First Home Buyers

Thinking of buying your first home? Compare offers with comparison expert Savvy so we can help you find the best loan deal in Australia.

Last updated on May 17th, 2022 at 03:11 pm by Cate Cook

First home buyers

Compare loans and save with Savvy

Buying your first home will probably be the biggest purchase you’ve made in your life to date.  Therefore, it’s important to be across as much as you possibly can regarding home loans and the numerous types of assistance offered to first home buyers.

Savvy can help you with valuable home loan information and, when you’re ready to compare loans, give you free and accurate comparison information so you’re able to make the best decision possible.  Compare today with Savvy so you find one of the lowest-interest home loans available in Australia that’s just right for your family’s needs. 

Home Loans

Home loan benefits available to first home buyers

Low interest rates

You’ll be able to compare offers starting at some of the lowest rates on the market right here, helping you save thousands over the life of your loan.

Help with your deposit

Low-deposit options of either 5% or 10% LVR are available for first home buyers – so you may not have to save up the usual 20% deposit.

Fixed, variable or split?

Whether you want the certainty of a fixed rate or the flexibility of a variable rate, or a combination of the two, you can find a loan that’s just right for your needs.

Extra repayments permitted

We can help you compare a home loan that will allow you to make extra repayments to help you pay off your mortgage much sooner and save on interest.

House and land package deals available

Construction loans are available for people who need help with their house and land package, which gives you access to progress payments that allow you to pay your builder as construction progresses.

Packed with features to make life easier

You can access home loans that are packed with additional features to make life easier, with offset accounts and redraw options affording you greater flexibility in your payments.

Why Savvy can help you make the best first home loan choice

What steps do I need to take before buying my first home?

More information for first home buyers

How should I compare loan features as a first-time home buyer? ​

It’s all about the interest rate

The interest rate offered on a loan will ultimately determine how much that loan will cost you. Naturally, the lower the interest rate, the better for your hip pocket.  Look not just at the base interest rate, which is expressed as a percentage per annum (% p.a.), but also the loan’s comparison rate, which includes any standard fees associated with the loan such as a loan application fee or ongoing monthly fees.

Many lenders are now offering fee-free loans with no application or ongoing costs.  Savvy can help you find the best home loan for your needs by offering free loan comparison information to help you make the best choice.

Introductory offers and honeymoon loan rates

There are many great introductory offers available to tempt first home buyers as competition between lenders heats up.  Some of these can be of great value for first home buyers, ranging from cashback offers, where the lender gives you a cash sum if you sign up for a home loan, to honeymoon loan rates.  These offer you a reduced interest rate on your loan for a fixed period (often six months to two years) before your loan reverts to a standard interest rate.  Use this introductory rate loan calculator to work out how much better off you’d be if you chose a loan with an introductory interest rate.

Cashback offers can be as high as $6,000, while honeymoon loan rates can slash up to a full percentage point off your loan interest rate.  However, beware of introductory offers which revert to a not-so-attractive (higher) interest rate and cashback offers which have strings attached (such as having to open a transaction account and depositing at least $2,000 a month into that transaction account for six months) to qualify for them.

Loan term

The phrase ‘loan term’ means the length of time you’re given to pay back the loan.  A standard first home buyers’ loan has a term of either 25 or 30 years, although the term can be as low as five years.  The length of your loan will determine what your repayments are.  The longer your loan is, the lower the monthly repayments, but the more you’ll pay in interest. 

The most important thing as a first-time buyer is to find a lender who offers the length of term you’re most comfortable with.  Try to find a good balance between paying off your loan as quickly as possible (to save on interest) but also keep your repayments to a maximum of 30% of your monthly take-home pay.  Any more than 30% of your income spent on your mortgage will likely see you struggling to pay other bills.  Use Savvy’s home loan repayment calculator to help you calculate what your repayments might be.

Additional loan features

There are several additional loan features available with first home loans that may be of benefit to you. Think about these features, decide if they’d be useful to you and compare home loans which offer these features with Savvy to make sure you get a deal which is just right for your personal needs.

Offset accounts

These are transaction accounts which are linked to your home loan account.  For every dollar you put into your offset account, you’ll pay less interest on one dollar of your loan amount. This is why they are called offset accounts: they offset your principal sum and save you money on interest.  Having your wages paid into your offset account is a very effective way of making your income work harder for you.  You can use Savvy’s home loan offset calculator to find out exactly how much you could save by stashing your wages and your savings into an offset account.

Extra repayments

As your career progresses and income increases, you may wish to make extra repayments into your loan account to pay your loan off quicker.  Make sure your loan allows you to do this without penalty.  Additional repayments are permitted on variable rate loans, but there may be caps or limits on how much extra you can pay off if you have a fixed rate loan.  Use this extra repayments calculator to crunch some numbers and find out how much you could save by paying a little extra off your loan on a regular basis.

For example, there may be an annual limit of $10,000 maximum that you’re permitted to pay off a fixed rate loan. It’s for this reason that many borrowers choose to split their loan, so they can have the flexibility that comes with a variable rate, but the certainty that comes with a fixed rate.  Savvy’s split rate loan calculator can help you decide if a split loan may be the right option for your new loan.

Repayment holidays

Some loans allow you to take a break from paying your loan repayments if you experience financial hardship or ‘exceptional circumstances.’ This might be due to the birth of a new child, illness or temporary redundancy.  Most lenders require you to apply for the repayment holiday and explain your exceptional circumstances, but this feature can come in handy if you’re planning an addition to your family, experience sudden illness or have an accident that prevents you from working.  Most loans have a cap on the length of repayment holiday permitted.

Redraw facility

If you make additional repayments into your home loan, a redraw facility allows you to redraw those funds in times of need.  This can be a lifeline if you suddenly find yourself in need of additional cash and is often a much cheaper option than taking out a more expensive personal loan.  Check whether there are any redraw fees that apply, or if there’s a cap on how much you’re able to redraw over a set period.

Which government grants can I access as a first home buyer?

Most states and territories in Australia have a First Home Owners Grant scheme, with the exception of the ACT.   These schemes help first home owners with grants of up to $15,000 (depending on which state you live in), to assist first home buyers in getting a loan for their first home.  Eligibility for these assistance packages changes regularly, so check your State Government website for details about the FHOG scheme currently available in your area.

In addition, there are two Federal Government schemes to assist people to buy their first house in Australia, which are:

The New Home Guarantee – this supports you to build or buy a new home by guaranteeing up to 15% of the deposit on your new property.  There are purchase price caps which apply in each State, so you’ll need to look at buying a property below these price caps to be eligible:

  • NSW: Sydney, Newcastle, Lake Macquarie & Illawarra – $950,000,  other – $600,000
  • VIC: Melbourne, Geelong – $850,000, other – $550,000
  • QLD: Brisbane, Gold Coast and Sunshine Coast – $650,000, other – $500,000
  • WA: Perth – $550,000, other – $400,000
  • SA: Adelaide – $550,000, other – $400,000
  • TAS: Hobart – $550,000, other – $400,000
  • ACT: All areas – $600,000
  • NT: General – $550,000, Jervis Bay, Norfolk Island – $600,000.  Christmas Island and Cocos (Keeling) Island – $400,000

(All these loan caps are current as of May 2022)

By the government guaranteeing a portion of your deposit, this eliminates the need for Lenders Mortgage Insurance.

Eligibility for the New Home Guarantee Scheme:

Purchases that qualify for the NHGS:

  • house and land packages
  • newly-constructed dwellings
  • off-the-plan dwellings
  • vacant land, plus a separate contract to build a new home
 

To qualify for a guarantee of up to 15% of the cost of the deposit on your new home, you must:

  • buy your new home within 90 days of being pre-approved, and
  • build your off-the-plan property within 12 months of receiving the guarantee
 

Age and citizenship qualifications are the same as for the First Home Loan Deposit Scheme.

The First Home Loan Deposit Scheme (FHLDS) – which supports you to buy your first home sooner, with a deposit of as little as 5%. The Government guarantees the lender the remaining 15% of the deposit on your behalf, enabling you to avoid having to pay Lenders Mortgage Insurance (LMI).  There is no price cap or requirement to buy a new home under the FHLDS.

Eligibility for First Home Loan Deposit Scheme:

To qualify for the FHLDS you must:

  • Be at least 18 years of age
  • Be an Australian citizen
  • Have an income of up to $125,000 for singles or $200,000 for couples
  • Be married or in a de facto relationship
  • Have at least 5% deposit
  • Intend to be owner-occupiers
  • Be first home buyers in Australia

Home loan jargon explained for first-time buyers​

When looking to buy your first home, it’s easy to get confused about all the jargon and abbreviations used.  Here’s your Savvy guide to home loan terms and what they mean:

Borrowing power: a dollar amount which is an estimate of how much you may be able to borrow based on your income and outgoings.  Use Savvy’s borrowing power calculator to find out an estimate of what your borrowing power may be before applying.

Comparison rate: a percentage figure which shows borrowers a truer cost of the loan when additional loan fees have been taken into account.  A comparison rate must be displayed alongside all loan interest rates under Australian consumer protection law. These additional fees may be loan application fees or account-keeping charges and increase the overall cost of the loan.

Deposit: a lump sum you’ll need to provide as a contribution to the purchase price of your home. Usually, it’s 20% of the purchase price, but lenders may be able to accept as little as 5% in certain circumstances. 

Interest-only loan (IO): describes a type of home loan whereby the borrower only pays the interest due on the loan for an initial set period (typically between one and five years) and doesn’t make any repayments towards the principal sum borrowed

Loan default:  failure to fulfil your loan repayment obligation. This could involve being late with your loan repayments or not paying your agreed home loan repayments at all despite numerous requests. In extreme cases, it can result in the lender reclaiming your home and selling it to recover any lost funds

Lenders Mortgage Insurance (LMI): an insurance premium that borrowers may have to pay if they can’t provide a 20% deposit.  The insurance policy protects the lender in case of loan default and can amount to thousands of dollars, although there are ways around paying LMI even if you don’t have a 20% deposit (such as via government assistance, a guarantor or if you work in a profession where a lender may be willing to waive it)

Loan-to-value ratio (LVR):  a percentage figure which describes how much money you want to borrow compared to the value of the property you want to buy.  Usually, loans have an 80% LVR, so lenders will give you 80% of the cost of the home (and you’ll need to find the remaining 20% as a deposit)

Principal and interest loan (P&I): this is a standard home loan whereby your loan repayment pays the interest due on the loan but also a small amount of the sum you originally borrowed. As time goes by, a larger portion of each repayment goes towards paying off your principal

Principal sum:  the amount of money you want to borrow

Refinance:  to swap your existing home loan to another one which may offer you more benefits or flexibility

Split loans: a popular type of home loan which involves one portion of the loan having a fixed interest rate and the remaining portion having a variable interest rate. The borrower can choose which portion of their loan is fixed and variable (commonly 60/40 or 70/30).  Use this calculator to see how a split loan could benefit you

Stamp duty:  a state-based tax on the price of buying land. First home buyers can get reductions and exemptions in many states, but stamp duty can still amount to thousands of dollars

Frequently asked questions by first home buyers

Who is eligible for a home loan in Australia?

These are the main eligibility criteria for applying for a home loan:

  • You must be over 18 years of age
  • You must either be an Australian citizen or a permanent resident
  • You must be employed, either part-time or full-time
  • Your deposit must meet the minimum requirement (up to 20%)
How much can I borrow as a first home buyer?

The amount you will be able to borrow will depend on your income and expenses, and how much you will be able to afford to pay on your mortgage.  Use Savvy’s home loan repayment calculator to find out how much your repayments may be. All lenders will need proof of how much you earn and what your normal living expenses are.

Can a guarantor help me get my first home loan?

Yes – if you’re struggling to save a large deposit, don’t qualify for government assistance or don’t have a great credit rating, you could use a guarantor to secure your mortgage. Guarantors are usually family members who sign a contract saying if you default on your loan, they will pay the lender on your behalf.  They usually need equity in an existing property to put forward as security.  It’s important to note that guaranteeing your loan will affect their ability to borrow money in the future.

Fixed, variable or split interest rates.  What’s the difference?

A fixed interest rate means the interest you pay is set at a fixed rate for a set amount of time, usually up to five or ten years.  A variable interest rate will change over the years.  If interest rates go up, so too will your mortgage repayments.  A split loan means that some of your loan has a fixed interest rate for a set period of time, usually one to five years, and the remainder of the loan has a variable interest rate, so you can benefit from the features that both types of loans have to offer.

What other costs should I budget for?

There are several additional expenses you should take into consideration when planning the budget to buy your first home, including:

  • Loan establishment fees: between $150 and $700
  • Legal and conveyancing fees: between $800 and $2,000
  • Stamp duty: the amount will depend on the value of the property you buy and the state you live in, but you’ll need to allow at least $5,000
  • Building inspection and report: depends on the size and type of property but typically between $100 and $600
  • Pest inspection: around $250 – $400
  • Home and Contents insurance: required from settlement, which will usually cost between $1,000 and $2,000 annually but varies depending on your property and where you live