By Nicole Hoyle

30 November 2021

On Friday 8 October 2021, the Victorian Government announced the shared equity scheme for eligible homebuyers to purchase residential properties within eligible Victorian locations. The intention of the scheme is to bring a new and expanded $500 million shared equity scheme to assist eligible Victorians in purchasing a home by providing a contribution of up to 25% towards the purchase price.

The Fund allow individuals the opportunity to own their own home that previously has always been out of reach.

The Fund is a shared equity scheme which means that the Victorian state government’s contribution is made on the basis that the State is to acquire a share, or proportional interest, in the property. The value of the property will determine the share, or interest, in which the State will hold.

An eligible homebuyer can receive a contribution of up to 25% towards the purchase price of a property which reduces the minimum required deposit to 5%, and in turn avoiding the requirement of Lenders Mortgage Insurance. For any Aboriginal or Torres Strait Islander homebuyer, the contribution is up to 35% and the minimum deposit amount decreased to 3.5%.

 

Who is an eligible Applicant?

To be considered an eligible Applicant, an individual must satisfy all of the following criteria:

  1. Be an Australian or New Zealand citizen, or a permanent Australian resident;
  2. Be at least 18 years of age at the time of settlement;
  3. Have demonstrated ability to save the minimum deposit required (being at least 5% or 3.5%, depending on an individual’s circumstances) of the property price;
  4. Have an annual income of less than $125,000.00 for individuals, or an annual income of less than $200,000.00 for joint applicants;
  5. The property is to be occupied as the Applicant’s principal place of residence;
  6. The Applicant is to be the registered proprietor of the property;
  7. The Applicant is to be an individual and not a corporate entity;
  8. The Applicant is not to purchase from a vendor of whom is a relative or related person;
  9. The Applicant is not to have owned an interest in any land in Australia or overseas at the time of the purchase, which is inclusive as a trustee of a trust or as a beneficiary under a trust;
  10. The Applicant is not to be a shareholder of any corporation (other than a public company) that owns an interest in any land in Australia or overseas; and
  11. An Applicant must obtain an approved loan from a participating lender in order to be eligible for the Homebuyer Fund.

In addition to the Homebuyer Fund, it is important to note that an Applicant may also be eligible for other stamp duty concessions, exemptions or grants, including the first home owner grant.

 

What is an eligible location?

The property is to be located in metropolitan Melbourne or Geelong (with a maximum purchase price of $950,000.00), or other eligible regional locations, including Bacchus Marsh, Echuca, Horsham, Gisborne, Sale and Shepparton (with a maximum purchase price of $600,000.00). The property is required to be classified as a standard residential property – which is inclusive of an existing dwelling, townhouse, unit or apartment, or a new property in which a Certificate of Occupancy has been issued. It is important to note that vacant land and off-the-plan properties are not eligible for the Fund.

The purchased property is also required to be vacant, or if the property is subject to lease, the tenants are required to vacate within 12 months from the settlement date. The applicant is then required to occupy the property as their principal place of residence.

 

What is an Applicant’s ongoing obligations under the Fund?

It is important to note that an Applicant will have the following ongoing obligations to satisfy:

  1. An annual review is to be completed every year and the Applicant is required to provide supporting information to ensure the eligibility criteria is maintained;
  2. An Applicant is to ensure the property is insured;
  3. The Applicant is to ensure the property is maintained to a standard, and is kept in good working order, including the rectification of any defects;
  4. The Applicant must seek approval prior to making any form of modification or renovation to the property in excess of $10,000.00, or those works that require structural modification to the property and council approval (if applicable);
  5. In the event the Applicant intends to refinance, sell or make any voluntary payment that may result in the exiting of the Fund, then approval is to be sought within the first 2 years;
  6. The Applicant is to attend to payment of all outgoings, utilities, stamp duty and home loan repayments, when they are due and payable.

An applicant is required to ensure that the State Revenue Office is notified of any change of circumstances at all times, including any changes to the eligibility criteria.

 

What Repayments are required to be made?  

Applicants are able to repay the Fund’s share, or interest in the property over a period of time, which can be made by refinancing, using personal savings or indeed from proceeds from the sale of the property.

An Applicant is required to commence repayment of the Fund’s interest upon the following:

  1. The Applicant’s annual income (gross) exceeds the threshold on 2 consecutive annual review reporting dates; or
  2. The Applicant received a financial gain, including an inheritance or lottery win, of a value of $10,000.00 or more; or
  3. The Applicant makes a mandatory payment and the Applicant’s gross annual income at the following report date has increased by an amount of 10% or more; and
  4. The Applicant’s lender increases the total home loan amount to facilitate the Applicant to make a payment to reduce the Homebuyer Fund’s share by at least 5% and is at least of the value of $10,000.00.

An Applicant is also able to make voluntary and additional payments provide each repayment is to reduce the Homebuyer Fund’s share by at least 5% and is at lease of the value of $10,000.00.

It is important to note that an Applicant must seek approval in order to pay the total amount owing within the first 2 years, or if the Applicant intends to reduce the equity below 5% of the interest in the property.

 

What happens when the property is sold?

It is important to note that in the event the property is sold for a profit, the Fund’s share, or interest in the property, will mean that the Fund will share in any profit made. Accordingly, upon the sale of the property, the funds will be distributed to the lender (outstanding amount owing), the Homebuyer Fund, any other person(s) with a legal or equitable interest in the property, and then the Applicant.

 

If you have any questions or would like to know more about the Homebuyer Fund, then please reach out to property team.

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