First Home Owner Grant (FHOG) & Stamp Duty Concessions
First Home Owner Grant: $10,000 for new homes valued under $750,000
Stamp Duty:
- Properties under $600,000: 100% exemption (you pay zero stamp duty)
- Properties $600,000–$750,000: Sliding scale reduction
- Properties over $750,000: Full stamp duty applies (~5.5%)
Victorian Homebuyer Fund (VHF): The government contributes up to 25% of the purchase price as a shared equity partner.
- Your deposit: Only 5% ($35,000 on a $700K property)
- Government: 25% ($175,000)
- Bank loan: 70% ($490,000)
- Maximum property price: $950,000
- Requirement: Must self-occupy for the first year
Smart VHF strategy: Purchase using VHF, live in the property for 12 months, then refinance after appreciation to buy out the government's share. Annual interest savings at the 93.5K contribution level: approximately $14,000.
The Rentvesting Strategy — Our Top Recommendation
If you're a first home buyer with investment goals, we strongly recommend Rentvesting over buying a dream home:
Rentvesting = Rent where you want to live + buy an investment property where the numbers work.
Why? Self-occupied homes and investment properties have completely opposite selection criteria:
- Dream home: Close to work, nice neighbourhood, renovated kitchen, personal taste
- Investment: Large land (500+ sqm), 85%+ land value ratio, high rental yield, growth suburb
Trying to combine both means compromising on everything. A $700K property in your preferred inner suburb might yield 3% with zero growth potential. The same $700K in Cranbourne or Hampton Park yields 5%+ with granny flat upside and 8% capital growth.
The plan: Rent a nice apartment in your preferred area ($400–$500/week), buy a $700K investment property earning $600+/week. The investment property pays for itself while building equity. In 5–7 years, the equity growth funds your dream home purchase.
Deposit & Borrowing Capacity
How much do you need?
- 20% deposit (standard): $140,000 on a $700K property
- 10% deposit + LMI: $70,000 + $1,500–$1,800 Lenders Mortgage Insurance
- Professional exemption (nurses, accountants): 10% deposit, NO LMI
- VHF scheme: Just 5% ($35,000)
Borrowing capacity rule of thumb: Approximately 5× your pre-tax annual income.
- $100K salary → ~$500K borrowing
- $150K salary → ~$750K borrowing
- Each $10K in annual rental income adds $5,000–$6,000 to borrowing capacity
Couple strategy for maximum borrowing: Put Property 1 in one person's name only (clean debt allocation). The other person maintains a clean credit profile for Property 2. This maximises total borrowing capacity across two properties.