Buying Property $900k in VIC - We Have 20% Deposit in Cash, but Also Have The Option to Use The Victorian Homebuyer Fund

• 

  Drakesy on 03/10/2024 - 13:24

  then bank the remaining cash in a mortgage offset account,

  If this gives guaranteed returns of 9+% sure.
  However after tax i feel you may be struggling to come out ahead.

  Basically an offset is a guaranteed 6% ROI.

  • 

    Irishjoe91 on 03/10/2024 - 14:04

    Thanks Drakesy, sorry maybe I wasn't clear (Australian terminology still getting the better of me)

    My options are:
    Use my full savings as a 20% deposit for the property
    or
    Utilise the VHF for 25% equity, have a 5% deposit and leave the remaining 15% savings in a mortgage offset account.

    • 

      Drakesy on 03/10/2024 - 23:22

      Ohh,

      may come out ahead if the Victorian gov owns a portion of your house in that case.

• 

  markathome on 03/10/2024 - 14:06

  +5

  I had no idea that the Victorian scheme was so much more generous than other schemes. Check it out. The income caps are:

  1. Victorian Homebuyer Fund: $135,155 (individual) $216,245 (joint) link
  2. Albo's Help to Buy: $90,000 (individual) $120,000 (joint)
  3. Western Australia's Opening Doors: $70,000 (individual) $90,000 (joint)
  4. NSW Home Buyer: $93,200 (individual) $124,200 (joint)
  5. Queensland Pathways: must be a currrent tenant of the Department of Communities and Housing
  6. Tasmania's MyHome: $96,447 (individual) $155,369 (joint two kids)
  7. ACT's Shared Equity Scheme: public housing tenant
  8. South Australia’s HomeStart: $100,000 (household)
• 

  freefall101 on 03/10/2024 - 14:16

  +4

  Basically need to weigh up whether 6% savings in interest will be greater than the appreciation of the house. You're not borrowing $225k from the government, they own a quarter of your house and that will increase in value over time along with the rest of your house.

  My concern with utilising the fund is that there are financial impacts of using the fund that may degrade the interest savings.

  What do you mean by financial impacts? Genuinely curious since I have a VHF loan, I haven't seen anything like that. Had zero issue getting a new credit card after getting the home loan either.

  Curious about the moral side too. Shared equity is a good idea IMO, particularly when rents are skyrocketing but housing prices are stagnating somewhat. There needs to be long term solutions too, but it's not a bad short term one (except it gives the government an incentive to keep housing prices growing, because they'll earn more on their equity).

  • 

    JDMcarfan on 03/10/2024 - 14:34

    +1

    exactly this. If you need to stretch to buy your dream house then perhaps (seems like you are being reasonable).
    Its not free money, its buying a property with 3 parties (37.5% each and 25% the gov).
    I'm not well versed on the structure of this arrangement, is it a government loan (i.e you own the house, can pay the loan at any time (with interest/capital appreciation) and don't need to legally transfer title/pay stamp duty - i.e. like a bank loan) or does gov take an equity position (25% stake) in the house.

    It could still be worthwhile if you aren't planning to sell or really view the house as an investment as then you can reduce your repayments and pay off your loan sooner (or otherwise purchase an IP sooner). But if you do want to capitalise on the capital gains on the house (you should as they are 100% tax free) then consider just funding via the normal route unless it is indeed a government loan (can pay it off when selling the house).

    • 

      freefall101 on 03/10/2024 - 15:29

      +1

      Government takes an equity position. It can only be repaid in a minimum 5% chunk (so if they fund 25%, you can reduce that to 20%) and when that happens they will do a valuation on the house. So if 25% was originally worth $100k and is now worth $200k, reducing their share to 20% will cost $40k, not $20k.

      You also need approval to do major renovations (structural or over $10k), need to file an annual statement with them confirming the loan details, insurance, etc, it limits which banks you can borrow from (it was 2 when I signed up, I think it's more now). You need to track improvements to the house that you pay for yourself to reduce the govts equity share.

      So for anyone wanting to refinance a loan it becomes more complicated, or even selling, as it needs the government's approval to do so. Cookers need not apply.

      • 

        JDMcarfan on 03/10/2024 - 15:33

        the fact that the gov takes an equity position itself rules it out for me personally (and should for OP too) let alone the other admin headaches.
        seems the facility exists to only benefit those who truly cannot afford support without their intervention (as it should) and would result in a poorer financial outcome for those with the means (like OP)

        • 

          freefall101 on 03/10/2024 - 15:49

          +3

          @JDMcarfan: There's a financial benefit while interest rates are high and housing prices in Victoria are stagnating a bit, but long term that's unlikely to last. I totally agree, it's likely not worth it for anyone who doesn't need it.

          For me, govt having an equity is vastly better than a landlord owning everything, as those were the two options. Bought a place where my loan repayments were less than my existing rent, the $1k a month increase in rent my landlord was pushing on me goes into the offset instead.

  • 

    Irishjoe91 on 03/10/2024 - 19:14

    -1

    I believe the 6% saving per annum will supercede the capital growth over the next few years, and so am inclined to take the VHF. If capital growth begins to exceed the 6% then I could always pay back the government earlier. I'm just interested if others have a different opinion, and also whether the interest rates offered by the VHF banks are prohibitively higher. Are there any other costs to taking a VHF (filing annual reports, additional valuations etc) that I have not considered in this calculation?

    Moral quandary because we are taking a spot on the sheme that others could use, without necessarily requiring it.

• 

  Benoffie on 03/10/2024 - 15:02

  Im not familiar with these schemes (as noted, the SA scheme is limited and crp).

  What happens when you reach the point where you have paid off your portion but the govt portion is outstanding AND you wish to move to freehold?

  Does the loan amount at that time reflect the value at the time of purchase or 25% of the value/equity at the time the loan is taken to get the govt off the title?

  • 

    freefall101 on 03/10/2024 - 15:35

    -1

    The loan is entirely separate to the govt equity. So when the loan hits zero, it's gone, you have nothing to do with the bank anymore, you just own 75% of the property and the govt owns the other 25%.

    Personally I'm planning on paying out the govt before I pay off the loan by putting tonnes into the offset account and whenever there's a dip/lull in housing prices I'll pay off as much as I can.

    • 

      Benoffie on 03/10/2024 - 19:00

      That's what I mean, that 25% is still owed, unless you're happy to share title with the govt. Im wondering what the mechanism is for removing them off the title without selling is?

    • 

      Irishjoe91 on 03/10/2024 - 19:15

      Out of interest why pay government before bank?

• 

  JIMB0 on 03/10/2024 - 15:10

  Unless I've missed something a 20% deposit on a $900k house is $180k not $300k.

  • 

    djsweet on 03/10/2024 - 15:34

    Stamp duty. You need about 215-220k. But yes still not 300k

  • 

    Irishjoe91 on 03/10/2024 - 19:07

    Sorry yes, 20% because with stamp duty etc I wouldn't quite reach 30% deposit on the 900k houses

• 

  joka on 03/10/2024 - 15:16

  +1

  All i can say is well done!

  Tell the people debating this very topic: https://www.ozbargain.com.au/node/869309 that it can be done.

  • 

    Irishjoe91 on 03/10/2024 - 19:08

    -1

    Sorry to avoid gas lighting, my partner and I are 34 and have been earning over the threshold for a number of years. We have saved the money during this time, however now our salaries are lower due to parenting responsibility, therefore qualifying for VHF

• 

  Xetrok on 03/10/2024 - 20:18

  Make sure you account for stamp duty/conveyancing

• 

  mikekiwimike on 04/10/2024 - 07:31

  -1

  This is not just you but too many people (just finished reading a Novated Lease thread) give away too much information. User names and previous post or comment history can be enough for a criminal to work out who you are and get to you. In your case all I need to find out is your email address, I now know that you have 300k and are looking to buy a house in Victoria, it is very possible to compromise your email account given enough time and from then on just watch the emails between you and the real estate and then conveyancer and when the time is right they just send the right email or make the right call and maybe you pay the wrong person.

  I say this because when I was settling my last property I could have been scammed, on the day of the settlement I got a robo dial saying my payment was not going to go through and that I needed to call them, I didn’t call them as I knew the settlement was already in progress, this was a scam and they either used information they knew about me or they had compromised the conveyancers email (or Pexas).

  People be careful because you become a target when you provide information that shows you are well off or have something someone else might want, and today it is not someone in Australia (though it could well be) - it is a criminal who has all the time in the world to “slowly slowly catch the monkey(money)” - I see this all the time across my corp customers, business email compromise scams but they also happen to individuals a heap.

  • 

    Irishjoe91 on 04/10/2024 - 10:49

    Thanks for the feedback, very helpful!

  • 

    moar bargains on 04/10/2024 - 14:43

    -1

    Agree. You do need to be careful with providing personal information on the internet, especially in public/unrestricted places. I had this realisation a few years ago when someone tied my username on one website to the same username on another website and then knew more about me than I was comfortable with. So now I make sure to use different (and increasingly randomly generated) usernames across different sites, and try to limit the amount of personal information I give out.