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A good first home buyer loan will be different for different first home buyers. It can depend on how much deposit you've saved up, what your financial goals are and what you're planning to do with the property.
For example, someone buying a home to live in for the long-term will want a different home loan to someone planning to rent out the home and then sell in a couple of years.
Although most home loans are available for both first-time buyers and existing borrowers who want to refinance, there are features to look out for to know whether they are better suited for first home buyers. There are also some home loans which are specific to first home buyers.
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.
Although our best home loan for first home buyers above is a great solution, there's no one-size-fits-all and so it won't be the best for everyone.
Here's how to find the best loan for you:
Your deposit is usually the biggest cost, but there are other costs to consider when you buy a home:
You can use a borrowing power calculator like the one below to get an estimate of how much a bank will lend you.
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.
You can also check out our guide on how to increase your maximum borrowing capacity.
According to Finder data, XX% said that saving for a deposit as the biggest barrier to getting a home loan. Although it is generally thought that you need to save a 20% deposit, you actually can get a home loan with as little as 10%. As a first home buyer you might even be able to take advantage of schemes where you can use as little as 5%.
Here are some tips on saving for your property deposit, but you can also visit our full guide for more in-depth tips:
"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.
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.
[And] 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."
Having a 20% deposit means you can avoid paying LMI.
If your deposit is smaller than 20% of the property's value, your lender will charge you LMI. This is to cover the lender in case you're unable to repay your home loan.
LMI 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.
Here are some examples:
Property price | Deposit | LMI |
|---|---|---|
$600,000 | 10% ($60,000) | $11,772 |
$500,000 | 5% ($30,000) | $22,788 |
$700,000 | 10% ($70,000) | $14,912 |
$700,000 | 5% ($35,000) | $30,676 |
$900,000 | 10% ($90,000) | $20,379 |
$900,000 | 5% ($45,000) | $39,355 |
The LMI amounts above are taken from Finder's LMI premium estimate calculator and are examples only.
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.
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.
Check your eligibility with our state-by-state first home owner guide.
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, eligible first home buyers don't have to pay stamp duty on properties valued below $800,000.
Learn more about the stamp duty exemptions and concessions in each state and territory.
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.
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.
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.
The Regional Home Guarantee lets you buy or build a new home in regional Australia with a 5% deposit while avoiding LMI costs.
The Finder Score crunches 7,000 home loans across 120+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best home loans for cashback, you can see how each home loan stacks up against other home loans with the same borrower type, rate type and repayment type. We also take into consideration the amount of cashback offered when calculating the Score so you can tell if it's really worth it.
Read the full Finder Score breakdown
The Regional First Home Buyer Guarantee lets low deposit borrowers buy or build in regional Australia while avoiding LMI costs.
The First Home Loan Deposit Scheme will let new buyers borrow 95% and avoid paying thousands in lenders mortgage insurance premiums.
Planning on buying your first home? Tips from the experts can help first home buyers save a deposit and get into your own home sooner than you think.
Find out what concessions are available to you under the First Home Owner Grant (FHOG) in your state with our comprehensive guide.
The First Home Super Saver Scheme explained.
Hi,
I am looking to buy a property in a developed suburb in west. we haven’t zeroed down the property but know what land size n house we are after. I am confused with the bank to pick. I consider these as my filtering options
low interest rate
at least 2 years fixed(not really if interest rate is low)
no pre closing charges
no ongoing fee
please can you suggest a lender.
Also the other question is – i am a first home buyer and i am currently on partner visa. is it possible that i will get the first home grant? my PR is due in june, and i do not want to wait that long as i feel the interest rate will rise and the grant will lower down.
please advice
thanks
Hello Shu,
Thanks for the question.
While we are unable to recommend a specific product, you can use our home loan comparison page to find the loan that suits you. You can compare the features and fees you’ve singled out. You can sort the table on the page mentioned to show the lowest interest rates, and then compare them. Next to each loan, there’s a small box. Check the boxes of the loans you wish to compare, and then click the ‘compare’ button on the top left of the table. This will help you compare more effectively.
In regards to your second question, to be eligible for the first homeowner grant, in addition to other conditions, at least one buyer must be an Australian citizen or permanent resident.
I hope this helps,
Marc
hey i am looking into buying my first property, here a quick rundown on what i am looking doing
buy vacant property for $13000 in a small country town with power and water (already found one)
buy a transportable for $7000 with free delivery (already found one)
i have over $5000 for a deposit already and the transportable home makes me eligible for the first home owners grant of $10000.
house + land = $20000
deposit and FHOG = $15000
$20000 – $15000 = $5000 left to pay off on loan
i am looking for a 1 year home loan
have no proof of income but am able to pay repayments ]
i need 20,000 to do it.
would this be possible
Hello Daniel,
Thanks for the question.
Most lenders will vary in their requirements but the majority of full documentation homes require proof of income. Generally, low doc home loans allow you to self-declare your income although these may come with higher fees and rates. Also, many home loans come with a minimum term of five years, so you’d need to be wary of this when making a comparison. I’d recommend speaking to a financial advisor or mortgage broker for personal advice regarding this.
Cheers,
Marc
I am pretty much sure Illawarra Home Loans is still own the Top Beating Home Loan range compared with other Lender and i think its good thing to do is to help any one who needs a Home to Buy,,,if you do good you will Last for Forever,,,,As a New Home Buyer,am looking at Low Doc Loan to purchase an existing Residential property as Town House,value at $290.000 but now the Valued Reduced to $240,000,as i proposed to turn this property to Farm Workers Accommodation and my question is, how much Deposit it may require as i want to borrow amount of $250,000,?,,,,i still reckon u are the best,,,,,,,,,,thanks,,,,,williams
Hello Williams,
Thanks for the question.
Most home loans will require you to have at least a 20% deposit of the purchase price of a property, although you may require a larger deposit for a low doc home loan. In some cases, if you’re prepared to pay a lender’s mortgage insurance premium, you could pay less of a deposit (between 5 – 10% of the property value). It’s important to remember that the less deposit you have the more lender’s mortgage insurance you might have to pay for.
You can find out more about low doc home loans.
I hope this helps,
Marc
Hi can I buy a first property in Qld and rent it out for a year before I move in , and still keep the stamp duty cut?
Hi Jim,
Thanks for your comment.
To be eligible for the first home transfer concession in QLD, the Office of State Revenue website states that “you must move into the property as your principal place of residence, then not dispose of any of the property for 1 year (e.g. by renting or selling).”
Hope this helps,
Shirley
hi can i get a home loan with out a deposit or a small deposit
Hi Tracy,
Thanks for your comment.
Guarantor loans are the only home loans that allow you to have no deposit, you may check the guarantor loans article and compare options but you will need consent from a family member who is willing to offer their property as security for your home loan. There are loans for those with a small deposit home loan, they usually require a deposit of around 5%.
Hope this helps,
Shirley