Wondering if I Should Use the Vic Homebuyer Fund

Miss B on 24/07/2022 - 13:19
Last edited 24/07/2022 - 13:20

The gist of the scheme - Vic Gov buys 25% of the property. They own that 25%. If your income goes above $128k (for singles) for 2 consecutive years you have to buy them out (if approved to refinance to do so), if you receive $10k+ from something like lotto/inheritance you have to pay some back. If you sell they get their 25% after the bank gets their money, before you get yours. Otherwise you have to buy them out within 60 days of the original loan term (e.g. 30 years + 60 days for a 30 year loan).

I'm on $74k income. I don't believe my income will go over $128k in the next 10 or so years. I have $75k deposit. I've been pre-approved for a loan of $430k, but not comfortable going above about $380k, especially without knowing what's happening with interest rates. I plan to live in the home long term. I would intend to buy out the government at some point, but I'd like to see what interest rates and house prices do and how I manage the smaller loan.

Based on my limited experience the houses in the area are selling within the range the agents are listing. I can find a place for $450k. It will be missing something I want or it might need some TLC, but I am confident I can find a house that I would be happy enough living in for that much.

Having extended my search to properties up to $500-$550k I can find a much nicer, newer property that has everything I want and a decent yard (for dog/kids). Even if I buy at $550k my loan would only be ~$335k if I use the Vic Hombuyer Fund, or ~$260k if I buy a $450k property.

What do you think I should do? I'm leaning towards using the scheme and buying around $500k.

Poll Options

  • 6
    Use the Vic Homebuyer Fund, but stick to $450k budget still
  • 23
    Use the Vic Homebuyer Fund and buy at $500-$550k
  • 0
    Don't use the Vic Homebuyer Fund, it's too risky
  • 3
    Don't use the Vic Homebuyer Fund, stop mooching off the government
  • 3
    No one cares, where is the TLDR?
Home & Garden

Comments

  • Xetrok on 24/07/2022 - 13:28
    +4

    Just note that you can't lease out the property if you want to move out later on down the track.
    "If we determine that your property is no longer your principal place of residence, we may request you pay back the Government’s financial contribution within six months."

    So if you intend to live in it for 10 years, it's fine.

    You should be worried more about interest rates becomming more volatile, guague you repayments on 7-10% interest rates against the proposed amounts.
    If it's within your range then consider. If not, keep saving.

    • Miss B on 24/07/2022 - 13:44
      +1

      Thanks. My intention is to live in it until retirement, things change, but it should suit me whatever the circumstances. This makes me think even if I'm buying at $450k I should use the scheme. I can't save fast enough to keep up with the rising cost of buying a house. If I have a $380k loan I'm not comfortable with the repayments if interest rates go up to 10%. Probably cements my thoughts of potentially going up to $500k and using the scheme (if I'm using it anyway, might as well get a nicer house for a little more).

  • bobbified on 24/07/2022 - 13:57
    +1

    The hardest part about buying a property for most people is being able coming up with the deposit, which you have the majority of (and the help of this scheme).

    What are you paying for rent now? Is it anywhere near the monthly payments of the lower mortgage? When you do buy, just don't over commit with the monthly mortgage payments.

    • Miss B on 24/07/2022 - 16:08
      +1

      Yeah, if interest rates go up about another 3% I'm confident in being able to pay the 380k loan. I can manage a bit higher than that, but things might get a bit tight. I'd probably get a housemate in. I'd be more comfortable with $260-$300k using the scheme though, that way if interest rates skyrocket I'm still going to be comfortable.

  • Benoffie on 24/07/2022 - 14:10
    +1

    I would only jump up the price bracket if it moved you into a substantially different/better neighbourhood. I don't know Melbourne enough to comment but I suggest that $100k wouldn't achieve that.

    So stick to the lower budget.

    • Miss B on 24/07/2022 - 16:17

      It would be the same neighbourhoods, but instead of being e.g. 2005, 1 bathroom and courtyard it might be 2016, 2 bathrooms and an actual backyard, in nicer condition and it might even include an extra living room or bedroom for $50k-$80k more.

      It depends on the houses/sellers at the time, but there seem to be a lot more and nicer options available when moving up a little from the bottom of the market. It feels worth it to have a nicer home.

      • Benoffie on 24/07/2022 - 21:05
        +1

        Wait and see how it plays out in the next 6 months. Unless you have to move now of course. Prices will stabilise/drop.

        • Miss B on 24/07/2022 - 22:39

          I have time, only concern is prices going up further. In a rental with no mention of having to move out. I'll keep an eye on the market for a bit. I have to go with a different bank for the scheme anyway and apparently they're a bit busy with enquiries about the scheme. So it may be a month or so before I get preapproval from the new bank plus approval for the scheme.

  • zonra on 24/07/2022 - 14:21
    +3

    Off topic:
    Weird scheme, I feel all it’ll do is drive prices up since supply stays the same, but every buyer has access to more buying power.

    • Miss B on 24/07/2022 - 15:57

      Not every buyer, ~3000 places and I think as people pay it back it opens up more places in the scheme. But between October last year and May this year only ~1100 had used it and about 50k houses are sold each year. It's not insignificant, but it's also not much of the market.

      • zonra on 24/07/2022 - 16:17

        Increasing buying power of even one buyer can definitely drive up prices, let alone 1 to 3 thousands of buyers.

    • thirtysixd on 24/07/2022 - 19:53

      Definitely helps set a floor

      That + construction industry going boom…

      Obviously wont do anything for 1-2 mill+ price range however

  • tsunamisurfer on 24/07/2022 - 14:33
    +1

    If the government owns 25% of the property then the occupant should pay 25% of the market rate rent to the government.

  • duluxe2000 on 24/07/2022 - 15:19
    +1
    1. Buy what you are happy with, don't buy with maximum amount of money you can borrow
    2. It's always smart to use others money, use yours to invest. So use the gov scheme.
  • taoz on 24/07/2022 - 15:42
    +1

    This is a strange scheme.
    Our Tax dollars going to help keep house prices higher, and in the end people owing the govt and the bank.

  • thirtysixd on 24/07/2022 - 20:02
    +1

    Nothing wrong with something that needs fixing up.
    If you want to save money I'd actually target places needing work.

    But I wouldnt buy a 2 bedroom just because its cheaper than a 3 bedroom
    Try hunt for good value on a land size / house size basis is my tip :D

    • Miss B on 24/07/2022 - 22:57

      I'd end up having to pay someone to do the work. I don't have many tools and when I did woodwork in school everything came out a bit wonky. There are a few people I know who may be willing to help, I'll have a think about it.

      Definitely getting 3+ bedrooms as I plan to do foster care.

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