Buying your first home in Australia

Buying your first home is the biggest financial decision most Australians make, and it feels a lot less scary when you can see the whole road ahead. The steps to buying a first home are the same whether you are buying a two-bedroom unit in Brisbane or a house in the outer suburbs of Melbourne. Here is the path, and the rest of this guide explains each stop in plain English.

1. Work out what you can afford. Look at your income, spending and savings honestly, and test repayments at a higher interest rate than today’s.
2. Save your deposit and upfront costs. A bigger deposit means a smaller loan, but government schemes can get you in with as little as 5%.
3. Check what help you qualify for. Grants, stamp duty concessions, the 5% Deposit Scheme, Help to Buy and the First Home Super Saver Scheme can add up to tens of thousands of dollars.
4. Get pre-approval for a home loan. It tells you your budget and shows agents you are serious.
5. Search, inspect and research. Look at plenty of properties and read the fine print on what you are buying.
6. Make an offer or bid, then sign the contract. Get a conveyancer or solicitor to review the contract first.
7. Reach settlement and collect your keys. Your lender and conveyancer handle the final transfer of money and title.

A deposit is only one part of being ready. The people who struggle after buying are rarely the ones who were short of a deposit. They are the ones who stretched their budget so far that a rate rise, a lost job or a surprise repair knocked them over. Before you start looking at first home listings, run through these checks.

• Stable income. Lenders like to see you in your job (or at least the same industry) for several months, and casual or self-employed borrowers usually need to show two years of history.
• An emergency buffer. Keep three to six months of living costs and repayments in savings after the deposit is gone, not before.
• A clean credit file. Missed payments, a string of recent credit applications or unpaid mobile bills can cost you a loan or a better rate. You can get your credit report free from the main credit reporting bodies.
• Low other debt. Credit cards count against you at their full limit, not the balance. Closing cards you do not use can raise how much you can borrow.
• A plan for how long you will stay. If you might move in two years, the costs of buying and selling can wipe out any gain.

A useful test for any first home buyer is to pay your future mortgage repayment, plus rates and insurance, into a savings account for three to six months while you keep paying your rent. If you can do it without strain, you have proof the budget works. If you cannot, you have found out cheaply.

Interest rates drive all of this. The Reserve Bank’s decisions flow straight into variable loan repayments, and you can follow them in our economy coverage.

The price on a first home listing is never the total. Plan for the deposit, plus a pile of one-off costs that arrive in the weeks around settlement. A common rule of thumb is to budget an extra 3% to 6% of the purchase price, though stamp duty swings that number a lot depending on your state and whether you qualify for a concession.

These are typical ranges, not quotes. Get written costs from your conveyancer and lender before you bid, so the number you are working with is a real one.

Then there are the costs that never stop once you own your first home. Council rates, water charges, building insurance and maintenance are on you. If you buy a unit or townhouse in a complex, add strata levies, which can run into the thousands each year. A common rule of thumb is to set aside around 1% of the home’s value each year for repairs, which is $7,000 on a $700,000 house. Not every year is that expensive, but a hot water system and a roof do not wait for a convenient moment.

A first home deposit is the part of the price you pay from your own savings. The bank lends you the rest. The size of the deposit matters for two reasons: it sets how big your loan is, and it decides whether you pay lenders mortgage insurance (LMI).

LMI is a one-off premium that protects the lender, not you, if you default and the sale does not cover the loan. Lenders normally charge it when your deposit is smaller than 20% of the property’s value, and the cost depends on the loan size and how small the deposit is. You can usually add it to the loan, which means you pay interest on it. Here is how the deposit changes the loan on a $700,000 first home, using an illustrative interest rate of 6% over 30 years.

The rate is only an example to show the maths. The difference between a 5% and a 20% deposit is roughly $630 a month in repayments, plus the LMI you would pay at the low end. Our finance calculators let you try your own price, rate and loan term, and work out how much you need to save each month to hit a target.

Practical ways to save a first home deposit faster

• Automate it. Move money into a separate savings account the day you get paid, so it never sits in your spending account.
• Use a high-interest savings account. Compare bonus rates, and read the conditions on what you must do each month to earn them.
• Cut one big cost, not ten small ones. Moving in with family, sharing a rental or selling a second car does more than skipping coffees.
• Keep the deposit out of the share market. Money you will need within about five years belongs in cash, because a market fall at the wrong moment can shrink your deposit. Our guide on how to invest in shares covers why time frame matters so much.
• Count gifts honestly. If family is helping, lenders may want to see it documented as a gift, not a loan.

This is where first home buyers most often leave money on the table. Between the federal government and your state or territory, there are several programs aimed at first home buyers, and many of them can be used together. The rules shift regularly, so treat the numbers below as a snapshot and confirm the details with the official source before you rely on them.

The 5% Deposit Scheme

This is the scheme formerly known as the First Home Guarantee. The government guarantees part of your loan so the lender does not charge LMI, which is why a 5% deposit becomes workable. Since October 2025 there are no income caps and no limit on the number of places. You must be an Australian citizen or permanent resident aged 18 or over, buying as an owner-occupier, and you must be a first home buyer or someone who has not owned property in Australia for at least ten years. You apply through a participating lender, not the government directly. The property’s value must fall under a price cap that depends on where it is.

Regional areas have their own caps, and the lists are updated from time to time, so use the postcode tool on the Housing Australia website to check the exact cap for the suburb you have in mind.

Help to Buy

Help to Buy is a shared-equity scheme for people who have saved what they can but are still short. The government contributes up to 40% of the price of a new home or up to 30% of an existing one, and you only need a 2% deposit. You live in the home, and you repay the government’s share when you sell or earlier if you choose. The government does not charge rent or interest on its share, but its share rises and falls with the property’s value. Because it is open to both first and previous homeowners, it suits people who have been priced out for years. It has income and price caps, so check you qualify before you plan around it.

First Home Super Saver Scheme

The First Home Super Saver Scheme, or FHSS, lets you make extra voluntary contributions into your super fund and later withdraw them, plus deemed earnings, toward your first home. You can put in up to $15,000 a year and $50,000 in total. Contributions made from your pre-tax pay are taxed at 15% going in, and when you withdraw them you pay your marginal tax rate less a 30% offset. For many people on middle incomes, that adds up to more savings than putting the same money in a bank account. You can use FHSS together with the other schemes.

You cannot simply withdraw your existing super balance for a home. The scheme only covers extra contributions made for this purpose, and you must ask the ATO for a determination and a release before you sign a purchase contract. The timing rules are strict, so read the ATO’s FHSS page before you start. If you want the bigger picture on how contributions and caps work, our superannuation explained guide covers it.

State grants and stamp duty concessions

Every state and territory sets its own first home owner grant and its own stamp duty concession. Grants usually apply only to newly built homes or off-the-plan purchases and range from about $10,000 in some states to $30,000 in others, depending on the rules at the time. Stamp duty relief can be larger. Many states exempt first home buyers from duty entirely up to a certain price, then phase the relief out over a higher range. Because these settings change with state budgets, always check your state revenue office for current thresholds before you decide how much to spend.

When you apply for a first home loan, lenders do not just look at your income. They work out how much is left each month after your living costs and existing debts, then test whether you could keep paying if rates rose. By rule, banks must check that you could cope with a rate at least 3 percentage points above the one you are actually paying. This is the serviceability buffer, and it is the main reason people are told they can borrow less than they hoped.

These are the factors that move the number most:

• Your income. Salary is counted in full, while bonuses, overtime and casual income may be discounted or need a longer history.
• Your expenses. Lenders use your actual spending or a benchmark, whichever is higher, so a tidy account history helps.
• Debts and credit cards. A $10,000 credit card limit can cut your borrowing power by tens of thousands of dollars, even if the balance is zero.
• HECS-HELP debt. It is repaid through your tax, so it reduces your take-home pay and your borrowing capacity. Our tax basics guide explains how HELP repayments work.
• Dependants. Each child raises the living costs the lender assumes.
• Total debt compared with income. Lenders are increasingly cautious about loans that are more than about six times your gross income.

Just because a lender approves a figure does not mean you should borrow it. Work backwards from a repayment you are comfortable with, then check it against the maximum, not the other way around. Moneysmart’s home loans guide, run by the corporate regulator ASIC, has independent calculators and explainers.

The headline interest rate is only one piece of a first home loan. Two loans with the same rate can cost very different amounts once fees, features and conditions are included, and over 30 years, a small gap in rate becomes a very large sum. Here are the main choices you will face.

Look at the comparison rate as well as the advertised rate. It folds most fees into a single figure, which is a fairer way to compare. Then check the ongoing annual fee, whether extra repayments are unlimited, and what the lender charges if you leave. A cheap rate that comes with a high annual package fee might not be cheap at all.

Banks change their rates and policies constantly, and our banking news tracks the moves so you can see which lenders are sharpening their pricing.

Broker or bank?

A mortgage broker compares loans from a panel of lenders, helps you get the application right and chases the lender for you. They are paid by the lender, usually through commission, and they must act in your best interests. A direct bank loan can be quicker and sometimes comes with a discount for existing customers, but you see a single lender’s products. If you use a broker, ask which lenders they compare and how they are paid. If you go direct, get a second quote to test the offer.

Pre-approval, sometimes called conditional approval, is a lender’s written estimate of how much it is willing to lend you, based on your documents. It is not a guarantee. The lender still has to value the property you pick and confirm your finances have not changed, and most pre-approvals last three to six months. Even so, it is the most useful early step in buying a first home. It sets your real budget, speeds up your offer and shows a seller you are not wasting their time.

To apply, you will need to gather:

• Photo ID such as a driver licence and passport
• Your last two or three payslips, plus your most recent tax return or notice of assessment (self-employed borrowers usually need two years)
• Three to six months of bank statements, including savings history
• Details of all debts, credit cards, buy-now-pay-later accounts and HELP balances
• Evidence of your deposit and any gifted funds

Avoid taking on new debt, such as a car loan or a new credit card, between pre-approval and settlement. Lenders check your finances again before they release the funds, and a change can sink the deal.

Almost no first home ticks every box. Decide your must-haves, your nice-to-haves and the things you refuse to accept before you start inspecting, or every viewing becomes a new argument. Think about commute time, schools, transport, noise and how the area is changing, and then be honest about what your budget can reach.

If you are looking at a unit, read the strata records. They show levies, any special levies planned, the sinking fund balance, building defects and disputes. A cheap unit in a building with a big repair bill coming is not cheap. For a house, remember land is the part that has historically held its value, while the building itself ages.

To get a feel for prices and trends before you start, our property coverage reports on auctions, clearance rates and what buyers are doing.

Go to plenty of open homes before you fall in love with one. After five or ten, you will start to see what is priced fairly and what is not. Look past the styling. Check for cracks, damp, water stains, uneven floors, doors that stick and signs of patched-up repairs. Visit at different times of day, so you can hear the traffic, see the light and watch the parking.

• Building and pest inspection. Pay for one before you buy, or before the auction. A cheap report can save you from a very expensive surprise.
• Contract review. Have a conveyancer or solicitor read the contract of sale and the title documents before you sign.
• Council and zoning checks. Look for easements, flood or bushfire overlays, planned developments next door and unapproved building work.
• Recent sales. Compare similar properties nearby that sold in the last few months, not just the asking prices of those still listed.
• Valuation. Your lender will order its own. If it comes in under the price, you may need to find extra cash.

How you buy your first home depends on how the property is being sold. The method changes how much time you get, whether you can add conditions and what happens if you change your mind.

At an auction, set your limit in advance and stick to it. It is easy to blow past your number when the adrenaline kicks in. If you win, you sign the contract on the spot and pay a deposit, usually around 10%, which is why your pre-approval and inspections need to be sorted in advance.

With a private sale, you will normally sign the contract after your offer is accepted, then pay a deposit. The amount varies by state and what you agree with the seller. Many states give buyers a cooling-off period of a few business days after signing a private sale contract, but it varies from state to state, and in some places there is none. Do not count on it as your safety net, and ask your conveyancer how it works where you live.

Keep offers realistic. Lowball offers tend to waste time in a hot market, but you should never pay more than the property is worth to you just to win.

After you sign the contract, the lender completes its own checks. It values the property, confirms your finances and issues formal approval. You then sign the loan documents, and arrange insurance on the property, which you need from the moment you are at risk. Your conveyancer will confirm the settlement date and handle the legal side.

Settlement is the day ownership of your first home transfers. It happens electronically through PEXA, the online platform your conveyancer and your lender both use to exchange money and update the title. Most settlements take place 30 to 90 days after the contract is signed. Just before settlement, do a final inspection, usually within a day or two, to check the property is in the condition you agreed to, that nothing promised in the contract has been removed and that any repairs the seller agreed to are done.

When settlement completes, the agent releases the keys, and you are the owner. Then your repayments begin, usually one month later.

The first year is when the true cost of owning your first home shows up. A few habits make it easier.

• Keep your emergency buffer intact. Do not spend it on furniture.
• Set up your repayments to match your pay cycle. Fortnightly or weekly repayments can shave a little off your interest over the years.
• Review your rate every year. Lenders often give new customers better rates than existing ones, so ask for a better deal or compare refinancing options.
• Use your offset account. Every dollar sitting in it reduces the interest charged on your loan.
• Check your insurance. Make sure the building is covered for the cost of rebuilding, not the price you paid.

On the tax side, your first home, as your main residence, is generally exempt from capital gains tax when you sell it, which is one reason property appeals to so many Australians. There are rules on how long you must live there and what happens if you rent it out, so speak to a registered tax agent when it matters.

Most regrets from buying a first home come from a short list of avoidable errors.

• Borrowing the maximum. The bank’s limit is not your budget. Plan around repayments you could handle if rates rose.
• Forgetting the extra costs. Stamp duty, legal fees and inspections have sunk plenty of deals at the last minute.
• Skipping the building and pest report. The cost is small compared with a hidden structural fault.
• Buying emotionally at auction. Set a limit before you walk in, and walk away if it passes.
• Ignoring strata reports. A unit in a building with large upcoming repair costs can wipe out your savings.
• Missing government help. Check every scheme, because the combination can save a lot.
• Taking on new debt before settlement. A new car loan can reduce your approval at the last minute.
• Not shopping around for the loan. A small difference in interest rate adds up to tens of thousands over the life of the loan.