Victorian Homebuyer Fund - 7 Steps to Qualify, Benefits, Pitfalls & Real-Life Example

Buying a home in Victoria can feel like an uphill climb, especially with rising property prices across the Mornington Peninsula and beyond. For many first-time buyers, saving for a deposit large enough to avoid Lenders Mortgage Insurance (LMI) feels almost impossible.

That’s where the Victorian Homebuyer Fund comes in — a shared equity scheme designed to help eligible buyers get into their own home sooner with as little as a 5% deposit.

But here’s the thing — while the scheme can be a game-changer, it’s not without conditions, ongoing obligations, and long-term implications. In this guide, I’ll walk you through 7 steps to meet the eligibility requirements, explain the benefits and pitfalls, and show you a real-world example of how much you’d walk away with if you buy at $700,000 and sell in five years for $800,000.

As a Mornington Peninsula real estate agent, I’ve seen how this scheme has helped some buyers — and also how it’s caught others off guard when it comes time to sell.

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What Is the Victorian Homebuyer Fund?

The Victorian Homebuyer Fund (VHF) is a shared equity scheme offered by the Victorian Government.
Here’s how it works:

• The Government contributes up to 25% of the purchase price (35% for eligible Aboriginal and Torres Strait Islander buyers) toward your home.

• In return, they take the same percentage ownership share in your property.

• You contribute a minimum deposit of 5% (or 3.5% for eligible Indigenous buyers).

• You borrow the balance from a participating lender.

You don’t pay interest on the government’s contribution, but you do share your property’s capital gains — and losses — with them when you sell or refinance.

Why This Scheme Matters for Mornington Peninsula Buyers

Property prices across suburbs like Mornington, Mount Martha, and Mount Eliza can easily push buyers beyond their comfort zone. The VHF can:

• Reduce your mortgage size.

• Help you avoid costly LMI.

• Allow you to enter the market years earlier than if you saved a 20% deposit.

But it’s not just a “free kick” into the market — you need to understand the rules, the impact on your equity, and how it might influence your future moves.

7 Steps to Qualify for the Victorian Homebuyer Fund

Here’s your eligibility checklist. Missing just one of these steps could disqualify you.

1. Confirm Your Citizenship or Residency

You must be:

• An Australian citizen,

• A New Zealand citizen, or

• A permanent resident.

2. Be at Least 18 Years Old

You need to be 18 or older at settlement.

3. Save the Minimum Deposit

• 5% for most applicants

• 3.5% for eligible Aboriginal or Torres Strait Islander buyers

This deposit must come from genuine savings or eligible contributions such as gifts from family.

4. Meet the Income Threshold

• Single buyers: up to $140,230 gross annual income

• Couples/joint applicants: up to $224,370 gross annual income

Income is assessed based on your most recent Notice of Assessment from the ATO.

5. Be a First Homeowner (in Effect)

You cannot currently own, or have previously owned, property anywhere in Australia — whether in your name, in a company, or in a trust.

6. Buy Within Price Limits and from an Eligible Seller

You must:

• Buy a property within the maximum price cap for the area (as set by the VHF)

• Buy from an unrelated seller

• Purchase an eligible property type (e.g., house, townhouse, apartment that meets livability requirements)

7. Commit to Living in the Home

The property must be your principal place of residence for at least the first 2 years. You can’t rent it out during this time without approval.

Pro tip: Get provisional approval before you make an offer. This ensures you know exactly how much you can spend and avoids heartbreak later.

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Benefits of the Victorian Homebuyer Fund

The scheme offers some undeniable advantages for eligible buyers:

1. Lower Deposit – Enter the market sooner without waiting years to save 20%.

2. No LMI – Potentially saving tens of thousands of dollars in insurance premiums.

3. Reduced Loan Size – Lower monthly repayments make budgeting easier.

4. No Interest on Government Share – You don’t pay interest on their contribution.

5. Access to a Better Location – May help you buy in an area that would otherwise be out of reach.

Pitfalls You Need to Know

While attractive, the VHF comes with some strings:

1. Sharing Capital Gains – If your property rises in value, so does the government’s share.

2. Sharing Losses – If your property value drops, their share drops too — but your equity shrinks.

3. Ongoing Obligations – You must maintain the property, keep insurance, and complete annual reviews.

4. Restrictions on Renting or Selling – Minimum occupancy periods and notice requirements.

5. Impact on Future Moves – When you sell, you’ll have less equity for your next purchase than if you’d owned 100%.

Real-Life Example: Buying at $700,000 and Selling at $800,000

Keyword focus: Homebuyer Fund example, shared equity example Victoria

Let’s break down the numbers.

Purchase Price: $700,000

• Your deposit (5%): $35,000

• Government contribution (25%): $175,000

• Your loan: $490,000

Selling Price after 5 years: $800,000

• Government share (25% of $800,000): $200,000

• Loan balance after 5 years (approx.): $420,000*

• Sale proceeds after paying loan and government: $180,000

• Less selling costs (agent fees, legal, etc.): approx. $35,000

• Net cash to you: $145,000

*Loan balance assumes consistent repayments at a standard interest rate.

This example shows that while you do keep most of the profit, you hand over a portion of your capital growth to the government.

 

How the Scheme Affects You at Sale or Refinancing

When you sell:

• You must notify the State Revenue Office at least 45 days before settlement.

• The government’s share is calculated on current market value, not the original purchase price.

When you refinance:

• If you repay the government share, it must be based on the property’s current value.

Who Should Consider the Victorian Homebuyer Fund?

The VHF is ideal for:

• First-time buyers with a solid income but low deposit savings

• People confident in maintaining ongoing obligations

• Buyers planning to stay in their property for at least 5 years

It’s less ideal for:

• Buyers wanting to renovate and “flip” quickly

• Those planning to upgrade within a short timeframe

• Investors (scheme is for owner-occupiers)

Planning Ahead – Thinking Beyond the First Purchase

While the scheme can get you into the market faster, think about the long game:

• How will sharing capital gains affect your upgrade plans?

• Could you repay the government share early to keep more equity?

• Would saving longer and buying without shared equity serve you better?

A good buyer’s plan considers not just getting in, but also moving up.

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Frequently Asked Questions

Is the scheme still open?
Yes, but places are limited and it’s set to close on 30 June 2025 unless extended.  This was extended on 1 July 2025. The Victorian Government  announced on 1 July 2025, a short-term extension of the Victorian Homebuyer Fund.

The extension will now remain until the Government’s total investment of $2.8 billion is exhausted and will enable new applications to be made beyond the original 30 June 2025 cut-off.

After this, Victorians will transition to the Federal Help to Buy shared equity scheme.

Can I pay out the government share early?
Yes, in part or in full, but based on current property value.

Can I use the First Home Owner Grant as part of my deposit?
Yes, subject to eligibility.

The Victorian Homebuyer Fund can be a fantastic tool for eligible buyers, but it’s not a one-size-fits-all solution. By understanding the rules, benefits, and long-term implications, you can make an informed decision that suits both your current needs and future plans.

As a Mornington Peninsula real estate agent, I’ve guided many buyers through this process — from checking eligibility to finding the right property. If you’d like to discuss whether the scheme is right for you, get in touch today.

Thinking about buying your first home with the Victorian Homebuyer Fund? Contact us at McNeill Real Estate — we’ll help you navigate the process and find a property that ticks all your boxes.

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