What to Expect as a First-Time Home Buyer in Australia

Owning their first home is a dream for numerous Australians, yet accomplishing this goal can be challenging.

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Buying a home, especially with a mortgage, can be difficult because of various factors:

  • strict eligibility requirements
  • elevated property prices
  • need for a significant down payment
  • complex paperwork
  • varying interest rates
  • potential economic uncertainties

These are why it is important to do your research. You might be tempted to rush purchasing because you’re concerned about potential future price increases or you want to capitalise on favourable conditions. But slow down! First-time home buyers should take their time thoroughly understanding the complexities of the home-buying process. Rushing into a purchase can lead to potentially costly mistakes.

Here are some things you would want to know as a first-time home buyer in Australia.

It’s essential to factor in various expenses when planning your budget to avoid any surprises. Understanding the full scope of costs ensures you make informed financial decisions in your home-buying journey.

It is good to save 20% of the property’s full value as a deposit. You can still get a loan if you have a smaller deposit, but you may need to take out Lenders Mortgage Insurance (LMI).

A deposit of 20% is deemed ideal since it means you can avoid paying private mortgage insurance. There are also grants and schemes available for first-time home buyers that may allow you to deposit as little as 2% to 5%.

The deposit is not the only cost you have to save up for when buying a home. The incidental costs involved in property acquisition can go up to 11% of the purchase price.

The other expenses that might impact your budget include:

  • Property valuation fees: This covers the cost of assessing the property’s value to ensure the appropriateness of your deposit and loan amount. Valuation fees usually range from $100 to $300 depending on property type, location, and value.
  • Home loan application fee: A one-time charge at the beginning of your loan application for processing and documentation, usually ranging from $200 to $700.
  • Mortgage registration fee: State government fee for registering the property as a loan security, payable at the time of loan establishment.
  • Stamp duty: State government tax on property buyers, paid upfront. Costs vary, with potential concessions for first-home buyers.
  • Legal fees: Charged by solicitors or conveyancers for contract review, title checks, document drafting, and paperwork handling. Costs range from $700 to $2500, depending on the complexity and scope of procedures.
  • Lender mortgage insurance (LMI): Paid if your deposit is below 20% of the property’s value. This protects the lender in case of borrower default.

Australia has numerous schemes that aim to help first-time home buyers navigate homeownership. That help comes in the form of grants and assistance.

Home Guarantee Scheme (HGS)

The Home Guarantee Scheme (HGS) is an initiative by the Australian Government designed to expedite property purchases for eligible buyers. Through the HGS, a segment of your home loan Australia is secured by the National Housing Finance and Investment Corporation (NHFIC). This scheme allows you to acquire a property with a deposit ranging from 2% to 5% without paying lender mortgage insurance.

  • First Home Guarantee (FHBG) facilitates eligible first-time homebuyers in achieving property ownership with a deposit as low as 5%.
  • Regional First Home Buyer Guarantee (RFHBG) caters to eligible regional first-time homebuyers aiming to purchase a property in specific regions.
  • Family Home Guarantee (FHG) supports eligible single parents with at least one dependent child, enabling them to purchase a property with a deposit as low as 2%.

First Home-Owner Grant

If you meet the eligibility criteria, you could qualify for a $10,000 grant through the First Home-Owner Grant (New Homes) Scheme. The prerequisites for this scheme include:

  • Buying or building your first home
  • No one else has previously lived in the new home
  • The property is worth a maximum of $750,000

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The mortgage application process in Australia will generally involve the following steps:

  1. Gathering your required documents
  2. Home loan comparison
  3. A preliminary assessment by the lender
  4. Submitting your application to the lender
  5. The lender completes a property valuation
  6. The lender approves or rejects the loan
  7. They send you an offer
  8. The loan is settled, and the funds are advanced to you.

Several things determine how much you can borrow for a home loan.

Income and Expenses

Lenders will evaluate your capacity to repay the mortgage based on a secure employment history and job stability. Having higher income and lower expenses increases your borrowing potential.

Credit Rating

A robust credit history enhances your borrowing capacity, whereas a weak credit history can restrict the loan amount or result in higher interest rates. Any existing debts or liabilities, like personal loans or credit card balances, will also impact your borrowing limit.

Other Factors

  • Deposit Savings
  • Type and Length of Home Loan
  • The price of the property
  • Property Location
  • Loan Type
  • Interest Rates and Loan Terms

When purchasing your first home, having a mortgage broker ensures you have a confident guide and reliable adviser who prioritises your best interests. A mortgage broker will support you on your home-buying journey, from obtaining loan pre-approval to finalising the deal on your new home.

Mortgage brokers act as intermediaries with lenders, addressing issues that may arise and ensuring a smooth process. A mortgage advisor can help you collaborate with multiple lenders, offering you more options than a single lender could. Their negotiation skills work on your behalf to secure the most favourable terms.

While conducting personal research is beneficial, a mortgage broker’s expertise allows you to assess your situation and find a loan tailored to your best interests. This will ultimately save you time and money.

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Making a decision to purchase your first home means you feel ready to take on a major financial commitment. But don’t rush. Exploring various factors and seeking assistance from professionals, such as mortgage brokers, can contribute to a successful and well-informed home-buying experience.

Unlock a confident first home-buying journey with Scale Mortgage. We specialise in delivering personalised financing solutions to cater to the unique needs of both homebuyers and investors. With MPF Solutions, you gain access to tailored expertise and a commitment to ensuring a seamless and rewarding experience.

Take the next step towards your first home goals – connect with us at Scale Mortgage.

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Thomas Makin

Thomas Makin is the Principal Mortgage Broker and Co-Founder of Scale Mortgage. He has a Diploma in Finance and Mortgage Broking Management and is accredited by the Mortgage & Finance Association of Australia (MFAA).

Thomas is known for his skill in providing tailored mortgage solutions. He helps homebuyers and investors across Australia, showing a strong commitment to professionalism and high industry standards.

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