Victorian Homebuyer Fund

How does the Homebuyer Fund work?

If you want to purchase a property in Victoria but you're struggling to save the deposit, the Victorian Homebuyer Fund will cover up to 25% of the property value for eligible borrowers with at least a 5% deposit.

For eligible Aboriginal and Torres Strait Islander buyers, the Victorian Homebuyer Fund will contribute up to 35% of the property value, with a minimum required deposit of just 3.5%.

Here's a simple example:

• You buy a property in regional Victoria for $700,000.
• You have a 5% deposit, which is $35,000.
• The Homebuyer Fund agrees to cover 15%, or $105,000. This makes 20%, meaning you can avoid LMI.
• You get a home loan to cover the remaining 80% of the property. The Homebuyer Fund owns 15% of your property.
• 7 years pass and your home's value grows to $800,000. You've been repaying the home loan, but the Homebuyer Fund still owns 15%, which now equals $120,000.

There are eligibility criteria which we'll get into below.

What happens after you buy the property?

Once you own the home you start repaying the home loan, and other normal property obligations like council rates and body corporate fees. But the Homebuyer Fund, being a part-owner of your property, will impose some extra obligations.

The Victorian Homebuyer Fund expects you to hold an insurance policy over the property and maintain the property. And you will need to complete an annual review to prove you're repaying the loan, paying your insurance premiums and paying all your bills.

Repaying the Homebuyer Fund

You can make voluntary repayments of the Homebuyer Fund's share of the property. But these repayments must be at least 5% of the fund's share. For example, if the fund owns 15% of your home you can make a 5% repayment to bring it down to 10%, but cannot make a repayment lower than that. These repayments must also be at least $10,000.

There are a couple of situations in which you will be required to repay the Homebuyer Fund:

• If your income increases above the Fund's income threshold ($135,155 for an individual or $216,245 for 2 buyers) after you've bought the property.
• If you receive at least $10,000 in a circumstance such as winning the lotto or gaining an inheritance.
• You are approved by your lender to an increase of your home loan. The loan increase will only be approved if it enables you to make a repayment to the Fund of at least 5% (e.g. reducing the Fund's equity from 15% to 10%) and is at least $10,000.

Who is eligible?

To apply for the fund you need to meet multiple criteria:

• You need to be an Australian citizen or permanent resident aged 18 or older.
• You need a gross annual income of $135,155 or less (for 2 borrowers, $216,245 or less).
• The property needs to be your principal place of residence, meaning you must live in it and not rent it out.
• You can't buy a property from a family member.
• You need to be a natural person, meaning you are not buying as an organisation or trust.
• You can't own any interest in any land at the time of the purchase or be a shareholder in any private corporation that owns land.

Check out the Homebuyer Fund's eligibility quiz to see if you qualify.

Our expert says: Don't jump in without comparing options

"Shared equity schemes can be a helpful solution if you're struggling to save up a full deposit. But it's important to be mindful of a couple of facts:

1. The Fund will own a portion of your property
2. You're limited to specific lenders so may find you're not offered competitive interest rates

It might be a good idea to speak to a mortgage broker, who will meet you free of charge to discuss your options. They can typically map out your financial situation and whether there are more cost-effective options for you."

Rebecca Pike

Editor, Money

What are the rules and restrictions around the properties you can buy?

You can purchase a property anywhere in Victoria, including Melbourne, Geelong and regional towns. However, there are price caps for different locations.

Price caps

If you're buying in metropolitan Melbourne or Geelong the maximum purchase price of an eligible property is $950,000. In regional Victoria the maximum price is $700,000.

Can I get a home loan from any lender?

No. To get help from the Homebuyer Fund you need to also get approved for a loan with 1 of the 4 lenders participating in the scheme:

• Bank Australia
• Bendigo Bank
• Indigenous Business Australia
• Unity Bank

Am I eligible for other grants and concessions?

You can take advantage of the Homebuyers Fund and still qualify for other schemes like stamp duty concessions and grants for first home owners (if you are eligible).

What are the advantages of buying a home with the Homebuyer Fund?

Saving a standard 20% deposit is getting increasingly difficult for many Australians. And it gets harder every year that property prices rise.

The biggest advantage of the fund is that you only need a 3.5% or 5% deposit. And if the fund covers enough of the purchase price you can avoid paying lender's mortgage insurance. This can save you thousands of dollars in LMI premiums.

What are the disadvantages?

The Victorian Homebuyer Fund is a shared equity scheme. Equity is the value of the property, minus any debts you owe. Because the fund is paying for the part of the property, it will own that proportion of the property.

You will have to repay the fund, either in instalments or when you sell the property.

Apart from shared ownership, the fund also imposes other obligations, like the annual review mentioned above. And if you want to sell or refinance in the first 2 years you need the fund's approval.

You are also limited in your choice of lender.

Before entering into a shared equity arrangement with the Homebuyers Fund you need to understand these extra obligations.

Frequently asked questions

• How many places are available for the Victoria Homebuyer Fund?

  The Fund has an investment of $2.8 billion and is expected to help 18,000 households. There's a cap on the number of applications that can be received in each financial year, but it's unclear exactly what that cap is.

• How do I apply for the Victoria Homebuyer Fund?

  You will first need to fill out the eligibility questions on the State Revenue Office Victoria website. If you meet the required criteria, you will receive an email with the next steps.

• Will I need to pay any other costs?

  Yes, you will need to pay other costs associated with buying a property. This includes conveyancing, any loan application fees, building inspections and stamp duty (unless eligible for concessions or exemptions).

Written by

Richard Whitten

Senior Money Editor

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Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

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