For many first home buyers, accumulating a deposit is the biggest challenge to getting onto the elusive property ladder. But fear not, there are a few government schemes available that are designed to help you get there. In this blog, we break down the Victorian Homebuyer Fund and the First Home Guarantee (FHBG).
What’s the difference?
Both aim to help homebuyers get into the property market with a low deposit, while still avoiding Lenders Mortgage Insurance (LMI), but they have distinct differences to be aware of.
The Victorian Homebuyer Fund is a shared equity scheme that lets a buyer co-purchase with the state government. This means, if a buyer has a 5 per cent deposit, the Victorian Government could contribute up to 25 per cent of the purchase price, while the buyer takes out a mortgage for the remaining 70 per cent. This will save you money by reducing your mortgage and removing the need for LMI, while also allowing you to enjoy lower monthly repayments.
Participants are required to buy back the government’s share in their property over time through refinancing, using savings, or upon sale of the property. The Victorian Government does not charge interest on its investment in participants’ homes, but shares in any capital gains or losses proportionate to its share in the property.
This is compared to the First Home Guarantee (previously known as the First Home Loan Deposit Scheme) which also allows eligible first home buyers to purchase a property with as little as a five per cent deposit. But rather than taking an equity share in your home, the Commonwealth Government simply guarantees the difference between what the buyer has saved and the 20 per cent deposit threshold lenders usually require before they’ll provide a loan without LMI.
With this scheme, since your mortgage can be up to 95 per cent of the value of the property, there is potential to reap a greater share of the capital gain once it comes time to sell if the value of your property rose.
From 1 July 2022, the scheme was expanded to 35,000 places per year, ongoing, for the purchase of both new and existing homes.
Who is eligible?
Some standard eligibility criteria apply to both schemes, for instance, you must be over 18 years old, be an Australian citizen and plan to be an owner occupier of the purchased property. Various income thresholds also apply for couples and singles.
The Victorian fund is also available to people who have previously owned property – which opens up possibilities for a wider range of buyers needing assistance.
How do I apply?
To apply for either scheme, you must go through a participating lender, either directly or through a mortgage broker.
For the Victorian Homebuyer Fund, you must have approval for a compliant home loan from a participating lender to be eligible. For full details click here.
And for the FHBG, a full list of participating lenders can be found on the National Housing Finance and Investment Corporation’s (NHFIC) website.
We hope this brief guide helps you navigate some of the different options available to first home buyers! Have more questions? Contact our sales team on 0499 940 120 or register your interest via the form below to secure one of the last lots or townhomes in our boutique Cranbourne East community!