Article by Patrick Lynch, Head of Operations
Despite all the talk of rising interest rates and the effects on property prices, borrowing capacity and so on, there are still many active purchasers in the market. Many Long Property clients are actively putting pre-approvals in place for future acquisitions. There is a lot of Government assistance available, particularly for first home buyers. For Victorians, a list can be found via the State Revenue Office website and include:
- Stamp duty concessions
- First Home Owner Grant
- Victorian Homebuyer Fund
The first 2 are common and more information is available through your conveyancer/ solicitor – we can provide referrals, if needed. The final support is less well known but can potentially save you money via a smaller Bank loan and avoiding Lenders Mortgage Insurance.
Victorian Homebuyer Fund
This is a shared equity scheme helping Victorians enter home ownership. If you have a 5% deposit, the Victorian Government could contribute up to 25% of the purchase price in exchange for an equivalent share in the property (for Aboriginal and Torres Strait Islander participants, it is 3.5% and 35% respectively).
Participants are required to buy back the government’s share in their property over time, but the Government does not charge interest on its investment. It shares in any capital gains or losses proportionate to its share in the property.
Eligibility can be checked here but is limited to those persons meeting ALL the following criteria
- be an Australian or New Zealand citizen, or permanent Australian resident
- be at least 18 years of age at settlement
- have saved the required minimum deposit of your property price
- earn $128,000 or less per annum for individuals, or $204,800 or less per annum for joint applicants. This refers to your gross annual income
- occupy the purchased property as your principal place of residence
- be a natural person (that is, not an organisation, company, trust or other body or entity)
- not purchase your property from a vendor who is a related person
- not own an interest in any land in Australia or overseas at the time of purchase (including as trustee of a trust or beneficiary under a trust)
- not be a shareholder in any corporation (other than a public company) that owns any land in Australia or overseas
- have an approved loan from a participating lender and have sufficient funds to pay all acquisition costs associated with the purchase.
- Eligible participants must become registered owners of the property they buy.
The property purchase must be in Metro Melbourne, Geelong or another eligible regional location and be a standard residential property such as a house, townhouse, unit, or apartment (vacant land is not eligible). The maximum purchase price is $950,000 in Metro Melbourne and Geelong, or $600,000 in eligible regional locations. It can be for an existing or new property provided that a certificate of occupancy has been issued prior to the date of the contract of sale, i.e., excludes off-the-plan purchases. Finally, the property must also be vacant when purchased or, if under a lease, the lease must expire within 12 months of the acquisition date and any tenants must vacate the property.
There are limited participating Lenders – Bank Australia and Bendigo Bank, plus Indigenous Business Australia.
If approved for the Victorian Homebuyer Fund, there are a range of ongoing obligations you are required to fulfil. These include:
- An annual view, with supporting documents, to ensure you are still eligible.
- Ongoing property insurance.
- Paying rates, utilities, loan repayments, etc. on time.
- Maintaining the property in good order, seeking approval before any modifications or renovations over $10,000 or that involve structural changes or require council approval.
- You also must seek approval to refinance your property, sell your property, or make voluntary payments that result in you exiting the Victorian Homebuyer Fund within the first two years.
Repaying the Victorian Homebuyer Fund’s interest in your property starts when:
- Your gross annual income exceeds the applicable threshold on two consecutive annual review reporting dates, or
- You receive a windfall gain such as an inheritance or lotto win of $10,000 or more, or
- You have made a mandatory payment and your gross annual income at the next reporting date has increased by 10% or more, and
- You are approved by your Lender to increase your home loan – so long as it enables you to make a payment to reduce the Victorian Homebuyer Fund’s share by at least 5% (& is more than $10,000).
Voluntary (extra) repayments can be made under similar circumstances:
- Each repayment reduces the Victorian Homebuyer Fund’s share in your property by at least 5 percentage points and by at least $10,000.
- You need to seek and gain approval from the Victorian Homebuyer Fund team to pay the full amount back, or reduce the State’s equity below 5%, in the first 2 years.
If your property is sold, the money is distributed to the following entities in order:
- Your Lender
- The Victorian Homebuyer Fund to pay back its share in your property
- Anyone else with a legal or equitable interest in the property, such as council rates, and
- You as owner.
Closing
The Scheme has proven to be very attractive, with funding and places limited. However, a similar Federal Government fund has been proposed to further support prospective purchasers. Similar schemes have been active across the country before Victoria. More information on the Victorian Homebuyer Fund can be found on the State Revenue Office’s website by clicking here.
For any other information about lending and property, you can arrange a call with the Long Property Brokers via the following links:
- Dan Gold – https://calendly.com/dangold
- Ian Creighton – https://calendly.com/ianlongproperty
