The Pros and Cons of Buying Your First Home in Victoria

The Two Decisions Every First Home Buyer in Victoria Makes

Victoria offers ADF members a combination of federal low deposit schemes and state stamp duty relief that removes two of the largest upfront barriers to property ownership. The decision you need to make is whether to aim for a 5% deposit and use the Australian Government 5% Deposit Scheme or build a larger deposit and access the Victorian stamp duty exemption on established homes. Both paths work, but they require different preparation.

Consider a buyer posted to Puckapunyal who wants to purchase in the regional market. They have $35,000 saved and are deciding whether to buy now with that 5% deposit or wait another 12 months to build the deposit to 10%. With the 5% scheme, they avoid Lenders Mortgage Insurance entirely. If they wait, they may still face LMI unless they reach 20%, but they gain more equity from day one and pay less in total interest. The scheme removed the place cap in October 2025, so availability is not the issue it used to be.

The stamp duty exemption in Victoria applies to properties valued up to $600,000, with a sliding concession up to $750,000. That exemption can save between $11,000 and $31,000 depending on the purchase price, which makes it one of the more valuable concessions available to Victorian buyers.

How the 5% Deposit Scheme Works for Regional Victorian Purchases

The 5% scheme caps properties in regional Victoria at $650,000 and Melbourne and regional centres at $950,000. Those caps determine which markets are accessible under the scheme. A buyer with a 5% deposit purchasing at $650,000 needs $32,500 in genuine savings, which must exclude any gifted deposits or borrowed funds. The remaining 15% is guaranteed by Housing Australia, not paid by the buyer.

Applications go through a participating lender, not directly through Housing Australia. Not all lenders participate, and not all participating lenders offer the same loan features. Some offer offset accounts, others do not. Some offer split rate structures, others limit you to fixed or variable only. Confirm what is available before you apply.

In regional markets like Ballarat, Bendigo, or Wodonga, the $650,000 cap limits access to the lower end of the market. In Melbourne, the $950,000 cap covers a broader range of suburbs but excludes inner and middle ring areas where median prices exceed the threshold.

Stamp Duty Relief and How It Changes the Deposit Calculation

Stamp duty in Victoria is calculated before any exemption is applied. For a property valued at $600,000, the standard duty is $31,070. The first home buyer exemption reduces that to zero. For a property valued at $700,000, standard duty is $38,070, and the concession reduces it to approximately $7,800. At $750,000, standard duty is $41,070, and the concession reduces it to roughly $11,700.

Those savings do not increase your deposit, but they reduce the cash required at settlement. If you are purchasing at $650,000 with a 10% deposit, you need $65,000 for the deposit plus settlement costs. Without the exemption, you would also need $33,070 for stamp duty. With the exemption, that $33,070 stays in your offset account or emergency fund.

The exemption applies to new and established homes, which gives Victorian buyers more flexibility than buyers in states where concessions are limited to new builds. You must move into the property within 12 months of settlement and live there for at least 12 continuous months.

Fixed Rate, Variable Rate, and Offset Account Access Under the 5% Scheme

Loan structure depends on which lender you use within the 5% scheme. Some lenders allow you to split your loan between fixed and variable, which lets you lock in part of your rate while keeping flexibility on the remainder. Others require you to choose one or the other.

Offset accounts are available with some participating lenders but not all. If you are posted interstate frequently or expect variable income from deployment allowances, an offset account gives you access to your savings without triggering redraw restrictions. Redraw is available on most loans, but it can be restricted or delayed depending on lender policy.

Interest rate discounts are typically lower on loans with a 5% deposit compared to loans with a 20% deposit. That difference is usually between 0.10% and 0.30% depending on the lender. On a $600,000 loan, a 0.20% difference costs roughly $1,200 per year. Factor that into your comparison when deciding whether to build a larger deposit.

Combining the 5% Scheme with the Victorian Stamp Duty Exemption

You can use the federal 5% deposit scheme and the Victorian stamp duty exemption on the same purchase. The schemes do not exclude each other. If you purchase an established home in regional Victoria at $600,000 with a 5% deposit, you pay no LMI under the federal scheme and no stamp duty under the Victorian exemption.

If you purchase at $700,000, you pay no LMI but roughly $7,800 in stamp duty after the concession. If you purchase at $950,000 in Melbourne under the 5% scheme, you pay standard stamp duty because the concession phases out entirely at $750,000. At that price point, stamp duty is approximately $51,070.

The combination works for buyers who have enough deposit to meet the 5% threshold but not enough to cover a 10% or 20% deposit plus full stamp duty. It also works for buyers who prefer to keep more cash in reserve rather than putting everything into the purchase.

When Waiting to Build a Larger Deposit Makes Sense

A larger deposit reduces the amount you borrow and the total interest you pay over the life of the loan. It also increases your equity from settlement, which gives you more options if you need to refinance, renovate, or sell within the first few years.

Consider a buyer purchasing at $650,000. With a 5% deposit, they borrow $617,500. With a 10% deposit, they borrow $585,000. Over a 30-year loan, the difference in total interest at a variable rate is several thousand dollars, depending on rate movements. The higher loan amount also means higher monthly repayments, which affects serviceability if your income changes due to posting or discharge.

If you are currently in shared accommodation or posted to a location where you do not want to purchase, waiting 12 to 24 months to build a larger deposit may reduce your overall cost. If you are paying rent that exceeds what your mortgage repayment would be, buying sooner with a 5% deposit may be the more cost-effective option.

What You Need Before You Apply for Pre-Approval

Pre-approval confirms how much you can borrow and locks in your application before you start looking at properties. It requires proof of income, proof of savings, and a clean credit history. For ADF members, proof of income includes your payslips and a letter from your unit confirming your employment status and allowances.

Savings must be genuine, which means held in your account for at least three months and not borrowed. If part of your deposit is a gift from family, some lenders will accept it, but it cannot form the majority of your deposit under most policies. The 5% deposit must come from your own verified savings.

Pre-approval does not guarantee final approval, but it gives you a clear budget and shows vendors and agents that you are in a position to proceed. Most pre-approvals are valid for three to six months depending on the lender.

How ADF Posting Cycles Affect Your Purchase Timeline

If you are posted every two to three years, purchasing in a location you may leave within that timeframe creates risk. You may not meet the 12-month occupancy requirement for the stamp duty exemption, or you may need to sell or rent the property sooner than planned. If you rent the property out before meeting the residency requirement, you may lose the exemption and be required to pay the duty in full.

If you are purchasing in a location where you plan to stay beyond your current posting, or if you are purchasing as an investment while renting elsewhere, the calculation changes. The stamp duty exemption does not apply to investment properties, but the 5% scheme can still be used for owner-occupied purchases where you intend to live in the property initially.

If you are considering purchasing in Victoria while posted interstate, confirm with your lender whether the occupancy requirement can be met within your posting timeline. Some buyers purchase before a confirmed posting to Victoria, but that creates risk if the posting does not proceed or is delayed.

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