How the Victorian Homebuyer Fund Worked (scheme now closed to new participants)
⚠️ The Victorian Homebuyer Fund is CLOSED to new participants. This page is kept online as a reference for people who already hold a VHF shared-equity interest and as background on how the scheme operated. Do not plan a purchase around it. Confirm the current position with the State Revenue Office and, for the current Commonwealth 5% deposit pathway, with Housing Australia — First Home Guarantee. Everything below is written in the past tense for that reason.
The Victorian Homebuyer Fund (VHF) was a shared equity scheme under which the Victorian government contributed up to 25% of the purchase price as a co-owner.
The structure:
- Your deposit: 5% ($35,000 on a $700K property)
- Government contribution: 25% ($175,000) — interest-free
- Bank loan: 70% ($490,000)
- No Lenders Mortgage Insurance (LMI) required
Eligibility requirements:
- Single income: Under $130,000/year
- Family income: Under $200,000/year
- Maximum property price: $950,000
- Must be an Australian citizen or permanent resident
- Must self-occupy for the first 12 months
- Cannot already own property
What makes VHF powerful: On a $700K property, a standard 20% deposit is $140,000. With VHF, you need just $35,000 — that's $105,000 less cash upfront. The government holds a 25% equity share but charges zero interest on it.
The Smart VHF Exit Strategy
The VHF is not just a first home buyer scheme — it's a wealth-building launchpad when used strategically:
Step 1 — Purchase with VHF:
- Buy a $700K property with 5% deposit ($35,000)
- Government contributes 25% ($175,000)
- Your loan: 70% ($490,000)
Step 2 — Add value during your 12-month occupancy:
- Light renovation: $10K–$15K (paint, flooring, landscaping)
- Research granny flat feasibility for future conversion
- Property appreciates naturally (~8% = $56,000)
Step 3 — Refinance and buy out government share (after 12+ months):
- Property now worth ~$770K (after renovation + market growth)
- Refinance at 80% LVR: Bank lends $616,000
- Pay out government's 25% share: $192,500 (25% of new value)
- Your new loan: ~$616,000
Step 4 — Convert to investment:
- Move out after 12 months
- Rent the main house: $600/week
- Build granny flat: $110K → additional $380/week
- Total rental income: $980/week on a $616K loan
Annual interest savings at the government's contribution level: approximately $14,000/year during the VHF period.
VHF vs Standard Purchase — Which Is Better?
Choose VHF when:
- You have less than $140K saved for deposit
- Your income is under the threshold ($130K single / $200K family)
- You plan to live in the property for at least 12 months
- You want to minimise upfront cash and preserve savings for renovation
Choose standard purchase when:
- You have 20%+ deposit saved
- Your income exceeds VHF thresholds
- You want to buy purely as an investment (VHF requires owner-occupancy)
- You're buying your second or subsequent property
The maths: | | VHF Purchase | Standard 20% | |---|---|---| | Deposit needed | $35,000 (5%) | $140,000 (20%) | | Government equity | $175,000 (25%) | $0 | | Bank loan | $490,000 (70%) | $560,000 (80%) | | Monthly repayment (IO 6.5%) | $2,654 | $3,033 | | Monthly saving | $379/month | — |
On those figures VHF reduced the upfront requirement by $105K and monthly repayments by $379. The trade-off was that the government shared in 25% of any future change in value — in both directions. Note that VHF is now closed to new participants.