Highlights
- The Victorian state government has created a shared equity scheme to assist home buyers
- Victoria's Homebuyer Fund will cover up to 25% of a buyer's property's value and only require a 5% deposit
- Applicants need not be first-time homebuyers, but they cannot currently own a house
Victoria has introduced a $500 million fund to attract homebuyers in a shared equity scheme to help the state's residents buy a home amid rising concerns about skyrocketing house prices.
The scheme allows eligible homeowners to pay a 5% deposit and receive a contribution from the government of up to 25% towards the price of the property they choose to buy.
Under the fund, homebuyers will not have to pay lenders mortgage insurance (LMI) and don't have to be first home buyers.
The buyers are not required to pay lenders mortgage insurance (LMI), which is usually required of borrowers with a small deposit. It, however, comes with a caveat.
A portion of the property will be owned by the government, as it pays for a part of it.
Melbourne-based mortgage broker Niti Bhargava said that this fund could be a good option for buyers unable to purchase a property at a time when the prices are rising at their fastest rate in more than 30 years, and investor activity continues to climb.
Home Buyer Fund will enable buyers with small deposits to enter the property market, claims mortgage broker. Source: Getty Images
"Buying a first home is difficult for many young families. However, if someone's financial situation is not getting any better and they are not able to save more than 5% deposit, it's a good option to avail this opportunity," she said.
Ms Bhargava said the home buyers would have to meet set criteria to avail this fund.
"Australian citizens or permanent residents over the age of 18 years need to have an income of $125,000 per year, or $200,000 if they're a joint applicant to be eligible.
"5% deposit should be genuine savings that have been gradually saved over a period of time and not a lump-sum. In addition, banks will assess credit scores and capacity to meet mortgage repayments," she explained.
"The house that you want to buy must be your principal place of residence and should be five years old or less.
"Even if you are not the first home buyer and you want to upgrade, still you can use this home buyer fund if you are eligible," Ms Bhargava said.
She added that eligible participants are also required to fulfil obligations once they receive approval.
"To name a few, you must be eligible for this loan each year, be adequately insured, maintain the property is in good working order, and make all repayments on time.
"You also need to get the fund's approval if you want to sell or refinance within the first two years," she said.
But while aspiring buyers have primarily welcomed the state government's scheme, some, however, feel the fund would further push up property prices.
In addition, some potential buyers have also criticised the geographical limitation attached to the location of the property they choose to buy. According to the state's guidelines, buyers need to buy in either Metropolitan Melbourne, Geelong or an eligible regional location such as Ballarat or Bendigo.
Disclaimer: The views presented by the mortgage broker in the article are general and must not be taken as financial advice.
Click on the player at the top of the page to listen to this interview in Punjabi.
