What makes these loans good for first home buyers?
Most home loans are available for first-time buyers and existing borrowers who want to refinance or buy a second home. There aren't many loans that are only offered to first home buyers.
All of the loans in the table above are suitable first home buyers because:
They are owner-occupier loans, meaning they're not for investors.
We've included fixed and variable rate loans with competitive interest rates.
Many of the loans we've selected are available with deposits smaller than 20%.
They won a Finder Award (including the winner for First Home Buyer Home Loan).
How to find the best home loan as a first home buyer
First home buyers, like all other borrowers, are trying to get approved for a home loan that suits their needs, without paying more than they need to.
Here's how to find the best loan for you:
Get a low interest rate. The lower your interest rate, the lower your repayments.
Decide on fixed versus variable.Variable rate loans typically offer more features and flexibility, as well as access features like an offset account (more on that in a moment). With a fixed rate loan, you have the certainty of knowing your repayments will never move up (or down) during the fixed period, but it's hard to make changes if you need to.
Work out your deposit size. Having a bigger deposit means your monthly repayments will be lower and it also makes it easier to get a home loan approved. Most banks want to see a deposit between 10% and 20%, although it's possible to buy a home with the First Home Loan Deposit Scheme with just a 5% deposit.
Think about the features that matter to you. First home buyer loans are often basic home loans, without extra features like an offset account. This is fine if you're keen to get a low deposit loan with a low interest rate. But if you have extra savings to put into an offset account, consider a home loan with this feature.
Working out your costs and borrowing power
Before you can get your first home loan or even try to buy a home, you need to know how much it will all cost you. Your deposit is usually the biggest cost.
But there are many other costs to consider:
Stamp duty. Every property purchase attracts stamp duty, a tax charged by state and territory governments. Stamp duty can add thousands or tens of thousands of dollars to your purchase costs. Luckily, many first home buyers can get a discount or exemption if they're buying their first home.
Lenders mortgage insurance (LMI). The LMI premium costs thousands and is usually payable when you have a deposit worth less than 20% of the purchase price (we'll deep-dive this in a moment).
Inspections. While not compulsory, getting a professional building and pest inspection before buying a property is always a good idea.
Conveyancing. You need a legal expert to review your contract of sale (for the property purchase), check the property title is correct and represent you at settlement. The services of a conveyancer or lawyer can cost $1,000–$2,000.
Bank and government fees. There's a government fee to register your mortgage and your lender may charge other upfront fees, like an application fee or valuation fee.
Insurance. You need to take out a home insurance policy on your home before settlement occurs and you take ownership of the property. If you're buying a strata property (an apartment or townhouse), strata insurance is usually included in the strata fees and covers the building.
How much can you afford to borrow for your first home?
Enter your income (and your partner's income if making a joint application), plus the number of dependants and any debts you have. The calculator will estimate your expenses using a standard cost of living index.
Once you have a good understanding of your property buying costs and how much you can borrow, it's time to think about the deposit.
Loan to value ratio (LVR) is a fancy mortgage term for your deposit size in relation to your property's value. For example:
If you bought a $500,000 property
With a $100,000 deposit
That would be a 20% deposit, or 80% LVR
Having a 20% deposit means you can avoid paying LMI.
Expert tips
Max Phelps, founder of Golden Eggs and creator of the Five 2 Money Diet, says first home buyers also need to prepare themselves for the financial responsibilities that come with owning a home, which goes much further than just saving the deposit.
"How good are you at managing your expenses and building up savings? If you've gotten into bad spending habits and money feels a little out of control, imagine how much worse it would feel with a giant mortgage hanging over your head," Phelps says.
"People spend an average of 30% of their income on a mortgage, but to get ahead, you should plan to still save 20% of your income as well – this will set you apart in the long run."
For those who are considering asking their parents for help with a home loan deposit, Phelps is cautious.
"My advice to parents thinking about putting their property on the line for their kids would be to make sure the kids are good savers first," he says.
If your deposit is smaller than 20% of the property's value, your lender will charge you LMI. This can cost you thousands or tens of thousands on top of all your other expenses (although you can often borrow it alongside your loan amount).
LMI costs vary depending on your loan amount and deposit size. If your LVR is 85% (a 15% deposit) then your LMI will be less than if you have an LVR of 95% with a 5% deposit.
First home buyers in Australia have access to a large (and sometimes confusing) range of state and federal grants, concessions and other schemes.
Eligibility for these programs depends on things like the property value, your location and whether it's newly built or already exists. Every state and territory has different rules and policies.
First home owner grants
Some first-time buyers are eligible for a cash grant. These grants can run up to $10,000 or even more in some cases. To qualify, you often need to be purchasing a new or off-the-plan property, with a limit on the overall value of the property. These grants differ in every state and territory.
Stamp duty is one of the biggest costs associated with buying a property. Luckily, many first-time buyers can avoid stamp duty completely or get a discount on this tax. In NSW, for example, first home buyers don't have to pay stamp duty on properties valued below $650,000, saving them up to $22,000.
If you only have a 5% deposit saved and you're a first home buyer, you could be eligible for the First Home Guarantee. Under this federal scheme, eligible borrowers can borrow 95% of their property value with a 5% deposit and have the government guarantee the remaining 15% of the deposit, allowing them to avoid LMI costs.
The First Home Super Saver Scheme
Another federal scheme, the First Home Super Saver Scheme allows first home buyers to make extra payments into their superannuation and then withdraw them to use for a home deposit. This ends up saving you in tax while helping you build your deposit.
Family Home Guarantee
Up to 10,000 single parents (2,500 per year for 4 years) are eligible to buy a home with a deposit of just 2%, under the government's Family Home Guarantee, announced as part of the 2021 Federal Budget in May. This means for the purchase of a property worth $700,000, the homebuyer will need to save a deposit of just $14,000.
Regional Home Guarantee
The Regional Home Guarantee lets you buy or build a new home in regional Australia with a 5% deposit while avoiding LMI costs.
Why you can trust Finder's home loan experts
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You won't pay any more by taking out a home loan with us. Better still, we regularly run exclusive deals that you won't find on any other site – plus, our tables make it easy to compare loans.
We're experts
We've researched and rated dozens of home loans as part of our Finder Awards. We provide unique insights and our in-house experts regularly appear on Sunrise, 7News and SBS News.
We're independent
Unlike other comparison sites, we're not owned by a third party. That means our opinions are our own and we work with lots of home loan lenders, making it easier for you to find a good deal.
We're here to help
Since 2014, we've helped 150,000+ people find a home loan by explaining the nitty gritty details simply and clearly. We'll never ask for your number or email. We're here to help you make a decision.
Frequently asked questions about first home buyer loans
While some lenders offer home loan products specifically for first home buyers, most do not. But an ideal mortgage product for a first home buyer usually:
Has a low interest rate. No one wants to be stuck with a high interest rate, especially first home buyers. A lower rate means lower repayments, making your mortgage more affordable.
Requires a 10% deposit (or lower). Saving a deposit is often one of the hardest challenges for first home buyers. Loans targeting first home buyers often have a maximum insured LVR of 90–95%, meaning you can get the loan with just a 5–10% deposit. But you'll need to pay LMI if you're borrowing above 80%.
Has principal and interest repayments. With these home loans you repay the principal and the interest together. These loans often have lower interest rates too. But you could also consider an interest-only loan. Your rate will be higher but your repayments will be lower (in the short term).
First home owner grants and stamp duty concessions vary within each state and change over time.
In NSW first home buyers don't have to pay stamp duty on properties valued below $650,000, saving them up to $22,000. But first home buyers constructing or purchasing new homes can also receive a $10,000 grant (depending on the value of their property). In Victoria the grant can go as high as $20,000 if you're buying a new residential property outside Melbourne.
If you only have 5% saved and you're a first home buyer you could be eligible for the First Home Loan Deposit Scheme. Under this scheme eligible borrowers can borrow 95% of their property value with a 5% deposit and have the government guarantee the remaining 15% of the deposit, allowing them to avoid LMI costs.
Building that deposit for your first home is tough, especially if you're renting. And when house prices rise the amount you need to save only grows. Finding a low deposit home loan can make the task easier. But there are a few other ways to build your deposit:
Parental gift or inheritance. Most lenders want to see genuine savings. In other words, money you've earned yourself. But many will accept at least part of a deposit in the form of a cash gift or inheritance from your parents. Some lenders only need 5% of your deposit to be genuine savings.
Sell assets. You can sell valuable assets and use the cash to boost your deposit. You may need to hold the cash in your account for 6 months in order for it to quality as genuine savings.
Find a guarantor. As mentioned above, a parent can use their property as security to guarantee part of your deposit. This reduces the amount you have to save and might help you avoid LMI costs too.
You certainly can. Mortgage brokers are experts who have access to home loans from a panel of lenders. They can suggest suitable options for you and help you with the whole application process. Their services are usually free. While most people are perfectly capable of getting their own home loan, a broker can be a useful guide.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
A lender will review your credit score but it’s only one part of the home loan application. Lenders also consider your income, spending, and the size of the loan. However, you put yourself in a better position if you can improve your credit score by doing things like lowering your credit card limits, paying off any missed or late payments and challenging any errors on your credit report.
My parents have offered to help us in getting into the house market by being guarantors for my husband & I. Would this be possible if they still have a small mortgage to pay and currently on the pension & unemployment benefit?
It might be harder for them to act as guarantors but if the mortgage is small it might be possible. It really depends on the lender and its lending criteria.
My fiance and I are looking to go into partnership to buy a property with a family friend. The family friend has good borrowing capacity and will be getting a loan to buy the property, so the title will be in his name, but we are wondering if it is possible to enter into a vendor finance agreement with our family friend to buy a portion of the property while he is still paying off the loan to the bank?
Ideally, we would like to buy a portion of the property and also be on the title without having to subdivide. Is this possible?
We are also wondering if my fiance and I will qualify for the First Home Owners grant and the exception for stamp duty if we go into a vendor finance agreement? We do intend to build our first home.
With regard to the option of entering into a vendor finance agreement, it would help you buy a property without having to apply for a bank loan, but there are some major risks involved, including the big risk of losing your home.
The same fees and taxes are payable with vendor finance as they would be with a standard home loan. So the amount of stamp duty payable will vary depending on which state you live in and the value of the property.
To sum it up, if you’re thinking of purchasing a property through vendor finance, you should seek a solicitor to run you through the process and legal considerations so that you may be guided accordingly.
Hi, I was wondering if I buy an investment property, whether or not i can claim the fist
home buyers on my second home that I will live in? I live in Victoria.
These are the guidelines for those who wish to claim FHOG on an investment property in Victoria:
Victoria’s State Revenue Office is responsible for offering the $10,000 grant to applicants buying or building their first new home. To be eligible for the grant, you must not have:
– Received a First Home Owner Grant in Australia
– Owned a home in Australia, either jointly or separately, prior to 1 July 2000
– Occupied an Australian home in which either of you acquired a relevant interest on or after 1 July 2000 for at least six continuous months
So if you purchased your investment property on or after 1 July 2000 and you didn’t live in it for a period of six consecutive months, you may be eligible for the FHOG.
You may check the other eligibility criteria for more information.
Alternatively, you may also contact your local state revenue office for clarification.
Unfortunately, we cannot recommend what is best for you. Our company finder.com.au is a financial comparison website and general information service designed to help consumers to make a better decision. Please note we do not represent any company we feature on our pages.
However, at the time of this writing, there are three major search engines on the web today. That would be Google, Yahoo, and Bing. I would recommend you check each of them and see which would best meet your needs and preference.
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If the Veda Score is 560-590 -Will the lenders reject the loan application?
A lender will review your credit score but it’s only one part of the home loan application. Lenders also consider your income, spending, and the size of the loan. However, you put yourself in a better position if you can improve your credit score by doing things like lowering your credit card limits, paying off any missed or late payments and challenging any errors on your credit report.
My parents have offered to help us in getting into the house market by being guarantors for my husband & I. Would this be possible if they still have a small mortgage to pay and currently on the pension & unemployment benefit?
It might be harder for them to act as guarantors but if the mortgage is small it might be possible. It really depends on the lender and its lending criteria.
Hi team,
My fiance and I are looking to go into partnership to buy a property with a family friend. The family friend has good borrowing capacity and will be getting a loan to buy the property, so the title will be in his name, but we are wondering if it is possible to enter into a vendor finance agreement with our family friend to buy a portion of the property while he is still paying off the loan to the bank?
Ideally, we would like to buy a portion of the property and also be on the title without having to subdivide. Is this possible?
We are also wondering if my fiance and I will qualify for the First Home Owners grant and the exception for stamp duty if we go into a vendor finance agreement? We do intend to build our first home.
Thank you!
Hi Bri,
Thanks for reaching out to Finder.
With regard to the option of entering into a vendor finance agreement, it would help you buy a property without having to apply for a bank loan, but there are some major risks involved, including the big risk of losing your home.
The same fees and taxes are payable with vendor finance as they would be with a standard home loan. So the amount of stamp duty payable will vary depending on which state you live in and the value of the property.
To sum it up, if you’re thinking of purchasing a property through vendor finance, you should seek a solicitor to run you through the process and legal considerations so that you may be guided accordingly.
Cheers,
Joanne
Hi, I was wondering if I buy an investment property, whether or not i can claim the fist
home buyers on my second home that I will live in? I live in Victoria.
Hi Joel!
Thanks for the comment.
These are the guidelines for those who wish to claim FHOG on an investment property in Victoria:
Victoria’s State Revenue Office is responsible for offering the $10,000 grant to applicants buying or building their first new home. To be eligible for the grant, you must not have:
– Received a First Home Owner Grant in Australia
– Owned a home in Australia, either jointly or separately, prior to 1 July 2000
– Occupied an Australian home in which either of you acquired a relevant interest on or after 1 July 2000 for at least six continuous months
So if you purchased your investment property on or after 1 July 2000 and you didn’t live in it for a period of six consecutive months, you may be eligible for the FHOG.
You may check the other eligibility criteria for more information.
Alternatively, you may also contact your local state revenue office for clarification.
Hope this helps.
Cheers,
Jonathan
What is the best search engine in the world?
Hi Kathey,
Thank you for your inquiry.
Unfortunately, we cannot recommend what is best for you. Our company finder.com.au is a financial comparison website and general information service designed to help consumers to make a better decision. Please note we do not represent any company we feature on our pages.
However, at the time of this writing, there are three major search engines on the web today. That would be Google, Yahoo, and Bing. I would recommend you check each of them and see which would best meet your needs and preference.
Regards,
Harold