You Can Have Your Smashed Avo and Eat It Too: Government Equity Scheme Opening Doors for First Home Owners

For low or middle income earners, owning your first home could be closer than you think, with a new government scheme set to take on up to 25% of the cost of a property and deposits going as low as just 5%. HomesVic was announced in March of 2017 and is set to start rolling out early in the New Year, with prospective applicants able to register their interest now on the Victorian Government Website.

The benefits are significant. A smaller mortgage means less to pay bank to the banks. And, by lowering the minimum required deposit to just 5%, people who are currently paying inflated rents and are struggling to put money aside, will be able to get a foothold on the property ladder sooner.

The scheme joins a number of initiatives by the Victorian government designed to elevate the prospects of first-home owners, including the $10,000 first home owner grant, stamp duty exemptions, and the vacant land tax (targeting those who leave houses unoccupied and off the market).

Who is eligible to apply?

  • The pilot scheme is open to singles earning up to $75,000/annum, or couples and families with a combined household income of up to $95,000/annum.
  • Applicants will need to have a minimum 5% deposit of “genuine savings”, which cannot be used to pay costs such as conveyancing fees, building inspections, or any applicable taxes or stamp duty, and have no debts exceeding $10,000.
  • The property can be either a new or existing standard residential home, where you intend to live. Applicants cannot have owned any other real estate.

As for the rest, the process is fairly straightforward. Applicants must secure a loan from a list of financial providers (soon to be released). The maximum amount of time you’ll have to repay the loan is 30 years, with the repayments capped at around a third of your total income.  While the scheme does not have any limits set on housing prices, these rules will determine what properties are realistically affordable, and allow for a market that’s constantly in flux.

This all sounds great! What’s the catch?

Under HomesVic, the state government will own up to 25% of your home. This share must be ‘bought back’ once the mortgage has been paid off, or when you decide to sell. However, if you win the lottery or get a fabulous raise, this share may have to be paid back much sooner.

While allowing potential home owners to hop off the treadmill of renting sooner, it is well worth weighing up the short term benefits and the long term potential costs of not owning 100% of your home. For someone looking for a secure, long term place to live, the scheme could be hugely beneficial in easing up the pressure to save for a deposit while juggling the expenses of day to day life. However, for those looking at property ownership as a means of investment, shared ownership could potentially lessen your profits when it comes time to sell.

How to apply

The government will be rolling out the scheme for up to 400 homes. Currently, expressions of interest are open prior to applications commencing in February 2018. While a set roll-out day has yet to be announced, those who have registered their interest will be notified directly.

To register interest or to read more about HomesVic, click here.
To read the official statement from the Andrews Government, released March 5th 2017, click here.

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