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Top tips for first home buyers in Australia
First home buyers can access grants, incentives and discounts to save tens of thousands of dollars when buying property. These 13 expert tips show you how, before you compare your loan options.
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Buying your first property is undoubtedly an exciting time: the prospect of painting the walls, hanging pictures and creating your own sanctuary away from the world is exhilarating, and with interest rates at historic lows, it may be achievable sooner than later.
The process of gaining loan approval and preparing to buy a home can be an overwhelming process; read on for some expert tips to not only take the fear out of buying your first home, but also to help you save money along the way. And if you're feeling ready to buy, see how much you can afford to borrow or compare home loan options in the table below.
What's in this guide?
Check that you're eligible for a home loan
Before you get too excited about buying your first home, do some checks that you'll actually qualify for a home loan. Contact several lenders to get an idea of how much money you can borrow based on your current debts and financial position.
This will give you a realistic understanding of what (and where) you can actually buy. Try out Finder's home loan eligibility calculator to get a better idea of where you stand, and look for opportunities to boost your borrowing power; for instance, did you know that having a high credit card limit can impact your borrowing power?
It may be worthwhile consolidating your credit cards to one new low-rate credit card so you can lower your limits and improve your overall financial position.
Research your finance options
The home loan market is complex and competitive, which is why it's a good idea to compare home loans, to make sure you're getting the right rate and features. There are a number of options – from variable to fixed rate loans, to interest-only and investment loans – and there are many different types of mortgages to suit different situations.
If you're self-employed, for instance, you might find that some banks rate you as being too "high risk", while others are more than willing to lend money. It's a matter of finding the right lender and right loan product for you and your situation.
Sort out your debt to boost your borrowing power
If you already have some personal debts, you might find it harder to get a home loan approved, or you may not be able to borrow quite as much as you wanted. Focus on paying off any large and/or unsecured debts you may have before you apply for a home loan, especially high-interest debts. Earlier we suggested consolidating your credit cards; if you have a number of personal loans or car finance, you might want to consider combining those debts into one as well.
Note that some debts, such as university HECS debt, are far less troubling to a lender than unsecured debts such as credit cards, so create a plan to pay off the highest interest debts first.
Buy with just a 5% deposit
The bigger your home loan deposit, the more you may be able to borrow, as many banks and lenders will lend you 80% of the loan, provided you can save the initial 20%. While it's possible to take out a loan with a 5% or 10% deposit, historically, you would have been required to pay lenders mortgage insurance in instances where you have less than a 20% deposit.
However, this has changed since the introduction of the First Home Loan Deposit Scheme (FHLDS), which allows eligible first home buyers to buy a home with just a 5% deposit – without paying lenders mortgage insurance.
Here's how much you would need to save up in order to buy your first home with a standard 20% deposit, versus saving just a 5% deposit – as you can see, the FHLDS has the potential to help you buy a home far sooner than may be possible if you had to save the full 10-20% deposit:
| Deposit size | $400,000 home | $500,000 home | $600,000 home | $700,000 home |
|---|---|---|---|---|
| 5% | $20,000 | $25,000 | $30,000 | $35,000 |
| 10% | $40,000 | $50,000 | $60,000 | $70,000 |
| 15% | $60,000 | $75,000 | $90,000 | $105,000 |
| 20% | $80,000 | $100,000 | $120,000 | $140,000 |
The ultimate home loan deposit savings guide
Calculate your stamp duty concessions
All property buyers have to pay stamp duty in Australia – but if you're a first home buyer, you may be eligible for a concession or even a complete exemption, depending on your state or territory and the type of property you buy. These can amount to savings of up to tens of thousands of dollars.
Factor in the First Home Owner Grant
You should also see if you're eligible for the First Home Owner Grant. Again, if you're eligible, you'll potentially benefit from a grant worth thousands of dollars, though the exact amount depends on where you live and the type of property you buy. The FHOG is only ever available once, on your very first property purchase; as soon as you become a home owner, even if it's an investment property and you don't use the grant, you're not eligible for this concession again.
Consider buying new
Australia has long battled with a new housing shortage, which is why a number of grants and incentives have been introduced by the government to encourage people to build new houses or apartments. The most recent announcement, HomeBuilder, gives any home buyer (first home buyer or owner occupier, not investors) the opportunity to access a $25,000 grant towards the property purchase. This could be quite the incentive to consider buying a new home.
Crunch all of your other costs
Even after factoring in these generous grants and incentives, home buying can incur many surprise expenses and you don't want to be caught short. Be sure to budget for removalists' costs, home loan application and registration fees, legal expenses and pest inspection reports. Combined, these can amount to several thousand dollars.
Position yourself for success
If you've fallen in love with a particular property, other buyers probably may have taken a liking to it, too. To give yourself the best chance of being the successful buyer, it's a good idea to gather all your paperwork and deposit together, plus pre-approval, before you begin shopping for property. This puts you in a much better position to negotiate, sign a contract and snap up your dream home when you find it, because you'll be ready to take immediate action.
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Caveat emptor (home buyers, beware!)
Imagine buying a car without checking the mileage or the brakes, and then having it break down as soon as you buy it. A home is likely the largest purchase you'll ever make, and ultimately you as the buyer are responsible for making sure you're getting a quality property for the price you're paying.
Get building and pest inspections so you're not stuck with a collapsing, termite-infested disaster, and be sure to take out insurance. Examine the quality of the property's fittings and construction as best you can and if there are obvious repairs needed (and you're okay with taking them on board), make sure you get a quote for repairs and factor that into your budget.
Get expert help
There are professionals who can help you with every step of the home buying process. Buyers agents can help you with the whole property search process, from locating the ideal home to negotiating on the price, while a mortgage broker may be able to help you navigate the loan market. You also want to make sure you engage a licensed conveyancer to look over your contract thoroughly.
Create a home buying strategy
If you want the ease of moving into a home that is already established, landscaped and liveable, you may be favouring buying an established home. Buying a home that has already been built has the advantage of being in an established area with leafy streets, footpaths, nearby parks and, importantly, shops and transport. You may even be planning to buy an older home and carry out some improvements.
When buying a second-hand home, there are a few ploys to watch out for:
- Hosing down old concrete to make it look new
- Covering dead gardens with chip bark
- Nailing brush screens to crappy fences
- Photoshopping powerlines out and blue skies in
If you would prefer to put your own stamp on your home from the beginning then you might want to build your first home from the ground up. It involves choosing the block and the neighbourhood, the street and the orientation, choosing the plan and the builder, then choosing everything from the doorknobs to the paint colours, the pavers to the curtains and everything in between.
If you are building your own home, you may need to apply for a construction loan to draw down on funds.
Compare home loans for first home buyers
After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.
- A comparison of home loans from multiple lenders.
- Expert guidance through the entire application process.
- Free suburb and property reports.
The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)
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Ask an Expert
the First Home Savings Account here is ancient, not updated since 2010. All the dollar limits have since been changed AND the whole scheme has subsequently been scrapped.
Hi Peach,
Thank you for your feedback, we’ve now updated the page so it’s relevant for our users.
Cheers,
Shirley
Dear sir/madam
I am buying an established property from a seller
for $216,000 in fifteen months time to be paid in
cash from my own savings. The seller is still paying for the mortgage. Could you please tell me
how and to whom and in what manner should this money be paid?
Should the payment be made before or after the documentation has been completed?
Could you please give me an estimate of all other cost including the GST.
Hi Jim,
Thanks for your question.
Usually, payment is made when the seller and the buyer exchange signed copies of the contract of sale. If you are using a solicitor to draw up the documents then they may be able to advise you how the money should be paid, as the payment terms may be specified in the contract.
As for GST, the ATO has a GST Property Tool that can calculate the GST that will be payable in the sale.
I hope this has helped.
Thanks,
Elizabeth
is the first home owner grant only for new homes
Hi Philip,
Thanks for your comment.
Yes the FHOG is only for new homes.
Cheers,
Shirley