The Easiest Way to Prepare for Property Purchase

Deposit size dictates which loan options you can access

Your deposit determines which programs you qualify for and whether you'll pay Lenders Mortgage Insurance. A 5% deposit opens the door to the First Home Guarantee, while a 10% deposit gives you access to a wider range of lenders and potentially lower rates. Anything above 20% removes LMI entirely.

The First Home Guarantee was expanded from October last year with no income caps and no place limits, meaning eligible buyers can purchase with a 5% deposit without paying LMI. This applies to established homes as well as new builds, and the government covers the gap between your deposit and the usual 20% threshold. Most lenders now accept applications under this scheme, though you'll still need to meet standard serviceability tests.

Consider someone buying an established home with a 5% deposit. They access the First Home Guarantee, avoid LMI, and keep more cash aside for settlement costs and any immediate maintenance. Without the guarantee, that same buyer with 5% would face LMI premiums that could add tens of thousands to the loan amount. The difference isn't just upfront cost but also how much interest compounds over the life of the loan.

If you have a smaller deposit or need help building one, the First Home Super Saver Scheme lets you contribute up to $15,000 per year into superannuation, taxed at 15% instead of your marginal rate, and withdraw up to $50,000 for your deposit. This works particularly well if you're still 12 to 18 months away from purchasing and want to accelerate your savings.

State concessions and grants reduce upfront costs significantly

Every state offers different combinations of stamp duty concessions and grants, and most of these can be stacked with federal schemes. New South Wales offers a $10,000 grant for new homes under $600,000 or house and land packages under $750,000, plus a full stamp duty exemption on properties under $800,000 for eligible first home buyers. Victoria has a similar structure with no duty up to $600,000 and a reduced rate up to $750,000, plus a $10,000 grant for new homes.

Queensland currently offers up to $30,000 for new homes under $750,000, though this grant expires on 30 June this year unless extended. South Australia abolished stamp duty entirely for first home buyers purchasing new homes, regardless of price, which can save over $40,000 on higher-value properties. Western Australia increased its property cap to $800,000 and removed stamp duty on pre-construction purchases within that threshold. Tasmania offers no duty on established homes up to $750,000 until 30 June, and the Northern Territory provides a $50,000 grant for new builds with no price cap, the largest grant in the country.

In a scenario where a buyer in South Australia purchases a new townhouse, they pay no stamp duty and receive the $15,000 First Home Owner Grant. Across the border in Victoria, the same purchase would attract stamp duty unless the property fell under the $600,000 threshold. The difference in upfront costs between states can be $20,000 to $50,000, which directly affects how much you need in savings before making an offer.

Most grants apply to new homes only, but stamp duty concessions often extend to established properties. If you're buying an older home close to a concession threshold, it's worth confirming the exact dutiable value with a conveyancer before signing a contract. Even a small difference in valuation can shift you from a full concession to a partial one.

Serviceability matters more than deposit for most lenders

Lenders assess your income, expenses, and existing debts to determine how much you can borrow. This calculation uses a buffer rate, typically 3% above the actual interest rate, to ensure you can still afford repayments if rates rise. Your borrowing capacity shrinks if you have ongoing commitments like car loans, personal loans, or high credit card limits, even if those cards have a zero balance.

Someone earning $85,000 per year with no dependents and minimal debts might borrow around $500,000, depending on the lender's policy and current rates. Add a $15,000 car loan and a $10,000 credit card limit, and that capacity could drop by $80,000 to $100,000. Paying off the car loan or cancelling the credit card before applying can restore that borrowing power without increasing your income.

If you're self-employed, most lenders require two years of tax returns and financials. Some accept one year of returns if your accountant provides a letter confirming consistent income, but this depends on the lender and your industry. If your taxable income is lower due to deductions, some lenders will add back depreciation or other non-cash expenses to increase your serviceability. This is where working with a broker helps, as not all lenders assess self-employed income the same way.

Pre-approval confirms your budget before you start searching

Pre-approval gives you a conditional commitment from a lender based on your financial position, usually valid for three to six months. It doesn't guarantee final approval, but it does mean the lender has reviewed your income, debts, and deposit and is willing to lend a specific amount subject to a satisfactory property valuation and final checks.

Pre-approval lets you make offers with confidence and shows sellers you're a serious buyer. In competitive markets, this can make the difference between your offer being accepted or passed over for someone who already has finance in place. It also reveals any issues with your application before you find a property, giving you time to resolve them without delaying settlement.

Most lenders require payslips, tax returns, bank statements, and proof of deposit source. If part of your deposit is a gift, you'll need a signed letter from the person providing it confirming it's not a loan. If you've saved through the First Home Super Saver Scheme, you'll need a determination letter from the ATO showing the amount you're eligible to withdraw. These documents should be ready before you approach a lender, as incomplete applications slow the process and can result in a conditional pre-approval that's less useful when making offers.

Fixed and variable rates serve different purposes

A fixed interest rate locks in your repayments for a set period, usually one to five years, protecting you from rate rises but also preventing you from benefiting if rates fall. Variable rates move with the market, giving you flexibility to make extra repayments and access features like offset accounts and redraws without restriction.

Many first home buyers split their loan, fixing part of the balance for certainty and leaving the rest variable for flexibility. This lets you lock in a portion of your repayments while still having access to an offset account on the variable portion, which can reduce interest without locking funds away. The split doesn't have to be even; you might fix 60% and leave 40% variable, or any other combination that suits your risk tolerance and cash flow.

If you fix your entire loan and need to sell or refinance before the fixed term ends, you may face break costs. These can be substantial if rates have fallen since you fixed, as the lender calculates the economic loss from releasing you early. Variable loans don't have this issue, which is why keeping at least part of your loan variable makes sense if there's any chance you'll move or refinance within a few years.

Offset accounts reduce interest without additional repayments

An offset account is a transaction account linked to your home loan where the balance offsets your loan balance when calculating interest. If you have $20,000 in your offset and owe $400,000, you only pay interest on $380,000. The money in the offset remains accessible, unlike extra repayments into a loan account, which may require redraw requests.

Redraw facilities let you access extra repayments you've made, but some lenders restrict how much you can redraw or charge fees for each transaction. Offset accounts don't have these limitations, though they're usually only available on variable loans or the variable portion of a split loan. For first home buyers who want to build an emergency fund while reducing interest, an offset account does both without locking cash away.

Not all lenders offer full 100% offset accounts. Some offer partial offsets where only a percentage of your balance reduces the interest calculation. Always confirm the offset structure before choosing a loan, as a partial offset is far less valuable over time.

Low deposit options work if you meet income and credit requirements

The First Home Guarantee allows 5% deposits without LMI, but it's not the only low deposit option. Some lenders offer 10% deposit loans with reduced LMI if you meet specific criteria, such as being a professional in a recognised occupation or having a guarantor. Guarantor loans let a parent or family member use their property as additional security, allowing you to borrow with little or no deposit and avoid LMI entirely.

A guarantor only guarantees the shortfall between your deposit and 20%, not your entire loan. If you borrow $450,000 with a 5% deposit, the guarantor secures the 15% gap, roughly $67,500. Once you've paid down enough principal or the property has increased in value, the guarantee can be removed without refinancing. This structure protects the guarantor from unlimited liability while still giving you access to low deposit home loans.

If you don't have a guarantor and your deposit is under 10%, the First Home Guarantee is usually the most cost-effective path. It removes LMI without requiring family involvement, and the application process is the same as a standard home loan. Your broker submits the application through participating lenders, and if approved, the guarantee is applied automatically.

Call one of our team or book an appointment at a time that works for you. We'll review your deposit, confirm your eligibility for state and federal programs, and structure your application to give you the strongest position before you start making offers.

Frequently Asked Questions