First Home Buyer Guide
Buying your first home is one of the biggest financial decisions you will make. The good news: there are more government incentives, lower deposit options, and more lenders competing for your business than ever before. This guide walks you through everything from deposit size to settlement day.
1Key Financial Priorities
Save a sufficient deposit
Most lenders require at least 5% of the purchase price. A 20% deposit avoids Lenders Mortgage Insurance (LMI), which can add thousands to your loan cost. The First Home Guarantee Scheme lets eligible buyers purchase with just 5% and no LMI.
Understand your borrowing capacity
Lenders assess your income, expenses, existing debts, and credit history. Use a borrowing calculator to estimate your capacity before you start inspecting properties. Remember that lenders also apply a 3% buffer above the advertised rate when assessing serviceability.
Check your eligibility for grants and schemes
The First Home Owner Grant (FHOG), First Home Guarantee, and stamp duty concessions vary by state. In some states, first home buyers pay zero stamp duty up to a certain purchase price. Check our Government Incentives guide for full details.
Get pre-approval before you shop
Pre-approval gives you a clear budget ceiling and signals to vendors that you are a serious buyer. It typically lasts 90 days and involves a credit check. Avoid applying to multiple lenders simultaneously as each application creates a hard inquiry on your credit file.
2Best Loan Types for This Stage
Variable Rate Home Loan
Good starting pointRates can fall over time, and many variable loans allow extra repayments and redraw without fees. The trade-off is that your repayments can rise if the RBA increases the cash rate.
Fixed Rate Home Loan
Consider for certaintyLock in a rate for 1 to 5 years for predictable repayments. Useful if rates are low and you expect them to rise, but break costs apply if you exit early. Most fixed loans limit or prohibit extra repayments.
Split Loan
Best of both worldsFix part of your loan for security and keep the rest variable for flexibility. Commonly used by first home buyers who want predictability but still want the option of making extra repayments.
Low Deposit Loan (95% LVR)
Viable with cautionIf you use the First Home Guarantee Scheme, you can borrow up to 95% without paying LMI. Outside the scheme, LMI can cost $10,000 or more on a $500,000 loan at 95% LVR.
3Insurance Needs at This Stage
- ✓Building and contents insurance from settlement day
- ✓Income protection insurance to cover your repayments if you cannot work
- ✓Life insurance, especially if you have dependants
- ✓Mortgage protection insurance is optional but worth considering
4Common Mistakes to Avoid
- ✗Borrowing the absolute maximum the bank will lend, leaving no financial buffer
- ✗Not accounting for stamp duty, conveyancing, building inspection, and moving costs
- ✗Skipping the building and pest inspection to save $600 on a $600,000 purchase
- ✗Closing credit cards or applying for new credit in the months before your application
- ✗Forgetting about ongoing costs: council rates, strata fees, maintenance
5Tips for Getting the Best Rates
- 1Compare at least five lenders, including non-bank lenders who often have sharper rates
- 2Ask your broker or lender to price-match a competitor offer
- 3Consider a mortgage offset account to reduce your interest without losing access to funds
- 4Check whether cashback offers of $2,000 to $4,000 offset any higher rate costs
- 5Review your rate annually as lenders often reserve their best rates for new customers
