First Home Buyer

Buying your first home is a major milestone and one of the most significant financial decisions you will make. It requires careful planning, research, and budgeting. Here are some tips that we have developed to help you get started.

1. How much can I afford?

As a general guide: Maximum property budget = Borrowing capacity + Available savings

However, it is important to recognise that not all of your savings can be applied towards the purchase price. You will also need to allow for acquisition costs, which typically include stamp duty, mortgage registration fee, transfer fee, legal and conveyancing costs, lenders mortgage insurance and other cost. In addition, it’s important to retain a portion of your savings as a financial buffer for unexpected or emergency needs, rather than allocating all available funds toward the purchase.

Lender Mortgage Insurance (LMI) – if applicable. LMI is a one-off insurance cost that protects the lender, not the borrower, in the event you are unable to repay your home loan. It is typically required when your deposit is less than 20% of the property value. LMI can either be paid upfront or added to your loan (capitalised).

2. How much deposit do I need?

The deposit required will depend on your financial position and the lending structure you choose.

Option A: 20% deposit (no LMI)

• Generally considered the ideal scenario
• Avoids Lender Mortgage Insurance (LMI)
• Results in lower overall borrowing costs
• Requires a higher level of savings upfront
• A lot of flexibility in term of property price and lender options

Option B: 5%-19% deposit (with LMI)

• Borrow up to 95% of the property value
• LMI is payable, either upfront or capitalised into the loan
• Allows earlier entry into the market with a smaller deposit
• Results in a higher overall cost due to LMI

Option C: 5% deposit (no LMI – government support) – please refer to 5% deposit scheme:

• Eligible first home buyers can purchase with as little as a 5% deposit
• No LMI is required, as the government guarantees a portion of the loan
• Must be an owner-occupied property
• This scheme can significantly reduce the upfront cost of purchasing a home, particularly for buyers who have sufficient income to service a loan but have not yet saved a full 20% deposit.

3. What government support is available?

A number of government initiatives are available to assist eligible first home buyers in reducing upfront costs and improving affordability.

A. First Home Owner Grant (FHOG – Victoria)

• $10,000 grant for eligible first home buyers purchasing or building a new home valued up to $750,000
• Higher grants may apply in regional areas (subject to current policy settings)
• Must be a first home buyer (not previously owned residential property in Australia)
• Must be an Australian citizen or permanent resident
• Property must be a new home (not established)
• Must live in the property as your principal place of residence for a minimum period

B. Stamp Duty Concessions (Victoria)

• Full exemption for properties valued up to $600,000
• Concessional rates apply for properties between $600,000 and $750,000
• Available for both new and established homes
• Must be a first home buyer
• Must occupy the property as your principal place of residence

C. First Home Guarantee (5% Deposit Scheme)

• Eligible first home buyers can purchase a property with as little as a 5% deposit
• The government guarantees a portion of the loan, allowing buyers to avoid Lender Mortgage Insurance (LMI)
• Must be an owner-occupied property
• Must be an Australian citizen or permanent resident
• Must purchase a residential owner-occupied property
• Property price caps apply, which vary by location. For example, in Victoria, the price cap for capital city and regional centre is up to $950,000

D. First Home Super Saver Scheme (FHSSS)

The First Home Super Saver Scheme allows you to:

• Make voluntary contributions into your superannuation to save for a deposit
• Withdraw up to $50,000 per individual (subject to contribution limits)
• Benefit from concessional tax treatment on contributions
• Must be a first home buyer
• Must not have previously accessed the scheme
• Must intend to live in the property as your principal place of residence

E. Help to Buy Scheme (Shared Equity)

The Help to Buy Scheme is designed to reduce the cost of entering the property market:

• Government contributes up to:
  • 40% for new homes
  • 30% for existing homes
• Requires a minimum deposit of approximately 2%
• Results in a smaller loan and lower repayments
• Government holds an equity share in the property, which can be bought out over time
• Must be an Australian citizen
• Must meet income limits and property price caps
• Must occupy the property as your principal place of residence

4. Do I need loan pre-approval?

Loan pre-approval is strongly recommended before you begin seriously searching for a property, as it provides a clearer understanding of your borrowing capacity and helps you make more informed decisions.

Pre-approval is particularly important if you are:

• Purchasing at auction, where offers must be unconditional (i.e. not subject to finance)
• Making a strong offer in a private sale without finance conditions

Having pre-approval in place can also strengthen your negotiating position with vendors. Typically, loan pre-approvals are valid for approximately 90 days and may be extended by some lenders subject to updated financial information.

A fully assessed pre-approval is issued in writing once the lender’s credit team has reviewed and assessed your application and supporting documents. It is also important to note that each loan application may result in a credit enquiry being recorded on your credit file. Multiple credit enquiries within a short period may have an impact on how lenders assess your credit profile.

Disclaimer: This guide is general information only. Your borrowing capacity and eligibility will depend on your individual circumstances, lender policies, and government criteria. Professional advice is recommended before making financial decisions.