Jigar Modi

First home buyer guide · Australia

Buying your first home in Australia: the compact guide

Ten steps, from "how much should I spend?" to settlement day. Plain English, no sales pitch. If a term is new, the glossary explains it.

Step 1

Work out what to spend, not just what you can borrow

Your borrowing power is the most a lender will lend you. It's a ceiling, not a target. Lenders test your income against your expenses and debts, then add a buffer in case rates rise. They don't know about the baby you're planning, the parents who may move in, or the career change you're considering.

Start from the other end. What repayment could you comfortably make every month and still save and sleep at night? Work back from that number to a price range.

The rule I work by: borrowing power is not buying readiness. The bank tells you the most you can borrow. Your job is to decide the most you should spend.

Step 2

Know your deposit, and the 20% line

Lenders look at your loan-to-value ratio (LVR): the loan as a percentage of the property's value. With a deposit of 20% or more (an LVR of 80% or less), you usually avoid lenders mortgage insurance (LMI).

Below 20%, you have three main paths:

  • Pay LMI. A one-off cost that protects the lender, not you. It's often added to the loan, which means paying interest on it.
  • Use a government scheme. The federal Home Guarantee Scheme lets eligible first home buyers purchase with as little as 5% deposit and no LMI. Property price caps and other conditions apply.
  • Use a family guarantor. A parent offers equity in their home as extra security. It helps, but it puts their home on the line, so everyone needs independent advice.

Lenders also want to see that your deposit was saved over time. Some call this genuine savings. A sudden lump sum, including gifts from family, may need a gift letter and a paper trail.

Step 3

Add up the upfront costs

The deposit is not the whole bill. Budget for these as well:

  • Stamp duty (transfer duty), unless you qualify for a first home exemption or concession
  • Conveyancer or solicitor fees
  • Building and pest inspection, or a strata report for apartments and townhouses
  • Loan application, valuation and settlement fees
  • Government fees to register the transfer and the mortgage
  • LMI, if your deposit is under 20% and no scheme applies
  • Home and contents insurance from settlement day
  • Removalists, connections, and the things a new home always needs

Then keep a buffer. The first few months after settlement are when the surprise costs turn up, and an empty savings account turns a small repair into stress.

Step 4

Check what you may be entitled to

First home buyer support comes from both the federal government and your state or territory, and the rules change. These are the main types:

Always check current eligibility on the official sites before you count on any of it:

Step 5

Get pre-approval, and know its limits

Pre-approval tells you a lender is likely to lend a certain amount, based on what you've told it so far. It helps you set your range and shows agents you're serious.

It is not a final approval. The lender still has to approve the specific property, usually after a valuation, and it can say no if your job, debts or its own policies change. Pre-approvals also expire, often after three to six months. Don't change jobs, take on a car loan or open new credit cards while you're buying.

Step 6

Choose a home that fits the next ten years

Your first home is rarely your forever home, but you'll probably live in it longer than you expect. Ask what the next ten years look like: children, ageing parents, working from home, a second car, the commute.

  • House or apartment: apartments and townhouses come with strata fees and rules. Read the strata report before you buy.
  • New or established: grants often favour new homes, but compare the full cost, not just the grant.
  • Off-the-plan and house-and-land: the property may be valued for less than you paid when it's finished, and you'd need to cover the gap. Understand that risk before you sign.
Step 7

Do your checks before you sign

  • Have a conveyancer or solicitor review the contract and vendor disclosure before you sign or bid
  • Get a building and pest inspection, and a strata report where relevant
  • Check zoning, flood and fire overlays, easements, and planned developments nearby
  • Make your offer subject to finance and inspection where you can
  • Know your state's cooling-off rules and what it costs to use them
Step 8

Private sale or auction

In a private sale you can usually negotiate, add conditions such as "subject to finance", and you often get a cooling-off period. At an auction, the sale is generally unconditional. If you win, you're committed on the spot, deposit and all, with no cooling-off.

So before auction day, have your finance, inspections and contract review done. Set a walk-away number in advance, and decide who in the family has the final say. The room is not the place to work that out.

Step 9

From signing to settlement

After you sign, you pay the deposit (often 5% to 10% of the price, sometimes using a deposit bond). Your lender then values the property and issues formal approval. Your conveyancer handles the paperwork and the government forms. Arrange building insurance from the day the property becomes your risk, and do a final inspection before settlement. On settlement day the money moves, the title transfers, and you get the keys.

Step 10

After you move in

Put your buffer into an offset account if your loan has one, so it reduces your interest while staying available. Set up repayments a day or two after payday. Then review your loan once a year, or whenever your life changes, to check it still suits you.

If you're on a visa or have just become a permanent resident

Most first home grants and concessions require you to be an Australian citizen or permanent resident, and some also need you to live in the home for a set period. If you're on a temporary visa, you may need foreign investment approval and pay extra duty, and fewer lenders will consider you. Overseas income, a HECS-HELP debt and a short work history in Australia can all change what lenders offer. Check where you stand before you start looking.

Common questions

How much deposit do I need?

Many lenders will lend with a 5% to 10% deposit, but below 20% you usually pay LMI unless you use a government scheme or a family guarantor. You also need money for upfront costs on top of the deposit.

What do I pay besides the deposit?

Stamp duty (unless you qualify for an exemption or concession), conveyancing, inspections, loan and registration fees, LMI if it applies, insurance and moving costs. Keep a buffer for the first months too.

Does pre-approval mean my loan is approved?

No. The lender still needs to approve the specific property, usually after a valuation, and can decline if your circumstances or its policies change.

Is there a cooling-off period?

In most states there's a short cooling-off period for private sales, but the length and the cost of using it vary by state. There's generally none at auction.

Can I get first home buyer benefits on a temporary visa?

Most grants and concessions need citizenship or permanent residency. Temporary visa holders usually need foreign investment approval and may pay extra duty. Check your state's rules first.

General information only, not personal advice. Rules, grants and thresholds change and differ by state, so check what applies to you now on the official sites above.