Australia will talk about the Victorian Homebuyer Fund and how it can help aspiring homeowners enter the country’s housing market. We will discuss its application process, benefits, and more. Want to know if your clients can apply for this shared equity scheme? Keep reading to find out below. 

What is the Victorian Homebuyer Fund? 

The Victorian Homebuyer Fund is a state government initiative that helps eligible homebuyers by contributing up to 25% of the purchase price of a home in exchange for a share in the property. This allows home buyers to enter the property market with as little as a 5% deposit. 

The scheme reduces the amount that clients need to borrow from a mortgage lender. It was created to make homeownership more accessible for residents in Victoria. 

Want to better understand how your clients can use the Victorian Homebuyer Fund to purchase property? Watch this: 

How the Victorian Homebuyer Fund works 

The Victorian Homebuyer Fund is a shared equity scheme where the Victorian Government makes a financial contribution to the purchase of a home. 

They do this in exchange for an equity share in the property. Over time, clients will need to buy back the government’s share gradually. This can be through: 

• refinancing 
• payment using clients’ savings 
• sale of the property 

Additional support is available for Aboriginal and Torres Strait Islander participants. They can buy a home using only a 3.5% deposit. Plus, they are eligible for up to a 35% shared equity contribution. 

The Victorian Government does not charge interest on its investment in participants’ homes. However, it shares in any capital gains or losses proportionate to its shared equity in the property. 

Can you combine the Victorian Homebuyer Fund with other grants? 

Yes, the Victorian Homebuyer Fund can be combined with other government grants and schemes. An example is the First Home Owner Grant (FHOG). It is a one-time grant for first-time home buyers. Combining these schemes can further reduce your upfront costs. 

Here is a short clip if you want to know more about FHOG: 

Aside from FHOG and other schemes, learning about first-time home buyer mortgage rates is also essential when helping clients who have never owned a property. 

What is the price cap for the Victorian Homebuyer Fund? 

The maximum property purchase prices are: 

• $950,000 in Metropolitan Melbourne and Geelong 
• $700,000 in regional Victoria 

Which banks offer the Victorian Homebuyer Fund? 

Here are some participating mortgage lenders that offer this government scheme: 

• Bank Australia 
• Bendigo Bank 
• Commonwealth Bank 
• Indigenous Business Australia 
• Unity Bank 

Who is eligible for the Victorian Homebuyer Fund? 

Check out this list of requirements and see if your client is eligible to apply for the Victorian Homebuyer Fund: 

• must be an Australian citizen or have a permanent residency 
• must prepare for a minimum deposit of 5% (only 3.5% for Aboriginal and Torres Strait Islander applicants) 
• must have an annual income not exceeding $135,155 for individuals and $216,245 for joint applicants 
• must intend to make the property their primary residence 
• must not own an interest in any other land or property at the time of purchase 

Application process 

As a mortgage broker, you have a role in helping your clients with the Victorian Homebuyer Fund application process: 

Step 1: Assess eligibility 

Help your clients determine if they meet the program requirements. Tell your clients that they should: 

• have Australian citizenship or permanent residency 
• be owner-occupiers of the property 
• meet income and property price thresholds 

Step 2: Deposit preparation 

Guide your clients in saving the minimum 5% deposit. Explain how the government can contribute up to 25% of the purchase price.  

Step 3: Loan pre-approval 

Assist clients in obtaining pre-approval from a participating mortgage lender. Be sure that they understand their borrowing capacity and have all necessary documentation ready. 

Step 4: Application submission 

Cooperate with the mortgage lender to submit the Victorian Homebuyer Fund application. Your clients will need to provide: 

• proof of identity 
• income verification 
• contract of sale for the property 
• government review and approval 

The Victorian Government will assess the application. Keep your clients informed during this stage and address any additional information requests as soon as possible. 

Step 5: Settlement and fund allocation 

Once approved, the government’s contribution will be applied at settlement. Work with the participating mortgage lender and conveyancer to ensure a smooth transaction. 

By simplifying the process and clearly outlining the benefits and responsibilities, you can help your clients achieve their homeownership goals through the Victorian Homebuyer Fund. 

Is the Victorian Homebuyer Fund still available? 

Yes, the Victorian Homebuyer Fund is currently available. However, it's scheduled to conclude in June 2025, transitioning to the federal 'Help to Buy' scheme. An additional $700 million has been allocated to support approximately 4,600 more participants before the program ends.  

If you have clients who are interested and eligible, advise them to apply soon. Despite the additional funding made by the government, places are limited, and demand is high. Help clients grab this valuable opportunity to enter the property market with a smaller deposit and lower mortgage repayments. 

Advantages of using the Victorian Homebuyer Fund  

The Victorian Homebuyer Fund offers advantages for clients who wish to apply for it. These are: 

1. reduced LMI 
2. increased buying power  
3. no interest on government share  
4. potential for growth  

Let’s discuss each benefit one by one: 

1. Reduced LMI 

The LMI is a one-time insurance premium that protects the mortgage lender if the borrower is unable to repay their home loan. It usually applies when a borrower has a deposit of less than 20% of the property’s purchase price. 

The cost of LMI varies based on the mortgage amount and the size of the deposit. Often, it can be added to the home loan. With the government's contribution, home buyers can avoid paying LMI. Your clients can save thousands of dollars as a result. 

Learn more about LMI when you watch this video: 

LMI is not all bad. In fact, LMI can be helpful for property investors.  

2. Increased buying power 

By lowering the amount needed for a deposit and mortgage, this government scheme can help your clients afford properties that might otherwise be out of reach. 

3. No interest on government share 

The government’s contribution is not a loan. As such, your clients don't have to pay interest on it. They will only repay the government’s share when they sell, refinance, or choose to buy them out earlier. 

4. Potential for growth 

If property values increase, the overall value of your clients’ investment increases—though it also means the government’s share increases. 

Disadvantages of using the Victorian Homebuyer Fund 

While the Victorian Homebuyer Fund offers many benefits, there are some risks: 

1. Shared ownership 
2. Property price fluctuations 
3. Limited availability 

Let’s explore each risk below: 

1. Shared ownership 

The government holds a share in your clients’ property, which they need to repay if they sell or refinance. If they sell, refinance, or can afford to buy back their share, your clients will have to repay the government’s portion based on the property’s current market value. 

2. Property price fluctuations 

Since the government’s share is tied to the market value of your property, the repayment amount can change over time. If property prices go up, the amount that they owe the government will also increase. If prices fall, your clients may end up repaying less than the initial contribution. 

3. Limited availability 

The Victorian Homebuyer Fund has a limited number of places each year. The scheme is also scheduled to end in June 2025. Acting fast and checking eligibility early can improve your clients’ chances of securing a place. Assist them for a hassle-free application process. 

Making homeownership more accessible in Victoria 

The Victorian Homebuyer Fund presents a valuable opportunity for eligible homebuyers in Victoria to enter the property market. They get to benefit from a smaller deposit and reduced mortgage costs. 

By contributing up to 25% of the property's purchase price, the Victorian Government helps ease the financial burden for participants. This shared equity scheme also removes the need for LMI and lowers your clients’ monthly repayments. 

However, while the scheme offers some benefits, it is vital for applicants to consider the potential risks as well. With the program set to conclude in June 2025, prospective home buyers should act fast to meet the requirements and begin the application process. 

As a mortgage broker, you can help your clients by guiding them through the application process. Advise them about the benefits and never forget to remind them about the risks. Finally, be certain that they understand the long-term implications of shared equity. 

Do you have clients who have applied for the Victorian Homebuyer Fund to buy a home? How did you help them? Share your experience in the comments section below.