The Victorian Homebuyer Fund is a state-government shared equity scheme that lets eligible buyers purchase a home with a 5% deposit and the government taking a 25% (or 35% for First Nations buyers) equity stake in the property. There’s no Lenders Mortgage Insurance, no requirement to refinance immediately, and the government’s share is interest-free. The catch: when you sell or refinance, the government takes its 25% (plus 25% of any capital gain), and there are eligibility restrictions that catch out many first-time applicants.
This guide covers the eligibility criteria, the cost mechanics, the capital-gain treatment, and the contract checks specific to Vic Homebuyer Fund purchases.
How shared equity works
Under shared equity, the buyer and the government jointly purchase the property. The government takes a registered equity stake — not a loan, not a mortgage. Mechanics:
- Buyer contributes 5% deposit (cash)
- Buyer’s home loan covers 70% (or 60% for First Nations)
- Government takes 25% (or 35%) equity stake
- No interest, no fees on the government’s share
- No requirement to refinance the government out at any specific time
- When the property is sold, government receives its proportional share of the sale proceeds
Eligibility — who qualifies
| Criterion | Threshold (2024–25) |
|---|---|
| Income — single applicant | Up to $135,155 |
| Income — couple / joint applicants | Up to $202,733 |
| Property price cap (Melbourne metro) | $950,000 |
| Property price cap (regional Victoria) | $650,000 |
| Australian citizen / permanent resident | Required |
| Owner-occupier requirement | Yes — must live in property |
| First home or returning to homeownership | Both eligible |
Cost example — Vic Homebuyer Fund vs traditional mortgage
| Aspect | Traditional 5% deposit + LMI | Vic Homebuyer Fund |
|---|---|---|
| Property price | $700,000 | $700,000 |
| Buyer deposit | $35,000 | $35,000 |
| Buyer loan | $665,000 | $490,000 (70%) |
| Government equity | — | $175,000 (25%) |
| LMI | $28,000+ | $0 |
| Monthly repayment (6.5% rate, 30yr) | $4,210 | $3,098 |
| Annual saving | — | $13,344 |
Capital gain — the trade-off
The government’s 25% share of any capital gain is the scheme’s major economic feature. Example:
- Buy at $700,000. Government share: $175,000 (25%)
- Sell 8 years later at $1,000,000. Total gain: $300,000
- Government’s share of proceeds: $250,000 (25% of $1m)
- Buyer’s share: $750,000
Net gain to buyer: $750,000 minus loan repaid minus original deposit = $750,000 − $490,000 − $35,000 = $225,000 gain (vs $300,000 if owned outright, ignoring LMI savings and lower repayments).
The buyer captures 75% of capital gain, the government takes 25%. For long-term holders, the government’s share grows with property values — by year 20+, the government’s contribution can become substantial.
Buying out the government early
Buyers can buy out the government’s share at any time. The buyout amount is calculated on the current property value, not the original. Mechanics:
- Independent valuation by a panel valuer (paid by buyer)
- Government’s share = 25% of current valuation
- Refinance to cover buyout
- Standard mortgage thereafter
The buyout amount rises as the property appreciates. Many buyers defer buyout because keeping the government share is cheaper than refinancing.
Restrictions during ownership
- Must occupy the property (no rental except short absences)
- Major renovations may require consent
- Cannot subdivide
- Government has standing as a co-owner — input into major decisions
Contract checks
- Confirm property meets price cap for the area
- Confirm income within eligibility threshold
- Allow extra time for Vic Homebuyer Fund approval (4–8 weeks)
- Special condition making contract conditional on Vic Homebuyer Fund approval
- Right to rescind if approval declined
- Confirm participating lender is willing to lend on the proposed loan portion
Ready to check your contract? Upload your Section 32 or Contract of Sale at precontractreview.com for a pre-contract check — typically in just a few minutes.