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Thinking of buying your first home? Navigating the maze of home loans and financing options may seem daunting but there’s steps you can take to make the process easier. It’s always worth taking the time to prepare and understand the options available to you as a first home buyer.
This guide sets out the important things you need to know and what you should consider before you borrow to make sure you get a loan that’s right for you.
1. Using a Mortgage Broker
There’s a good reason why more than half of Australian mortgage customers use a broker – they can be your secret weapon in tracking down the most suitable loan options! With a broker you have an expert on hand that works with multiple lenders and can shortlist products that are most appropriate for your circumstances. Plus, they can often negotiate better outcomes for you too.
Consulting a broker early in your homebuying journey is advisable to get you on the right track before starting your home search, and to save you time and stress later.
2. Save for a Deposit
Develop good saving habits and don’t put off building up a deposit for your first home. Most lenders require a deposit of at least 10 to 20% of the property value. With a minimum 20% deposit you can avoid the extra cost of Lenders Mortgage Insurance (LMI) on loans that are over 80% of the property value. The fee is charged by the lender for higher-risk borrowing and is determined by your Loan to Value Ratio (LVR).
The good news for eligible first home buyers is that there are ways to avoid the cost of LMI AND buy your home with as little as 5% genuine savings deposit under the Australian Government’s First Home Guarantee scheme, or 2% deposit under the New South Wales Government’s Shared Equity Home Buyer Helper scheme. Find out more below.
Don’t forget all the other costs you’ll need to finance your purchase, including stamp (transfer) duty, legal and conveying fees, and building and pest inspection costs among others, so ensure you build up a good nest egg.
3. Check your Eligibility for Government Assistance
There’s a range of first home buyer grants and concessions that can help boost your spending power and make purchasing a little easier. Always check the current status of each program as they are subject to change, and some have limits on the number of applications they accept.
The First Home Guarantee
The Australian Government’s First Home Guarantee (FHBG) is a component of the Home Guarantee Scheme (HGS). The scheme provides a guarantee on a portion of the home loan from a Participating Lender to enable eligible buyers to secure a home with a deposit of just 5% without the need for Lenders Mortgage Insurance.
The FHBG guarantees a maximum of 15% of the property's value (as determined by the Participating Lender), serving as financial backing for the home loan. It is not a direct cash payment or a deposit toward the home loan. There are 35,000 places available under the FHBG between 1 July 2023 to 30 June 2024.
Queensland First Home Owner Grant
The Queensland first home owner grant helps first-time buyers to get a foot on the property ladder by providing either $15,000 or $30,000 towards buying or building a new home, including houses, units, or townhouses, off-the-plan, and self-built homes.
For new home purchases or construction:
$30,000 for contracts signed between 20 November 2023 and 30 June 30 2025, or $15,000 for contracts signed before 30 November 2023
For owner-builders:
$30,000 if the foundations are laid between 20 November 2023 and 30 June 2025, or $15,000 if the foundations were laid before 30 November 2023
Applicants or their spouses must not have received a first home owner grant in any Australian state or territory before unless it was repaid along with any penalty. The new home must also be the principal place of residence within one year of the completed transaction date and lived in continuously for six months. The home, its land and any contract variations must be valued under $750,000 and must not have been sold as a residence or been lived in at its completion.
Check out all the eligibility criteria here.
Queensland Transfer Duty Concessions
Transfer duty is charged on the value of a purchased property and can account for a sizeable chunk of your budget. The good news for eligible buyers is that you won’t pay anything when claiming a first home concession on a home valued under $550,000 which will save you thousands of dollars.
If you are buying a home to live in that’s worth over $550,000 you may still be able to claim a home concession on the first $350,000 of the property and pay the standard rate on the rest.
If you’re an eligible first home buyer purchasing vacant land to build your home on and it’s valued at under $400,000 you can also save yourself the transfer duty cost.
New South Wales First Homebuyers Assistance Scheme
Under this scheme, eligible first home buyers don’t pay any transfer fees on homes valued at $800,000 or less. If you are buying a property valued between $800,000 and $1 million you will enjoy a reduced transfer rate.
If you’re buying land to build your home on there’s no transfer fee if it’s valued at $350,000 or less and a reduced rate applies if it’s worth between $350,000 and $450,000.
You will have to move into the property within 12 months of your property completion or settlement date and live there for a year to be eligible for the savings.
New South Wales First Home Owner (New Home) Grant
As an eligible first home buyer you can apply for a $10,000 grant to buy a newly built home provided that you live in it for 12 months. The scheme applies to home and land packages worth up to $750,000 or $600,000 for a new build (including off the plan) or a substantially renovated home that has not been lived in by the seller, builder or a tenant prior to, during or after the renovations. Check out the details here.
New South Wales Shared Equity Home Buyer Helper
This scheme enables eligible buyers to buy a home with just 2% deposit of the purchase price with the New South Wales Government contributing up to 40% of the cost for a newly constructed property or 30% for an existing home. Not only will you save on the cost of lenders insurance you’ll also enjoy reduced mortgage payments.
In return, the government holds an equity share which you can repay voluntary over time or when the property is sold.
The scheme is designed to assist single parents, older singles, key workers buying their first home, and victim-survivors of domestic violence to buy a home. Check out the scheme and eligibility criteria here.
4. Calculate what you can afford
Be realistic about your expectations when working out what you can afford including concessions or assistance you might be eligible for, your income and expenses. You’ll find numerous mortgage calculators available online but better still, talk to a mortgage broker who can provide a more accurate picture for you. They can also help you to apply for pre-approval for a loan subject to conditions that will enable you to make an offer on a property when you’re ready to.
5. Loan options
Most couples buying a home together will take out a 'joint home loan'. These are designed for people with shared finances, assets, and expenses.
Alternatively, a property share loan may be a better fit if you're considering purchasing property with other family members such as siblings or parents, or with a friend or a partner you're in a relationship with but remain financially independent from.
You may be in the fortunate position to borrow from your family or the ‘bank of mum and dad’ but it’s still important to obtain legal and financial advice to protect everyone’s future interests.
Some first home buyers opt to buy their first home in a more affordable location as an investment to be rented out which can provide a return and help them to get into the property market while they continue to rent in their preferred location. Like all investments it is wise to seek legal and financial advice to understand the risks and potential benefits.
To learn more about the main types of mortgages and features check out the guide below.
6. Finding a home
For first-time homebuyers, compromise is often necessary when choosing your property type and location. Suburbs that are closer to the CBD, with plentiful transport and desirable amenities are often more expensive.
A lower budget may also mean consideration of apartments or units to keep within budget and enjoy the lifestyle offered in your preferred location.
Make sure you research suburb demographics, price trends, and infrastructure to make informed decisions about where and what to buy, aligning with your current needs and future plans. Budget constraints may limit your choices so be prepared to explore outer suburbs or regional areas. Research is crucial to provide insights into future property values and potential growth.
Next Steps
Remove any guesswork and speak to us to assess your buying power and position. At Biz Loan Connexion, we take the time to listen and understand your requirements and objectives. Being an accredited broker with an extensive panel of lenders means we can talk to you about different mortgage options and often access more favourable interest rates and fees than are available to customers directly.
Connect with us
Contact us if you’d like to learn more. You can also check out the Australian Finance Group 'First Home Buyers Guide':
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