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If you are saving hard in the suburbs, riding the tram to Saturday opens and wondering whether that $10,000 First Home Owner Grant can go straight on the contract deposit, you are not alone. The short answer is no for the initial deposit at contract, but yes for your overall funds to complete at settlement, provided your lender lines things up correctly. Here is the longer, more useful answer, tailored for buying in Melbourne as at 2 September 2025.
The quick answer, then the long one
Quick answer: the Victorian First Home Owner Grant (FHOG) is paid at settlement if your lender lodges as an approved agent, or after completion if you apply directly to the State Revenue Office. It is not cash you can hand to the agent for the contract deposit. Think of it as money that helps you finish, not start.
Long answer: you can still get a deal done by combining the FHOG with a smaller negotiated deposit, a deposit bond or bank guarantee, and, where suitable, the federal First Home Guarantee that lets you buy with a five per cent deposit without Lenders Mortgage Insurance. Add Victoria's first home stamp duty relief and you can shave thousands off upfront costs, freeing your savings to cover the deposit the agent actually needs.
First, what the FHOG is (and isn't) in Victoria
In Victoria, the FHOG is $10,000 for eligible buyers of a new home valued at $750,000 or less. 'New' means newly built or substantially renovated, not an established home that has been lived in. You must occupy the home as your principal residence for at least 12 months, starting within 12 months of settlement or completion.
Most people apply through an approved agent such as their bank or credit union. If you need the grant for settlement or a first construction drawdown, you must apply through an approved agent so the money arrives on time.
Two practical implications flow from this:
Timing: when you buy an already-built property and your lender lodges the FHOG application, the grant is paid at settlement, not at exchange of contracts. If you lodge directly with the SRO, you can only apply after completion and, once approved, the SRO pays the grant to your nominated account. Either way, this is too late for the deposit most vendors expect when you sign.
Use of funds: because the grant reaches the deal at settlement, lenders can count it toward your funds to complete. That helps cover the balance of the price and costs, but it does not replace the contract deposit.
How deposits actually work in Melbourne
There is no law fixing the deposit amount, but in practice ten per cent is common and it is usually paid when your offer is accepted or when you sign the contract. At auction, it is typically due on the day. Private sales sometimes allow a part deposit upfront with the remainder by a set date. Off-the-plan contracts have a statutory 10 per cent cap on the deposit, and the amount is negotiable within that limit.
Deposits are normally held in trust until settlement. Early release to the vendor under section 27 is possible but far from guaranteed, so you should not rely on that to solve your cash flow.
The point is simple: the deposit is an early, separate payment driven by the contract, while the FHOG is a later payment governed by eligibility and settlement.
'So… can I use the First Home Owner Grant as a deposit?'
Not for the initial contract deposit. The grant will not be sitting in your bank account in time to satisfy the agent or the auctioneer. It lands at settlement via your lender or, if you apply later, after completion.
Yes as part of your settlement funds. Your lender can include the $10,000 in the overall numbers, which reduces how much of your savings you need to contribute at settlement. It is a subtle distinction, but it matters when your solicitor or conveyancer tallies up the statement of adjustments.
Practical ways Melbourne buyers bridge the deposit gap
If you are rich in eligibility but light on ready cash for the deposit, consider these tools that we regularly see in Victorian contracts.
1) Negotiate the deposit
Even at auction campaigns, agents and vendors sometimes accept five per cent at signing with the balance of the ten per cent later, especially if your finance is strong and settlement is short. In private sales, part-deposit arrangements are common. The key is to agree and document the figure and due date in the contract before you sign. Consumer Affairs Victoria confirms there is no mandated amount, even if ten per cent is customary.
2) Use a deposit bond or bank guarantee
A deposit bond substitutes for cash at signing. You pay a fee to the bond issuer, the vendor gets the security they need, and the actual cash is paid at settlement when your FHOG and loan funds arrive. A bank guarantee is a similar instrument issued by your bank. Both need to be expressly permitted in the contract, and some vendors or developers have preferred providers.
3) Lean on the federal First Home Guarantee (if you qualify)
Under the First Home Guarantee administered by Housing Australia, eligible buyers can purchase with a minimum five per cent deposit, with a government guarantee that can remove Lenders Mortgage Insurance. Income caps and price caps apply, and the scheme looks back ten years to assess prior ownership. Check your postcode's price cap, as Melbourne and Geelong caps differ from the rest of Victoria.
This does not hand you cash for the contract deposit, but it can lower the amount you need to have on the day you sign, which in turn makes the FHOG's settlement-timed boost more meaningful.
4) Count every Victorian concession you are entitled to
Even if you are buying an established home and cannot receive the FHOG, you may still qualify for stamp duty relief. Victoria offers a full exemption for first home buyers at $600,000 and below, and a sliding concession from $600,001 to $750,000. This does not change the deposit mechanics, but it reduces total cash pressure on your savings between contract and settlement.
5) Off-the-plan timing
If you are buying off the plan, your deposit cannot exceed ten per cent and is negotiable within that ceiling. Given the longer lead time to settlement, many buyers use deposit bonds for the initial ten per cent while they continue saving. The FHOG will still arrive only at settlement, so you plan your cash flow accordingly.
Worked scenarios to make it real
Scenario A: Inner-north apartment, already built
Purchase price: $650,000 in Brunswick Contract deposit expectation: ten per cent ($65,000) Your savings today: $45,000 FHOG: not applicable if the apartment is established; applicable if it is a new build that has never been occupied before.
If the property is new and FHOG-eligible, you still cannot hand the $10,000 to the agent as deposit. Options include negotiating five per cent at signing ($32,500) with the balance of the deposit due later, using a deposit bond for the full ten per cent, or pairing a five per cent deposit with the First Home Guarantee if your income and the price cap line up. Stamp duty will not be fully exempt at $650,000, but the concession can reduce the amount due at settlement.
Scenario B: Off-the-plan townhouse in Preston
Contract price: $740,000 Deposit cap: capped at ten per cent under Victorian law, often negotiable to a lower percentage in practice. FHOG: eligible at $10,000 if the home is new and the price is under $750,000.
Strategy: use a deposit bond for the ten per cent now, keep saving during construction, have your lender lodge the FHOG application as an approved agent so the $10,000 arrives at settlement with your loan advance.
Scenario C: Western suburbs house, shared equity
Purchase price: $800,000 in Melton South You have five per cent savings.
Consider the Victorian Homebuyer Fund, which can contribute up to 25 per cent of the purchase price in exchange for an equivalent share. There is an income test and Melbourne price cap rules apply. The program was extended on 1 July 2025 until funds are exhausted, so availability is limited and you must check current status before relying on it. Off-the-plan purchases are not eligible.
The step-by-step plan we recommend
Confirm FHOG eligibility early. Make sure the property is 'new' in the SRO sense and under the $750,000 cap. If you are buying established, skip FHOG and focus on duty relief.
Talk to your lender before you sign. Tell them you want the FHOG to be part of funds to complete and ask them to lodge as an approved agent so the grant lands at settlement.
Choose your deposit strategy. Negotiate five per cent, use a deposit bond or bank guarantee, or combine a smaller cash deposit with the First Home Guarantee where eligible. Put the arrangement in the contract.
Stack other support. Use the stamp duty exemption or concession if your price falls in the $600,000 to $750,000 window. The duty calculator is useful, but your conveyancer will run the precise figures in the statement of adjustments.
Avoid timing traps. Remember, if you apply directly to the SRO, you can only do so after settlement or completion, and you will not see the money until the SRO approves the application. That is fine for reimbursement, not for deposits.
Let your conveyancer sanity-check the contract. Confirm the deposit clause, whether deposit bonds are acceptable, and any special conditions linked to finance or grants. That includes off-the-plan warning notices and the deposit cap.
Common myths, gently debunked
'I can use the FHOG on any first home.' Not in Victoria. The grant only applies to new homes. Buying established? Focus on duty relief instead.
'The FHOG can be my deposit.' No. It can help your settlement funds, not the contract deposit. Plan a deposit solution up front.
'The deposit must be ten per cent.' Ten per cent is typical, but the amount is negotiable in private sales and capped at ten per cent for off-the-plan.
'Federal and state help are either/or.' You can often combine the FHOG (state), stamp duty relief (state) and the First Home Guarantee (federal), subject to eligibility and lender policy.
A Melbourne-centric checklist for your next open-home Saturday
Savings today: what can you comfortably put down as a contract deposit this week.
FHOG status: are you looking at new stock under $750,000.
Guarantee options: do you meet income and price caps for the First Home Guarantee so you can buy with five per cent and no LMI.
Contract settings: is a five per cent deposit, deposit bond or bank guarantee acceptable to the vendor.
Stamp duty: are you under $600,000 for a full exemption, or between $600,001 and $750,000 for a concession.
Off-the-plan: confirm the ten per cent deposit cap and the warning notice requirements.
Final thoughts
Getting into your first home in Melbourne is a juggling act. The FHOG is a solid tailwind, but it arrives too late to be your contract deposit. With a bit of planning, you can still get your offer accepted, sign with confidence and let the grant do its job on settlement day.
If you would like a human to road-test your plan against the actual contract in front of you, we are very happy to help.
Free Section 32 contract review and friendly chat
Before you sign anything, send us the Section 32 vendor statement and the draft contract. We will review it, explain the deposit clause, check whether a deposit bond is permitted, and map how your FHOG, duty relief and any guarantees will flow at settlement. No cost for the first review.
Pearson Chambers Conveyancing