She's On The Money - FRIDAY DRINKS: The Victorian Homebuyer Fund

Episode Date: October 21, 2021

Happy Friday angel babies! We have an ep full of fun today - our young Jessica Ricci is looking at buying property sometime very soon, and V is going to break down the latest Government offering here in Victorian for young home buyers. You can assess your ability here.We also talked about our friend Heather from the community and her new jewellery business which you can find @lovelinejewelleryThe advice shared on She’s on The Money is general in nature and does not consider your individual circumstances. She’s on The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. Victoria Devine is an Authorised Representative of Australia Pacific Funds Management Proprietary Limited ABN 34 132 463 257 - AFSL 339151.See omnystudio.com/listener for privacy information.

She's on the money. She's on the money. Hello and welcome to She's on the money, the podcast for millennials who want financial freedom. This is our Friday drinks episode, hopefully one of the last ones we have to do from lockdown in our homes team, where we celebrate the money wins from our She's on the Money community. There are so many great money wins and confessions that are shared in our group every single week and Jess, Tony and I spend a very big part of our week talking about you all and

the things that you guys have achieved. So this episode is for you and we are so excited to share all of Tony's favorite wins from the week in a hot minute. But before we get there, Tony Lodge, what happened on this week's Money Diary? Our Money Diaries this week at 17 decided that she was going to break away from her family and actually become homeless to get out of a toxic home situation, which is obviously such a young age to make that decision. And she's now 19 and living financially free. She's got an amazing house. She's got a great job and she's just living her best life. And it was a really great

chat because it just showed that you can actually listen to your gut and know what's best for you even when people that are around you maybe don't agree with the choices you're making that you should always listen to your gut and um she was such a lovely young girl and I think Victoria you and I both after we chatted with her were like can we follow you on Instagram you seem so lovely we were both like off air we're like what's your Instagram handle can we follow you or is that weird and to be honest we've said it before Tony I feel like that hour that you spend with a money diarist, like you go real hard. It's like a first date where they're asking if you want kids, like you're actually getting really deep on who they are and what their values are. And at the

end, you're always like, we're friends now. We're best friends now. I'm pretty sure I've never been closer to anybody in my life. So to be honest, I really loved it. We're now following her on Instagram. But again, another killer money diary. Jess, what happened this week on our Wednesday deep dive episode with Georgia King. So on Wednesday, we spoke about a little bit of a heavier topic, but something that I think is really important to touch on, and that is gambling and the impact that it can have on you, the impact that it can have on the people around you, and a little bit of insight into what that can mean for you financially as well. Gambling is something that some people may choose to dabble in recreationally, and we're not here to judge,

but it can be a really slippery slope into something that has a really significant and negative impact on you and the people around you and we just wanted to shed a little bit of light on what that might look like we shared some really fantastic resources in case anybody or anybody that you know is going through it because it can also be a really isolating experience it's similar to the way that when you have large amounts of debt that debt that builds up from gambling can weigh on you emotionally and take a toll on you mentally and feel like you're in a bit of a hole that's hard to get out of so I think that that episode was really great to kind of let people know that they're let alone let people know that they can help themselves or their friends and that

you know there are resources out there that are accessible and that we hope that you will take up if you need them yeah and if you need some of those resources we jam packed the show notes of that episode with them and Jess you've been sharing them on socials all week so if you guys need to reach out please do we've said it before the people behind these companies that exist to help you are good people doing good things and they want the best for you and they are not going to judge you in fact they've seen worse they always have there's always a situation that they're like oh if you think your story's bad you should hear xyz and that's not a good way to view it but at the end of the day you might feel in over your head and that person's going to go oh tony that's

fine. We can get you out of that. I've gotten someone out of a way worse situation. You'd be like, well, I thought mine was the worst ever. And sometimes that's just really nice to know when you're going through a situation like that. So that episode was really heavy, but I think really, really necessary. Let's move on to something a little lighter. Tony, what have you pulled out of the Facebook groups money wins this week to share with us? All right. I reckon i've got some good ones oh i hope so no i picked the worst ones no there are no carry on all right georgia says and not our georgia different georgia georgia says money win a mate was throwing out an old pine three shelf cabinet i rescued it sanded it all back painted it and brought new doorknobs

looks as good as new and cost me in total 40 dollars that's a money win i wish i was smart like you jess and could do diy stuff because whenever you post stuff and whenever people say oh i rescued this and now it looks like something that they've literally bought brand new from freedom furniture i just can't believe it no no no like the chair i found on the side of the road just looks like the chair i found on the side of the road in my lounge room now whereas if jess found it she'd be like this chair is now a luxury sofa yes also i probably sold it for ten thousand dollars i wish rebecca says money win i decided to act on a lifelong dream and purchase a horse what i know horses are crazy expensive right yeah for sure so such a cool thing to buy

imagine getting to that point in your life we're like hey tony i'm gonna buy a horse yeah well the horse was advertised for two thousand five hundred dollars and she went to look at him and while speaking to the owner they decided to include his tack which for horse people we'll know what that is um it includes the saddle bridle and rugs apparently assuming they're expensive as well and do you know why i'm assuming that tony there's an entire company called saddle world and i'm pretty sure i've driven past it before sounds expensive well apparently it was all worth 1700 and she got it for free amazing money win yeah so now she's got a horse and most of the gear that she needs without forking out extra cash and found a great paddock i don't

really know anything about this but great job Rebecca and you know what if you can trust the she's on the money community to do anything it's find a money win whether that is a set of pine shelves or a legitimate horse or an actual horse Madeline says money win a money win from a few weeks ago on the podcast prompted me to check my fly buyers points turns out there was enough points to get a $90 Coles voucher which meant my grocery shop was very affordable I've said it before and i'll say it again if you don't have flybys get it it is the best thing it's so worth it you have to use the app to get the bonus points that's where the money is i feel very passionate about flybys if you couldn't tell see do you know what every time i go to coles i get

this pang where it's like do you have flybys i'm like oh jess would hate you you can have it on your phone so you don't even have to carry a card around if you're not gonna tap it let us tap for Well, if you ask Jess, what flybys is she adding to any of the She's on the Money purchases? Mine. That's just smart. Hold on, hold on, hold on. Tony, take this a step further.

Jess, do you use cash back on the She's on the Money purchases? If we buy anything, I use shop back. And whose account does it go into? Mine. The She's on the Money account or the Jessica Richie? Yeah, there you go. My shop back. I'm clicking purchase.

She's a genius. You know what? i can't even be jealous because it wasn't my idea you're being smart i can't hold that against you we love to say i don't know if we categorize it as income but i mean the thing she's doing there her employer knows so yeah that's true it's not like you can turn around be and go hang on i didn't know but anyone who is listening and goes oh that's genius i always put the coles order in for my work each week don't do it without permission that would be theft yes make sure you ask first unless you work at cheese on the money but it's too late because jess is doing it

Yeah, like, who's just told me? Heather says that she just started a little jewellery business and found a bead supplier that had a 50% off sale to celebrate the end of lockdown. Oh, exciting. Oh, cute. What is the company called? Okay, it's called Loveline Jewellery.

Oh, hang on, Heather's business or where she got the beads discounted? No, I don't care about the discount beads. I care about Heather's business. I was like, I asked Heather for her business name. I didn't ask about the bead company. Thanks. Yeah, okay. um thanks for the money win heather where'd you get the cheap beads so i can start a conflicting

business yeah we don't want to buy your products but we want to buy the cheap beads make our own no um heather's business is called loveline jewelry they um her instagram is at loveline jewelry and it's very very new and she's starting an etsy soon so can't wait to see that oh my gosh can you put her business in the show notes so we can absolutely shout out absolutely you'll either wonder where everybody's coming from or know because she listened to this week's episode um i really hope that she's listening and heather if you're not shame on you but you can't hear this molly says money win after much research and overcoming my fear of any degree of risk when it comes to money i've made my first small investments through spaceship and concept

pocket that's exciting that's what a step small amounts and super basic slash low risk choices for now but it's a big step for me after having my savings sitting stagnant for so long i love love that that makes me so happy i know and it's just so nice to know that people are like looking at their money and going oh i'm gonna take charge of this and everybody at their own pace like some people are ready some people aren't but it's just really cool that that's the money when we get to share um and finally lizzie says she got a new job earning double what she was earning before oh my gosh i love when people have these massive stories of like it's double it just sounds really dramatic but also she said that she's so much happier there which is amazing great job lizzie

oh my gosh we are genuinely so proud of anyone who hustled a pay rise let alone a 50 one doesn't happen all the time but we can all seek a little bit of inspiration from that hopefully at lizzie's new job they let her use her coals card and her shop and her flybys and maybe that's how she's making double so i want to chat about something this week that i found particularly interesting as someone who's getting close to being ready to purchase a home which is super exciting i know um let's not get ahead of myself have you been listening to the podcast the property playbook i heard it's very very good and very informative i heard the producer of that was also a legend and very good looking and also great tailors on the show i do listen i get all my tips and tricks there

But something kind of interesting in the property space that I saw this week was that there's a new government incentive. I can't remember the name of it, but Victoria, I feel like you might be across it. Maybe, maybe. It's called the Victorian Home Buyer Fund. Is that what you're talking about? Yes, that's the one. The one that's been in the news recently.

And the thing that I thought was really interesting about this is it's not a grant, which historically I'm really mad that I couldn't get into the property market last year because you could get like 35 to 45 000 in grants because there was all these different grants around the first home buyers grant is still existing in victoria specifically don't know about other states because i don't live there um but the thing that i found really interesting though is that this is not a grant it's kind of a loan would you say it is yeah technically so what jess is talking about is the Victorian Home Buyers Fund. And from what I understand is it allows eligible Victorian home buyers. So it's not open to everybody in the country, just if you're in Victoria,

but it allows Victorian home buyers to enter the market with 5% deposits. And that sounds really good. And you guys have probably heard that before, because there's obviously a couple of schemes that allow you to access that type of thing already. So that's nothing new. But the thing that is different here is that the government is actually going to contribute up to 25% of the purchase price, which sounds like a muddy win, but in turn, they will own a share of the home in exchange. So essentially the government will own a share of your home up to the percentage that they contribute. So it's kind of like having a guarantor where they own a percentage of your property, but it's actually called a shared equity scheme. Is this the first of its kind? I know that

we're talking strictly about Victoria at the moment, but is this the first in Australia where it's like a shared equity kind of thing? As far as I'm aware, I did a little bit of research when it first came out to see if I could find anything similar, but I do believe that this is the very first type of scheme to exist. And I think there are a lot of pros and cons. There are a lot of things that are going to make this really good and really accessible but at the same time like do i want somebody else to be in on owning my property in saying that please do keep in mind when you go and purchase property like jess you're going to go purchase a property and unless you've actually purchased that home outright you got a mortgage right the bank actually owns that percent

of your property so it's not a new concept for quote somebody else to own a percentage of your property until you've paid the entirety of it off. For example, the bank, and if you don't pay off your portions of the loan, they're going to go, all right, cool, Tony, you didn't pay off your loan. We're just going to go and sell it from under you and recoup our costs. So something similar could potentially happen with this as well. I have a question around the equity thing. And so if the government owns a slice of my house pie, shall I say, if I, let's say I put some money into it I want to make my house really homely I do some renovations I do some upgrades I put my own money into making that property better and then when I want to sell it down the track let's

say in two or three years I've outgrown the property I'm ready to move into a bigger one yeah if the government owns a slice of that pie is that then going to be based on a percentage so if I sell for a profit not only do I have to pay back the equivalent of what I've borrowed potentially, but they're also entitled to some of those profits that I put the hard work in to get. Yeah. So Jess, at the end of the day, they own a percentage of the property. So if that property increases in value, their percentage has just increased in value. I think the best way to explain this is actually with a bit of an example. So let's just put you in the place of the home buyer. Jess goes out, it's Melbourne. She's gone and purchased a property for $700,000.

dollars. Congratulations. You're well done, Jess. We'll have champagne later once we're out of lockdown. And Jess, you've got a 5% deposit or $35,000, which is the criteria that you need to meet. The Victorian Homebuyer Fund is then going to agree to cover 15% of that property purchase, which equals $105,000. And then that total equals 20%. So your 5%, the government's 15%. You've got 20% deposit for your property, which means you can actually avoid paying LMI or lender's mortgage insurance. We've covered all of this on the property playbook if you want to know more about it, but that's all I'll say on LMI. Essentially, then Jess is going to go get a home loan to cover the remaining 80% of the property. The home buyer fund then owns 15% of your property. So, it's not

that $105,000 that they've put in that they're expecting to get back. They're still expecting to get back 15%. So Jess, you and James, you move into your new property, you deck it out. Obviously it's going to be very aesthetic because Tony just lives there. And over the next few years, your property's value grows to 800 grand. Money win. You've been repaying the home loan, but the first home buyer fund actually still owns 15% of your property. And that's now worth $120,000 so if you were to go and sell that property they still get 15% of the sale price yeah um what if you like burn the house down and then you sell it um and their 15% is now no longer worth what they initially like bought into then what happens do you have to like top

that up with cash I mean I haven't actually googled what happens if I burn down my house do i have to pay the government back um that wasn't something that's a curveball that's something i didn't expect you to ask me um i would argue that's why you guys are gonna have home and contents insurance so that you can potentially rebuild that but i would say that from the government perspective this is an investment so as much as your property might now be worth just eight hundred thousand dollars what if it went backwards and was now worth six hundred thousand dollars. Their slice of the pie is worth less, which is why it is a shared equity scheme because they have equity. They've made an investment in your property. So essentially they're investing

in property as well, which means they are being exposed to the ebbs and flows of the market in exactly the same way you are. So if you make profit, they make profit. Everybody should be happy because they gave you a leg up to get into the property market. But if you made a bad property decision and they tipped in their 15% that time, well, then that's just how the market works. Yeah. And I feel like it would probably be safe to assume, right, that like any other grant or scheme, you have to apply, you don't just receive it. And they would probably be looking into those things when they're considering who will and won't have access to this fund. So yes, there is a list of criteria that you need to meet. Just like everything else in Australia, you do need to

be a citizen or a permanent resident, and you need to be over the age of 18, kind of a no-brainer. You need to have a gross annual income of $125,000 or less, or for a couple who's borrowing, $200,000 combined or less. The property also needs to be your principal place of residence. So you can't just go and buy an investment property and think the government's going to be like, yeah, sweet, Tony, let's go invest together. Not going to happen. And you can't buy a property from a family member. So like you couldn't go and buy, you know, my dad's property and think that that was a good way to get me into a property. So they're trying to make sure that there's no fuzzy lines or people doing dirties on the side. You also need to be a natural person. And I know

that that sounds very strange, but it essentially means you can't buy a property with an organization or a trust. So a lot of questions we get when it comes to property, especially on the property playbook is, should I be buying my property in a trust? You can't do that. The rule is you need to be a natural person. And that just means you have to buy it yourself. So, I mean, they could have just said that instead of being weird about it, but the government just makes weird decisions sometimes. And the other criteria that you need to meet is that you can't own any interest in any land at the time of purchase or be a shareholder in any private corporation that owns land. So they're like only giving this opportunity to people who don't have property already but it's

not the first homebuyers grant i think it's important to just work out if you're eligible for this or not before actually trying to work towards it and there is actually a homebuyers fund eligibility quiz and we will chuck that in the show notes for you guys so that you can see if you can access this scheme in saying that also relevant is the fact that it is capped so it is a 500 million dollar fund that sounds like a lot of properties but essentially that's going to mean that the Victorian government is going to become an investor, which sounds fun, in about 3,000 homes. So it's not a scheme that is going to see every single young Victorian who doesn't have any property and is a natural person purchasing a property and actually getting access to this

like every other grant, like every other scheme, there are caps. Yeah. It's interesting, isn't it? because i looked into it a little bit because i'm thinking about buying property and i was like is this something that i would consider doing and i think the equity thing really put me off and i don't know if that's entitled to say um but i just didn't love it yourself i get it i didn't love the idea knowing that i will likely do like a house and land kind of thing and then do additional work myself to kind of spruce things up yeah i didn't love the idea of doing that work for someone else to then benefit i was kind of like if i'm able to access it and there's a lot of if buts and maybes in this situation i guess um but if i can just you know take a mortgage on myself without that

input that would be my preference but i can see that it would be appealing for people not everyone is in the situation that i am there are people who might struggle to get a mortgage by themselves and I guess it's nice that there's something out there that they can access to help them get a leg up yeah and I think it's obviously there's a lot of pros but then that is a disadvantage and just knowing that you're gonna have to repay yet another thing I know you're gonna have to pay it on your mortgage but you kind of knew that that was yours and like any additional value you add you're not I guess throwing it in the bin in a way and that sounds a bit negative but the other thing that really got me with this scheme guys is just you said before I'll go and get a mortgage

Well, my friends, if you want to go and do this homebuyer fund, you can actually only get a mortgage from one of two places. Really? To actually participate in this. Yes. I didn't see that bit. No, it's actually crazy. So you can only get a mortgage from Bank Australia or the Bendigo Bank.

That is it. Those are the only two banks that are going to be, at this point, might change, going to be lending to people who are using this scheme. That feels a bit sneaky, doesn't it? It does, but I guess both of those banks are quite ethical, nice banks doing good things. I don't have a problem with products from either of those banks. They're good mortgages, but it does, again, further constrain you in terms of flexibility or if you already bank with NAB or you're already with Macquarie, you're not exactly chasing the lowest interest rate and you're not

potentially taking into consideration the bells and whistles that you might want if you'd seen a mortgage broker. So for example, Tony, you might go, oh, I'm buying a house. I really want like five offsets because I'm just going to offset every single savings account I have. Maybe, and please don't quote me on this because I haven't looked into Bank Australia or Bendigo Bank's products. Maybe that won't be an option because the bells and whistles aren't available at those banks. That doesn't mean they're bad. It just means you are a little bit more constrained. Yeah. That's really interesting in terms of the mortgage because something we've spoken about on the pod before is shopping around for your mortgage not every year and again not to shove

another plug in but we actually spoke to a mortgage expert all about mortgages and mortgage myths on the property playbook very interesting episode if you're interested in buying like me but it takes away that option for you to kind of play people off against each other or go oh well yeah get a better rate yeah like my rate is three percent but this place has 2.5 if you're only choosing between two places I would assume that these two banks would probably be offering similar rates knowing that they're going to have a lot of people coming through this fund and they would probably be matching each other or at least very comparable and so yeah you'd hope that's not the case but you totally know it probably is going to be the case because yeah they don't have to be

anything other than non-competitive they're like well you're going to need me so yeah going back to what you were saying as well Jess like about not wanting to have somebody else own your property like if you're paying back this home buyer fund they actually own a percentage whereas the bank they just have the loan so say we flip this and go back to that example that I was talking to you about before and I said you bought the $700,000 property and only had the 5% deposit say you'd gone down a different system where you'd only needed that 5% deposit and then you know in seven years worth $800,000 again, you're actually going to be $15,000 better off having not used this fund because you would have got that profit instead of having to share the profit with

somebody else who was technically a co-owner. So the government essentially is an equity holder, whereas the bank, they've just lent you that 80% loan. They just want it paid back. They couldn't care less if the property doubled in value and you made epic amounts of profit. They just want their money back so that they can extinguish the loan. So I think it's important to not, I guess, lump it in. Well, I guess you're going to owe someone something at some point. It's kind of like, yeah, but like in that example we gave before, if Jess had just used a 5% deposit and, you know, gone down a different route, she would have been 15 grand better off at the end of that story. So that's a lot of money. And I mean, that was a pretty conservative example, if we're being

honest, like seven years in Melbourne and property only increased a hundred grand. Like I've seen auctions last weekend that went a hundred grand over reserve consistently. So it's not something that is small or even to just blink at. So I definitely would be making sure that this really does work in your benefit. And if I was to use this scheme, I think I would be really trying to pay that back as soon as possible to kind of like buy them out sooner rather than later, instead of waiting until I sell the property because you do have a couple of options to pay that back like you could pay it back in installments or you could wait until you sell the property and then pay the home buyer fund back ASAP once you've done that so I don't know

I just think there's a lot to consider there and obviously if you're potentially considering it I'd look at getting some advice and doing a whole heap of research mortgage brokers are really great for that as well they're usually free again this is something we talk about a lot but their service is usually free and they can present you with a whole range of different options they usually have a really good knowledge of the grants that are available in your state and can help you make a decision that's going to put you in the best possible position yeah agreed and I think that we need to rely on the professionals sometimes to give us the advice because I think a lot of people saw this and like oh my gosh there's another fund I can get into property sooner and then you kind

of like go oh great that's exciting oh that's not so exciting um which is a bit disappointing but at the same time let's be honest that is going to give a leg up to like 3 000 people to get in the market when they probably didn't have any other option or would have had to say for like another 10 years to get that 15 of their deposit and then it's hard because they're priced out because of inflation so exactly there's always a catch right yeah the rat race is real with property i am feeling the pain right now but super interesting to know about thank you so much for breaking that down because it was something that i was not unsure about but it's worth i think knowing what's available and i know this is victoria specific but i highly recommend anyone

who's looking into property jumping on your state government website there will absolutely be a property section on that website and that will break down what is available what the eligibility criteria are all of those fun things will be in one place and it's a legit source of information all right guys as we said before make sure you're checking your facts but we have run out of time so no more home by a scheme conversation until friday drinks next week and as always just before we head off we'd like to acknowledge and pay respect to australia's aboriginal and torres strait islander peoples the traditional custodians of the lands the waterways and the skies all across australia we thank you for sharing and for caring for the land on which we are able to learn we pay our

respects to elders past and present and we share our friendship and our kindness the advice shared on she's on the money is generally nature and does not consider your individual circumstances she's on the money exists purely for educational purposes and should not be relied upon to make an investment or any financial decision and we promise that victoria divine is an authorized representative of australia pacific funds management proprietary limited abm 34132463257 afsl 339151 see you next week guys