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HomesVic launched to support Victorian first homebuyers
The Victorian government recently launched HomesVic – a new housing affordability scheme intended to assist struggling first home buyers to take their first step onto the property ladder.
First announced in early 2017, HomesVic will take a proportional interest of up to 25% in the properties of first home buyers who meet the eligibility criteria, thus reducing the need for these borrowers to save large home loan deposits, or to seek support from a family guarantor.
At launch, the HomesVic scheme will support up to 400 home purchases, backed by initial funding of $50 million. Eligible borrowers will need to have a 5% deposit available for buying their first home, as well as a maximum income of up to $75,000 for singles, or up to $95,000 for couples or families.
When the properties are sold, the Victorian government will recover its stake from the sale price, to be reinvested in other homes. The government’s share can also be repaid by the borrower over the course of their mortgage term.
Example:
Laura works as a part-time teacher earning $50,000 a year. She applies to HomesVic and, with the scheme’s assistance, is able to buy a property valued at $350,000.
Laura takes out a loan of $245,000 on the property, supported by a 25% shared equity contribution of $87,500 and a 5% deposit of $17,500, effectively giving her a Loan to Value Ratio (LVR) of 70%.
Two years after the purchase, Laura secures a full-time role as a teacher earning $80,000 a year, which is within the income thresholds which are indexed each year. With increased income, Laura begins to pay the Government’s proportional interest. By this stage, Laura’s equity has increased from 5% ($17,500) to 12% ($42,000).
Laura approaches her home loan provider and is permitted to increase the home loan by $60,000 based on her increased income and a revaluation of the property at $375,000. This reduces the Government’s proportional interest from 25% to 9%.
Source: HomesVic
HomesVic will allow eligible borrowers to purchase property in selected areas of Victoria where there is high demand for housing, as well as good access to employment, public transport and other services. There are 33 priority areas spanning 85 Melbourne suburbs, 130 town and suburbs in and around key regional centres and seven peri-urban towns.
Borrowers eligible for HomesVic will also be able to receive the First Home Owner Grant when purchasing new dwellings in metro Melbourne ($10,000) or regional Victoria ($20,000), though not when purchasing established dwellings. Also, in Victoria, first home buyers who purchase a home valued at under $600,000 will not be required to pay stamp duty, and first home buyers who purchase a home valued between $600,000 and $750,000 will pay reduced stamp duty.
The launch of the HomesVic has been welcomed by the Housing Industry Association (HIA), with HIA chief executive of industry policy, Kristen Brookfield, comparing it to similar schemes in other states and territories, such as Land Rent in the ACT and Keystart in Western Australia.
“HIA figures show that the typical stamp duty bill on homes in Victoria has risen by 4000 percent since 1982. With the median price of a Melbourne dwelling at $720,417, this makes buying a house a pipe dream for so many low income young people.” – Kristen Brookfield, HIA
The HomesVic application process will commence in early to mid-February 2018.
Disclaimer
This article is over two years old, last updated on January 29, 2018. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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