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First home buyer loans guide February 2020
Buying your first home? Find the right home loan and get the information you need to buy your dream property.
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Buying your first property is one of life's biggest decisions. This page will guide you through the basics of choosing a good first home loan, working out how much you can borrow and accessing first home buyer grants and concessions.
Compare home loan options for first home buyers
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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, making your mortgage more affordable. 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?
There are two benefits first home buyers can access: first home owners grants and stamp duty concessions. Both benefits vary within each state and change over time.
In NSW first home buyers don't have to pay stamp duty on properties valued below $650,000, saving them up to $22,000. But first home buyers constructing or purchasing new homes can also receive a $10,000 grant (depending on the value of their property). In Victoria the grant can go as high as $20,000 if you're buying a new residential property outside Melbourne.
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.
Check your eligiblity with our state-by-state first home owner guide
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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Ask an Expert
Hi team,
My fiance and I are looking to go into partnership to buy a property with a family friend. The family friend has good borrowing capacity and will be getting a loan to buy the property, so the title will be in his name, but we are wondering if it is possible to enter into a vendor finance agreement with our family friend to buy a portion of the property while he is still paying off the loan to the bank?
Ideally, we would like to buy a portion of the property and also be on the title without having to subdivide. Is this possible?
We are also wondering if my fiance and I will qualify for the First Home Owners grant and the exception for stamp duty if we go into a vendor finance agreement? We do intend to build our first home.
Thank you!
Hi Bri,
Thanks for reaching out.
As a friendly reminder, here at finder we cannot make any recommendations but we can guide you on how you can come up with a choice that would best suit your needs. With regard to the option of entering into a vendor finance agreement, it would be best that you read this page as it will discuss more information about that agreement.
The same fees and taxes are payable with vendor finance as they would be with a standard home loan. So the amount of stamp duty payable will vary depending on which state you live in and the value of the property.
To sum it up, if you’re thinking of purchasing a property through vendor finance, you should seek a solicitor to run you through the process and legal considerations so that you may be guided accordingly.
Cheers,
Joanne
Hi, I was wondering if I buy an investment property, whether or not i can claim the fist
home buyers on my second home that I will live in? I live in Victoria.
Hi Joel!
Thanks for the comment.
These are the guidelines for those who wish to claim FHOG on an investment property in Victoria:
Victoria’s State Revenue Office is responsible for offering the $10,000 grant to applicants buying or building their first new home. To be eligible for the grant, you must not have:
– Received a First Home Owner Grant in Australia
– Owned a home in Australia, either jointly or separately, prior to 1 July 2000
– Occupied an Australian home in which either of you acquired a relevant interest on or after 1 July 2000 for at least six continuous months
So if you purchased your investment property on or after 1 July 2000 and you didn’t live in it for a period of six consecutive months, you may be eligible for the FHOG.
You may check the other eligibility criteria for more information.
Alternatively, you may also contact your local state revenue office for clarification.
Hope this helps.
Cheers,
Jonathan
What is the best search engine in the world?
Hi Kathey,
Thank you for your inquiry.
Unfortunately, we cannot recommend what is best for you. Our company finder.com.au is a financial comparison website and general information service designed to help consumers to make a better decision. Please note we do not represent any company we feature on our pages.
If you are looking for home loan comparison you may want to consider the following options. Please note that most lenders would require 20% deposit if you’re taking a regular home loan. However, there may be options in the market that you can compare, please refer to the pages below:
1. Cheapest home loans
2. Low deposit home loans – Although you may have to get a guarantor for this type of loan
3. First home owners grant – If it’s your first time to buy a home, then you may also check if you’re qualified for a grant in your local state.
Alternatively, you can reach out to a mortgage broker who will take all your circumstances into account and offer you a range of lending options.
I hope this information has helped.
Cheers,
Harold
As a first home buyer, can I buy an investment property, and then when time is right buy a personal living home and qualify for the first buyers home loan on this property?
Hi Glenda,
thanks for the question.
The exact requirements and eligibility will depend on what state you’re buying in. Some states do not allow this, such as NSW and QLD, but others, such as WA, TAS, SA, NT and ACT allow this in some circumstances.
I hope this helps,
Marc.
Hi, I’m on single parenting payment and I was wondering if it was possible to get a home loan of some sort? I’ve read about something about FTB. My daughter is one and I am looking for a job.
Hi jess,
Thank you for contacting us regarding your inquiry.
If you are wanting further information on first home owners grants and how this works we have a page for this, we also have pages that gives advice for single parents who are looking at getting a home loan.
We also have advice on getting home loans, including lenders that assist, for people who are currently receiving payments from Centrelink.
I hope these pages assist you and show that there are avenues for you to receive a home loan.
Regards
Jodie
we are inquiring for our daughter to see if it is possible for her to get a loan to purchase a home She is on a Carers payment as a single mother with 3 autistic kids. She a part time job with a taxable income of $30 000pa. She is currently paying $720 pm rent, owns her car has a credit card debt of $9 000. Has an excellent credit history. She lives in country Victoria and would be looking at houses in the $120k – 140k range
Hi David,
Thanks for your enquiry.
Please note that finder.com.au is an online comparison and general information service, and we don’t offer home loans ourselves.
Generally, lenders will require someone on a carer’s allowance to have an additional source of income to meet their mortgage repayments. However, lenders do treat these applications on a case-by-case basis and ultimately they will assess your daughter’s ability to service the loan without incurring undue hardship.
However, your might be interested to read and compare home loans suited for those on a single income, as well as loans suited for Centrelink recipients.
I hope you find this useful.
Thanks,
Belinda
Hi there,
My wife and I are considering buying our first home. We have a fairly good deposit, around 40% of the property value.
The problem is we are employed under ABN which means we issue invoice to be paid up by our boss. Just wondering in this case, are we eligible for a home lone? Of course we can get the employment letter from our boss and the bank statement showing all the wage payment.
Thanks for your help.
Hi Peter,
thanks for the question.
Most lenders will accept this as a form of income, although they may require you to apply for a low doc home loan. I would recommend contacting a mortgage broker to help you shop around for the best deal for your situation.
I hope this helps,
Marc.
hi
My partner has just finished his bankruptcy and would like to buy a home .. He has a small deposit and has not had the first home grant . He has always worded and is on roughly $80k per year .
Is there anyone who would be able to help him?
Hi Melissa,
thanks for the question.
Unfortunately, the bad credit lenders and brokers currently on our panel do not cater to first home buyers, although there may be some lenders and brokers in the wider market which can help. I suggest conducting a search of home loan lenders who can offer discharged first home buyers a home loan.
You might also want to read our guide on home loans for discharged bankrupts to learn some tips for applying.
Note that regular lenders will require borrowers to wait for up to 7 years for the bankruptcy listing to be removed from your file, while other specialist lenders can grant home loans to those with these listings on their file.
Cheers,
Marc.
Hello,
Do you know how it is possible to get a home loan on an existing relocatable home in a relocatable home village?
So you own the home not the land. Thanks
Hi Blaise,
thanks for the question.
I would recommend contacting a mortgage broker for this situation, as they will be able to tell you which banks would consider this kind of home for a residential home loan. Alternatively, they may suggest a personal loan depending on the circumstances.
Cheers,
Marc.
hi my wife and I HAVE $134,000 given to us from a will.
What I wanted to know was we are in a nsw gov house, if we buy a house do we pay stamp duty.
As the house we are looking at is $320,000.
As I Don’t think we could still live in gov house still if we have too much money in bank.
i work 20 hrs a week my wife earns $49.000 before tax.
thanks jeff
Hi Jeff,
Thanks for your question.
Please be advised that there are currently no benefits (grants or exemptions from duty) available to first home buyers who purchase an established property.
If you’re purchasing a new property then you may be eligible for a stamp duty exemption.
Cheers,
Shirley