How to get a great deal on your first home loan

Buying your first property is a hugely exciting time, but it can also be stressful. There are so many things to consider, including saving the deposit, stamp duty and other costs of buying, along with shopping for a home loan and of course, finding the right property.

This page guides you through the basics of choosing a great value first home loan. It shows first home buyers how to work out how much you can borrow, and how to access the many concessions and grants for first home buyers, which could save you thousands.

Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)

2.44 % p.a.

variable rate

2.45 % p.a.

comparison rate

Suncorp Home Loan Offer

With the Suncorp Bank Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I) you can get a variable rate loan with low fees. Available with a 20% deposit.

• Interest rate of 2.44% p.a.
• Comparison rate of 2.45% p.a.
• Application fee of $0
• Maximum LVR: 80%
• Minimum borrowing: $150,000
• Max borrowing: $1,500,000

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Compare first home buyer loan rates

• What makes these loans good for first home buyers?

  Most home loans are available for first-time buyers and existing borrowers who want to refinance or buy a second home. There aren't many loans that are only offered to first home buyers.

  All the loans in the table above are owner-occupier loans, meaning they're for homebuyers and not investors. We've included a mix of fixed and variable rate home loans with competitive interest rates. Many loans are available with deposits smaller than 20%. To find these loans, look at the Max LVR (loan to value ratio) column in the table. If the maximum LVR is 90% or higher, then it's available with a 10% deposit or smaller.

*The loans in the table above may also be available for non-first home buyers. But first home buyers may find these loans useful because many have low interest rates or max insured LVRs above 80%, meaning you can get them with a smaller deposit.

Work out your costs and borrowing power

Before you can get your first home loan or even try to buy a home you need to know how much it will all cost you. Your deposit is usually the biggest cost, and the size of your deposit affects which home loans you can get (we'll cover deposit saving in the next section).

But there are many other costs to consider beyond the deposit:

• Stamp duty. Every property purchase attracts stamp duty, a tax charged by state and territory governments. Stamp duty can add thousands or tens of thousands of dollars to your purchase costs. Luckily, many first home buyers can get a discount or exemption if they're buying their first home.
• Inspections. While not compulsory, getting a professional building and pest inspection before buying a property is always a good idea.
• Conveyancing. You need a legal expert to review your contract of sale (for the property purchase), check the property title is correct and represent you at settlement. The services of a conveyancer can cost around $1,000-$2,000.
• Fees. There's a fee to register your mortgage and your lender may charge other upfront fees at settlement.
• Council rates and strata. When you take ownership of a property you have to pay council and water rates. If you're buying a property on a strata title there will be strata costs too.
• Insurance. You need to take out a home insurance policy on your home before settlement occurs and you take ownership of the property. If you're buying a strata property (an apartment or townhouse), strata insurance is usually included in the strata fees and covers the building.

How much can you borrow?

You can use a borrowing power calculator to get a clear idea of how much a bank will lend you.

You will need to enter your income (and your partner's income if making a joint application), plus the number of dependents and any debts you have. The calculator will then estimate your expenses using a standard cost of living index. The end result will only be an estimate but it gives you a better idea of how much you can borrow.

You can also check out our guide on how to increase your maximum borrowing capacity.

Save your deposit

Once you have a good understanding of your property buying costs and how much you can borrow, it's time to think about the deposit.

Loan to value ratio (LVR) is a fancy mortgage term for your deposit size in relation to your property's value. If you bought a $500,000 property with a $100,000 deposit, that would be a 20% deposit, or 80% LVR. Having a 20% deposit means you can avoid paying lenders mortgage insurance.

Max Phelps, founder of Golden Eggs and creator of the FIVE 2 Money Diet, says first home buyers also need to prepare themselves for the financial responsibilities that come with owning a home, which goes much further than just saving the deposit.

"How good are you at managing your expenses and building up savings? If you've gotten into bad spending habits and money feels a little out of control, imagine how much worse it would feel with a giant mortgage hanging over your head," Phelps says.

"People spend an average 30% of their income on a mortgage, but to get ahead, you should plan to still save 20% of your income as well – this will set you apart in the long run."

For those who are considering asking their parents for help with a home loan deposit, Phelps is cautious.

"My advice to parents thinking about putting their property on the line for their kids would be to make sure the kids are good savers first," he says.

"We find that having a few bank accounts spread across at least two banks dramatically increases savings and improves confidence in buying a first home."

Lenders mortgage insurance (LMI)

If your deposit is smaller than 20% of the property's value (so, your LVR is 81% or higher), your lender will charge you lenders mortgage insurance. This can cost you thousands or tens of thousands on top of all your other expenses (although you can often borrow it alongside your loan amount).

LMI costs vary depending on your loan amount and deposit size. If your LVR is 85% (a 15% deposit) then your LMI will be less than if you have an LVR of 95%.

Here are some examples.

Property price	Deposit	LMI
$500,000	10% ($50,000)	$8,679
$500,000	5% ($25,000)	$14,871
$700,000	10% ($70,000)	$15,498
$700,000	5% ($35,000)	$27,946
$900,000	10% ($90,000)	$19,926
$900,000	5% ($45,000)	$35,931

The LMI amounts above are taken from Genworth's LMI premium estimate calculator and are examples only.

How first home buyers can save a deposit

Building that deposit for your first home is tough, especially if you're renting. And when house prices rise the amount you need to save only grows. Finding a low deposit home loan can make the task easier. But there are a few other ways to build your deposit:

• Parental gift or inheritance. Most lenders want to see genuine savings. In other words, money you've earned yourself. But many will accept at least part of a deposit in the form of a cash gift or inheritance from your parents, if you can come to an arrangement. Some lenders only need 5% of your deposit to be genuine savings.
• Sell assets. You can sell valuable assets and use the cash to boost your deposit. You may need to hold the cash in your account for six months in order for it to qualify as genuine savings.
• Find a guarantor. As mentioned above, a parent can use their property as security to guarantee part of your deposit. This reduces the amount you have to save and might help you avoid LMI costs too.

Read our full guide to building your deposit savings here.

Access government support

First home buyers in Australia have access to a large and sometimes confusing range of state and federal grants, concessions and other schemes.

Eligibility for these programs depends on factors like your property value and whether it's newly built or already exists. Every state and territory has different rules and policies.

Here is a list of the various first home buyer grants and concessions:

First home owner grants

Some first-time buyers are eligible for a cash grant. These grants can run up to $10,000 or even more in some cases. To qualify you often need to be purchasing a new or off-the-plan property, with a limit on the overall value of the property.

These grants differ in every state and territory.

Check your eligibility with our state-by-state first home owner guide

Stamp duty exemptions and concessions

Stamp duty is one of the biggest costs associated with buying a property. Luckily, many first-time buyers can avoid stamp duty completely or get a discount on this tax. In NSW, for example, first home buyers don't have to pay stamp duty on properties valued below $650,000, saving them up to $22,000.

Learn more about the stamp duty exemptions and concessions in each state and territory.

The First Home Loan Deposit Scheme

If you only have a 5% deposit saved and you're a first home buyer, you could be eligible for the First Home Loan Deposit Scheme. Under this scheme eligible borrowers can borrow 95% of their property value with a 5% deposit and have the government guarantee the remaining 15% of the deposit, allowing them to avoid LMI costs.

This is a federal government scheme.

The First Home Super Saver Scheme

Another federal scheme, the First Home Super Saver Scheme allows first home buyers to make extra payments into their superannuation and then withdraw them to use for a home deposit. This ends up saving you in tax while helping you build your deposit.

HomeBuilder

A federal policy introduced to stimulate the economy after the pandemic hit, HomeBuilder provided grants of up to $25,000 ($15,000 as of 1 January 2021) for Australians building a new home or renovating an existing one. This policy has some very narrow eligibility criteria based on the usage of the grant, your income, the property value or renovation cost.

Keep in mind that first home buyers can often qualify for multiple grants and other schemes at the same time.

Stamp duty discounts

As part of the Victorian state budget update in November 2020, it was announced that all homebuyers, including first timers, now have access to a stamp duty discount of up to 50% of the purchase price of residential property in Victoria.

For those purchasing property in Victoria, a full 50% stamp duty discount will apply to all buyers of newly built homes valued at up to $1 million. For those buying existing homes, a 25% stamp duty discount will apply on properties priced up to $1 million.

This discount on stamp duty in Victoria will be available for those who enter a purchase contract between 25 November 2020 and 30 June 2021. Importantly for first home buyers, this discount applies in addition to any other waivers or concessions that you may be eligible for.

How to find the right home loan

First home buyers, like all other borrowers, need to find a home loan that suits their needs and has a competitive interest rate.

Here's how to find one:

• Low interest rate. No one wants to be stuck with a high interest rate, especially first home buyers. A lower rate means lower repayments, which makes it a cheaper mortgage. Interest rates are very low now, especially for new customers. So it's a good time for new buyers to shop around for their first home loan and look for a lower rate loan.
• Fixed versus variable. Both fixed rate and variable rate loans are very competitive at the moment, with fixed loans now lower than variable loans in many cases. But it's not just about getting a low rate. Variable loans typically offer more features and flexibility. With a fixed rate loan you know that the rate will never move up (or down) during the fixed period.
• Deposit size. As stated above, having a bigger deposit lowers your costs. It also makes it easier to get a home loan approved.
• Repayment type. Most first home buyers will choose a loan with principal and interest repayments. With these home loans you repay the principal and the interest together. These loans often have lower interest rates too. But you could consider an interest-only loan as well. Your interest rate will be higher but your repayments will be lower in the short term. This can help if you are struggling to make repayments but it's a big risk because it costs you more in the long run.
• Features. First home buyer loans are often basic home loans, without extra features like an offset account. This is fine if you're really just concerned with getting a low deposit loan with a low interest rate. But if you have extra money to put into an offset account you might want to consider a home loan that comes with one.

Get expert help

You don't have to find your first home loan all by yourself. Mortgage brokers are experts who have access to home loans from a panel of lenders. They can suggest suitable options for you and help you with the whole application process. Their services are usually free. While most people are perfectly capable of getting their own home loan, a broker can be a useful guide.

Find a mortgage broker today