Victorian Homebuyer Fund
The Homebuyer Fund allows eligible Victorian home buyers to enter the market with 5% deposits. The government will contribute up to 25% of the purchase price, but will own a share of the home in exchange.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
The Victorian state government has set up a shared equity scheme to support home buyers. The Victorian Homebuyer Fund will cover up to 25% of a property's value while the buyer only has to provide a 5% deposit.
This allows the buyer to enter the market much faster with a small deposit. They can also avoid paying lenders mortgage insurance (LMI), which borrowers with small deposits usually have to pay. But there's a catch: The Homebuyer Fund is paying for part of your property, which means the fund owns part of it.
How does the Homebuyer Fund work?
If you have saved a 5% deposit and are looking to buy a home in Victoria, you can apply to the Homebuyer Fund. If you meet all the eligibility criteria (including property value, location and income), the fund will pay up to 25% of your property's value.
Here's a simple example:
- You buy a property in Melbourne for $700,000.
- You have a 5% deposit, or $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.
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
There is an income limit for applicants to the fund. If your income increases above the threshold ($125,000 for an individual or $200,000 for 2 buyers) after you've bought the property, then the Victorian Homebuyer Fund expects you to start repaying its share of the property.
You can also make voluntary repayments of the Homebuyer Fund's share of the property. But you must make these repayments in specific amounts that equal at least 5% of the fund's share. For example, if the fund owns 25% of your home then you can make a 5% repayment, but not a 2% repayment.
Who is eligible?
To apply for the fund you need to meet multiple criteria:
- You need to be a citizen or permanent resident aged 18 or older.
- You need a gross annual income of $125,000 or less (for 2 borrowers, $200,000 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.
What are the rules and restrictions around the properties you can buy?
You can purchase a property in Melbourne, Geelong or in a long list of regional Victorian locations.
If you're buying in Melbourne or Geelong the maximum purchase price of an eligible property is $950,000. In regional Victoria the maximum price is $600,000.
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 2 lenders participating in the scheme:
Am I eligible for other grants and concessions?
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 5% deposit. And if the fund covers at least 15% of the purchase price you can avoid paying LMI completely. 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.
More guides on Finder
Athena Fixed Home Loan
A review of the Fixed Home Loan from Athena.
How much less can you borrow under new APRA home loan rules?
A stricter eligibility test could cut your borrowing power by 5%.
Why are the CBA and ANZ share prices in the red?
Shares in the major banks have risen more than 60% in the last 12 months.
RBA Survey: Half of experts say Big Four will raise rates out of cycle, cash rate holds
With the property market showing no signs of slowing down, experts are split on what measures will be taken to dampen price growth.
SME Recovery Loan Scheme
The government's SME Recovery Loan Scheme is designed to help small businesses get back on their feet. Apply by 31 December 2021.
Super low 1.59% home loan rate – but what’s the catch?
Greater Bank has dropped some fixed rate home loans to just 1.59%. Find out if you're eligible to save thousands on your mortgage.
Why are the CBA and WBC share prices stumbling today?
Shares in the major banks have risen more than 50% in the last 12 months.
G&C Mutual Bank Retirees Access Home Loan
Read our review of G&C Mutual Bank’s Retirees Access home loan to learn more about this reverse mortgage.
RBA cash rate hold: Why Aussies are refinancing in record numbers
As the low home loan rate environment endures, Australian borrowers refinanced $17.2 billion in 1 month.
G&C Mutual Bank Fixed Rate Home Loan
A review of G&C Mutual Bank’s fixed rate home loan. Discover the features and benefits of this loan.
Home Loan OffersImportant Information*
Find the right home loan now
Sign up for our FREE 8-week course to get on the property ladder.
Ask an Expert