First home buyer terms, in plain English

Borrowing

Borrowing power (borrowing capacity)

The most a lender is willing to lend you, based on your income, expenses, debts and dependants. It's a ceiling, not a recommendation. What you can comfortably repay is often lower.

Serviceability

A lender's test of whether you can afford the repayments. Lenders assess you at a rate higher than the actual rate (a serviceability buffer), so you can still pay if rates rise.

HECS-HELP debt and borrowing

A student loan doesn't stop you buying, but lenders count the compulsory repayments as an expense. That can reduce your borrowing power more than people expect.

Credit report and credit score

A record of your loans, credit cards, repayment history and recent credit applications. Lenders check it. Late payments, defaults and lots of recent applications can count against you.

Pre-approval (conditional approval)

A lender's indication that it's likely to lend you a certain amount, based on what you've told it so far. It isn't a final approval and usually expires after three to six months.

Formal (unconditional) approval

The lender's final approval for a specific property, usually after a valuation and final checks. Only then is the loan locked in, subject to the loan contract.

Valuation

The lender's own estimate of what the property is worth. It can come in lower than the price you agreed. If it does, the lender lends against the lower figure and you cover the gap.

Deposit and LMI

Deposit

The part of the price you pay from your own money. Lenders usually want at least 5%. 20% or more generally avoids LMI. It's separate from the upfront costs, which you need on top.

LVR (loan-to-value ratio)

Your loan as a percentage of the property's value. A $560,000 loan on a $700,000 home is an 80% LVR. Lower is better: it affects whether you pay LMI and which rates you're offered.

LMI (lenders mortgage insurance)

A one-off insurance cost when you borrow more than 80% of the property's value. It protects the lender, not you, if the loan goes bad. It's often added to the loan, so you pay interest on it too.

Genuine savings

Money you've saved or held yourself over time, usually at least three months. Some lenders ask for it when your deposit is small, to show you can save regularly.

Gift letter

A signed letter from family confirming money they've given you for the deposit is a gift, not a loan you have to repay. Lenders often ask for one.

Family guarantor (family guarantee)

A family member, usually a parent, uses equity in their own property as extra security for your loan. It can help you buy with a small deposit and avoid LMI, but it puts their property at risk, so everyone should get independent advice.

Government help

First Home Owner Grant (FHOG)

A one-off payment from your state or territory government for eligible first home buyers. In most states it's only for new homes, with price caps and residency rules. Amounts differ by state.

Stamp duty exemption or concession

A reduction or full waiver of stamp duty for eligible first home buyers, below price thresholds that each state sets. Often worth more than the grant.

Home Guarantee Scheme (5% deposit scheme)

A federal government scheme that lets eligible first home buyers buy with as little as 5% deposit without paying LMI, because the government backs part of the loan. Property price caps and other conditions apply.

First Home Super Saver Scheme (FHSS)

Lets you make voluntary contributions into your super and later withdraw them, with earnings, for a first home deposit. It can save tax compared with saving in a bank account. Limits and timing rules apply, so read the ATO guidance first.

Shared equity scheme

A scheme where a government takes a share of ownership in your home, so you need a smaller deposit and a smaller loan. You may pay the share back later, or when you sell.

Rebates and cashback

Money back on a purchase or a loan. Some states offer rebates or concessions on duty or fees. Some lenders offer cashback for new loans. Look at the whole loan cost over time, not just the cashback.

Foreign investment approval (FIRB)

Approval most temporary visa holders need from the federal government before buying residential property. Fees and extra state duties usually apply. Citizens and permanent residents generally don't need it.

Costs

Stamp duty (transfer duty)

A state government tax on buying property, usually the biggest upfront cost after the deposit. It depends on the price, the state, and whether you qualify for a first home concession.

Conveyancing

The legal work of transferring a property to you: reviewing the contract, searches, dealing with the seller's side and running settlement. Done by a conveyancer or a solicitor.

Building and pest inspection

A report from a qualified inspector on the condition of the property, including structural problems and termites. Get it before you sign or bid.

Strata (owners corporation or body corporate)

Shared ownership of the common areas in apartments and many townhouses. You pay strata levies for maintenance and insurance, and follow the building's rules. A strata report shows the finances, disputes and planned works.

Council rates and water rates

Ongoing charges from your local council and water authority. They're adjusted at settlement so you only pay from the day you own the home.

Land tax

A yearly state tax on land you own. Your own home, the one you live in, is generally exempt. It mainly applies to investment property.

Buying and settlement

Contract of sale and vendor disclosure

The legal agreement to buy, plus the seller's disclosure about the property (titles, zoning, easements and more). In Victoria the disclosure is called a Section 32. Have it reviewed before you sign.

Cooling-off period

A short window after signing a private sale contract when you can still pull out, usually for a fee. The length and cost vary by state, and there's generally no cooling-off at auction.

Subject to finance

A condition in a contract that lets you withdraw if your loan isn't approved by a set date. Common in private sales. Not available at auction.

Auction

A public sale where the highest bid above the seller's reserve price wins. The sale is generally unconditional: no cooling-off and no finance clause, so get everything checked before the day.

Deposit bond

A product from an insurer that stands in for your cash deposit when you sign, until settlement. Useful when your money is tied up, for a fee.

Off-the-plan

Buying a property before it's built. It may be valued for less than you paid when it's finished, and you'd need to cover any gap at settlement.

Settlement

The day the sale completes: your lender pays the seller, the title transfers to you, and you collect the keys. Usually 30 to 90 days after signing.

Your loan

Comparison rate

An interest rate that also includes most fees, so loans can be compared more fairly. Every lender has to show it next to the advertised rate.

Fixed, variable and split rates

A fixed rate stays the same for a set period. A variable rate moves with the market. A split loan does both, part fixed and part variable.

Principal and interest vs interest-only

Principal and interest repayments pay down the loan as well as the interest. Interest-only repayments are lower for a while, but the debt doesn't shrink. Most home buyers use principal and interest.

Offset account

A transaction account linked to your loan. The balance is subtracted from your loan when interest is worked out, so savings in it reduce your interest while staying available.

Redraw

Lets you take back extra repayments you've made on your loan. Similar to an offset, but the money sits inside the loan, and lenders can limit access to it.

General information only, not personal advice. Rules, grants and thresholds change and differ by state. Check what applies to you now with the relevant government site or a qualified professional. Last reviewed 31 October 2026.