These Victorian Homebuyer Fund case studies explain how your share and contributions are calculated when you start, if you take full ownership, sell, renovate, make extra payments, or your income changes.
How does shared equity work when I start out?
It’s easy. Find out how Elisa’s financial contributions and the State’s financial contributions give her shared equity in her home right from the start.
Elisa saves $25,000, the minimum required deposit of 5% for a $500,000 home. She completes the Homebuyer Fund eligibility tool to check her eligibility for the State to also contribute 25% to buy a $500,000 home. Elisa applies to one of the State’s participating lenders (a bank) for a shared equity mortgage with the Homebuyer Fund. To assess her application, the bank works with the Homebuyer Fund, which agrees to contribute 25% toward Elisa’s home purchase. Elisa provides her bank with all the information it requires and agrees to all the terms and conditions required, before gaining official approval for a shared equity purchase.
Elisa then makes an offer to buy a home, which her bank and the Homebuyer Fund approve. The offer is accepted by the seller and Elisa moves into her new home. As she is starting out, Elisa has 5% equity in her home while the State has 25%. Her bank mortgage is $350,000, or 70% of the purchase price. She must start making mortgage repayments under the terms of her bank mortgage. Elisa must repay the State’s share within the initial duration of her home loan, plus 60 days.
Can I refinance to pay out the State’s share in my property?
Yes! Find out how Chen refinanced her loan to pay out the State’s share of her home.
Chen buys a house valued at $460,000 with the help of the Victorian Homebuyer Fund. She pays a 5% deposit, which is $23,000 and the Homebuyer Fund contributes 25%, which is $115,000. To cover the remaining cost of $322,000, Chen takes out a home loan with one of the State’s participating financial partners. While Chen avoids paying interest and annual fees on the Homebuyer Fund’s 25%, the State’s share entitles it to any capital gains, based on the property’s value whenever Chen makes a payment.
Five years later the property’s value has increased to $560,000. Chen’s home loan balance is now $291,000. At this point, the State’s share has not changed, and is still 25%.
Chen decides she wants to pay out the State’s 25% share in her home, so she makes an appointment with her financial institution. She requests an additional $140,000, which represents 25% of $560,000 – the property’s total value. Chen gets approval for the $140,000 and uses it to pay out the State’s share of her house.
With the help of the Homebuyer Fund, Chen was able to buy her first home and then refinance to pay out the State’s share of her home.
Can I reduce the State’s share over time through extra payments?
Yes! Find out how Lily used accumulated savings to reduce the State’s share in her home.
Participants can make voluntary payments at any time. However, within the first 2 years of the scheme, the State’s interest in the property must be at least 5%. Voluntary payments must be at least $10,000 and reduce the State’s interest by at least 5 percentage points. The reduction in the State’s interest is calculated by dividing the payment by the current market value (adjusted for any value attributable to approved renovations) and deducting this from the original Homebuyer Fund’s interest. The market value is determined by a valuation from the Valuer-General Victoria (VGV).
Lily purchases a property for $500,000 and receives $125,000 shared equity contribution from the Victorian Government, equating to 25% of her property’s value. After 3 years Lily saved $30,000 and wishes to make a voluntary payment.
The VGV values the property at $550,000, which is $50,000 more than Lily purchased the property for. By making a payment of $30,000, Lily satisfies the legal requirement that voluntary payments must be at least $10,000.
The voluntary payment also reduces the Victorian Government’s share in the property by 5.45 percentage points, from 25% to 19.55%. This is more than the minimum 5 percentage points reduction requirement.
Calculation example:
$125,000/$500,000 = 25% (initial Victorian Government share)
$30,000/$550,000 = 5.45% (the total % reduction in the Victorian Government’s share by Lily making the voluntary payment)
25% - 5.45% = 19.55% (Victorian Government’s share once the voluntary payment has been made)
Are there any restrictions to making voluntary repayments?
Yes, find out why Eric was unable to make a voluntary payment.
Eric purchases a property for $750,000 and the Victorian Government contributes $150,000 towards the property. At the time of purchase, the Victorian Government has a 20% interest in Eric’s property.
After 6 months, Eric saves $15,000 and wishes to make a voluntary payment. VGV values his property at $725,000, which is $25,000 less than the original purchase price. Eric satisfies the legal requirement that voluntary payments must be at least $10,000.
However, the voluntary payment of $15,000 would only reduce the Victorian Government’s share in his property by 2.07 percentage points. Voluntary payments must reduce the Victorian Government’s interest by at least 5 percentage points. Eric will have to save more money for his voluntary payment.
Calculation example:
$150,000/$750,000 = 20% (initial Victorian Government share)
$15,000/ ($725,000) = 2.07% (the total percentage points reduction in the Victorian Government’s share by Eric making a voluntary payment)
Will I have to make mandatory repayments?
Katy’s circumstances changed and now she is required to make mandatory repayments.
When participants complete their annual review, their income will be measured against the relevant income threshold. Participants that breach the income threshold will still be eligible to participate in the Homebuyer Fund, however if they breach the income threshold in 2 consecutive annual reviews, they will be required to seek an increase in their loan from a panel lender of the maximum amount possible to pay back some or all of the State’s interest.
Participants are only required to proceed with an increase in the loan if it would result in a payment that reduces the States interest by at least 5 percentage points and is $10,000 or more. Lenders are not obliged to approve any increase in the loan amount unless it meets standard serviceability assessments. Lenders will need to notify the participant(s) in writing if a loan application is not approved so the participant can confirm this with the SRO.
If an increase in the loan amount is not approved, the participant must continue to try their best to increase their loan amount with a panel lender, reporting back to the SRO on their progress every 6 months.
The process to calculate the reduction in the Homebuyer Fund’s interest is the same as for voluntary payments.
Katy purchases a property for $610,000 and the Victorian Government contributes $152,500 towards the property. At the time of purchase, the Victorian Government has a 25% interest in Katy’s property.
After one year, Katy’s annual review shows that she is under the relevant income threshold. However, in the following 2 consecutive years, her income breaches the income threshold.
As a result, Katy must make a mandatory payment to reduce the Victorian Government’s share in her property. VGV values her property at $650,000, which is $40,000 more than the original purchase price.
Katy’s lender conducts a serviceability assessment and informs her that she can increase her loan by $50,000. This enables Katy to make a mandatory payment of $50,000, reducing the Victorian Government’s share in her property by 7.69% percentage points, from 25% to 17.31%. This is more than the 5 percentage points minimum reduction requirement.
Calculation example:
$152,500/$610,000 = 25% (initial Victorian Government share)
$50,000/$650,000 = 7.69% (the total percentage points reduction in the Victorian Government’s share by Katy making the payment)
25% - 7.69% = 17.31% (Victorian Government share once the mandatory payment has been made)
What if my circumstances change and I want to add a partner to the scheme?
Don’t worry. Find out how John and Cindy dealt with the changes to their personal situation.
John qualified for the scheme as an individual and was able to buy a home. Shortly after, John begins a relationship with Cindy and 3 years later Cindy moves into his home as his spouse. John would like Cindy to be added as a registered owner of the property.
To do so, John must first seek approval from the SRO for Cindy to be added to the Victorian Homebuyer Fund scheme. This will involve the SRO assessing John and Cindy’s eligibility for the scheme as joint applicants. John and Cindy are found to meet the eligibility requirements, so Cindy is approved to join the scheme and can be added to the title.
What happens if I want to sell my home?
You can! Find out how Sandeep and Susan sold their home and paid back the State’s share.
Sandeep and Susan buy a property valued at $700,000. They contribute a 5% deposit which is $35,000 while the Homebuyer Fund makes a 25% contribution which is $175,000.
After a few years, Sandeep and Susan decide to sell their home. They sell it for $890,000. The $190,000 increase in their home’s value means the State shares 25% of the capital gains, equalling $47,500. The Homebuyer Fund’s 25% share is now worth $222,500, which Sandeep and Susan have to pay back from the proceeds of their sale, after any outstanding loan to a participating lender is repaid.
Capital gains tax is administered by the ATO, not the SRO. For more information on capital gains, visit the ATO’s website.
If I renovate, will the State receive any of the benefit when I sell?
Find out how Yarran’s renovations affected his repayments.
Thanks to the Homebuyer Fund, Yarran was able to buy a home worth $700,000. He contributes a 5% deposit which is $35,000 and the Homebuyer Fund contributes 25% which is $175,000. After moving in, Yarran decides he wants to renovate, which he obtains approval to do.
A few years later, Yarran agrees to sells his home for $900,000. The Valuer-General Victoria (VGV) assessed the renovations to have added $20,000* to the value of his home. Given Yarran’s renovations are valued at $20,000 at the time of sale, this amount is deducted from the total sale price when calculating the amount payable to the State. As a result, Yarran repays $220,000 to the State from the proceeds of his sale calculated as follows: $900,000 (sale price) less $20,000 (value of renovations) x 25% (proportional share the State had in the home). *Improvements valued at the time of sale.
