First home buyer loans
Here's what first home buyers need to know about getting a good home loan, saving a deposit, and using first home owner grants and concessions other schemes.
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UBank Home Loan Offer
Apply for the UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000 and get a low rate plus no upfront or ongoing fees as well as unlimited redraws.
- Interest rate of 2.49% p.a.
- Comparison rate of 2.49% p.a.
- Application fee of $0
- Maximum LVR: 80%
- Minimum borrowing: $100,000
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- Completely free, expert home loan advice.
- Offers a suite of digital tools to make you a smarter borrower.
- Calculate your borrowing power with a free personalised home loan report.
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Australian Broking Awards
How do I compare first home buyer home loans?
While some lenders offer home loan products specifically for first home buyers, most do not. But an ideal mortgage product for a first home buyer usually:
- Has a 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. Some lenders offer special introductory variable rates, which start low for the first year or two but will revert to a higher rate later.
- Requires a 10% deposit (or lower). Saving a deposit is often one of the hardest challenges for first home buyers, especially if you need to save the traditional 20% of a property's value to qualify for a loan. Loans targeting first home buyers often have a max insured loan-to-value ratio of 90 or 95%, meaning you can get the loan with just a 5-10% deposit. But you'll need to pay lenders mortgage insurance if you're borrowing above 80%.
- Comes with few extra 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.
- Has 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 too. Your rate will be higher but your repayments will be lower (in the short term).
Am I eligible for any first home owners grants or concessions?
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 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.
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% 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.
A recent federal policy, HomeBuilder provides $25,000 grants 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.
How much can I borrow?
This is an important question for every first home buyer. 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.
How can I save up 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 ways, 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. 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 quality 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.
Can I get professional help with my loan?
You certainly can. 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.
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