First Home Buyers

First home buyer guide 2026

Congratulations, you’re thinking about buying your first home. You’ve built a steady income, developed good savings habits and are ready to take the next step. Now comes the big question: where do you start? This guide walks you through everything you need to know.

What is a first home buyer?

A first home buyer is someone purchasing their first residential property in Australia. Generally, this means you have never previously owned a property in Australia, either on your own or jointly with another person.

To qualify for government assistance programs and stamp duty concessions, you’ll usually need to live in the property as your principal place of residence for a minimum period.

It’s worth noting that not all first home buyers purchase a home to live in. Some choose to buy an investment property as their first purchase, a strategy known as rentvesting, where they continue renting in their preferred location while building equity in a more affordable property elsewhere.

First home buyer deposit: How much do you need?

First things first, you can’t buy a home without a deposit. So, how much do you need?

Most lenders require a minimum deposit of 5% to 10% of the property’s value. For example, if you’re buying an $800,000 home, you’d need a minimum deposit of $40,000.

First home buyers were traditionally told to save a 20% deposit to avoid Lenders Mortgage Insurance (LMI), which can add thousands of dollars to the cost of buying. However, government schemes and modern lending options have made the 20% deposit rule far less relevant than it once was.

You can avoid LMI by using the Australian Government’s First Home Guarantee, which allows you to purchase your first home with a 5% deposit. Under the scheme, the government effectively guarantees up to 15% of the property’s value, so you don’t pay LMI. Another option is a family guarantor loan, where your parents use the equity in their home as additional security for your loan.

How your deposit impacts your first home buyer loan

Your deposit doesn’t just determine how much you need to save — it also affects your Loan-to-Value Ratio (LVR), which is one of the most important factors lenders consider when they assess your application.

LVR is the percentage of the property’s value you’re borrowing. For example, if you’re buying an $800,000 home with an $80,000 deposit, you’ll need to borrow $720,000. This gives you an LVR of 90%.

First home buyer deposit examples: Loan amount and LVR

Deposit	Property price	Loan amount	LVR
5% ($40,000)	$800,000	$760,000	95%
10% ($80,000)	$800,000	$720,000	90%
20% ($160,000)	$800,000	$640,000	80%

As you can see above, the larger your deposit, the lower your LVR.

A lower LVR improves your chances of getting your home loan approved, and also helps to secure a lower interest rate. That’s because you’re considered a lower-risk borrower — you’re borrowing less relative to the property’s value. This provides the lender with a larger equity buffer, reducing the risk of loss if the property needs to be sold.

Conversely, a smaller deposit means a higher LVR, which lenders consider riskier. As a result, you may face a higher interest rate, stricter lending criteria and, in some cases, the added cost of LMI.

Home loan options for first home buyer

As a first home buyer, you’ll come across a range of home loan options. The main differences come down to what you’re buying, how your interest rate works, and how you repay the loan.

Loan Purpose

Owner-occupier loan	Investment loan
If you buy a home to live in. These loans generally have lower interest rates than investment loans. According to ABS lending data, around 95% of first home buyer loans are owner-occupier loans.	For a property you plan to rent out. These loans typically come with higher interest rates than owner-occupier loans. ABS lending data shows only around 5% of first home buyer loans are for investment properties.
Construction loan	Land loan
Designed for building a new home. Instead of receiving the full loan amount upfront, funds are released in stages as construction progresses and your builder reaches key milestones. Construction loans are commonly used for new builds and house-and-land packages.	If you’re buying a block of land now and planning to build later. Some first home buyers choose this option to secure land before construction costs and house prices rise further. Depending on the lender, you may need a larger deposit and could face stricter lending criteria than with a standard home loan.

Interest rate type

Variable rate loan	Fixed rate loan
Your interest rate will move up and down over time, often in line with changes to the cash rate set by the Reserve Bank of Australia (RBA). If rates fall, your repayments will decrease. If rates rise, your repayments will increase. Variable loans generally come with the best features, such as an offset account, redraw facility and unlimited extra repayments.	Locks in your interest rate for a set period (usually 1–5 years), meaning your repayments stay the same during that time. This can make budgeting easier, but flexibility is often limited. Fixed-rate loans may not include features like an offset account and usually cap the amount of extra repayments you can make. You may also have to pay break fees if you refinance or exit the loan before the fixed period ends.
Split loan
This is where the loan has both a fixed and variable portion, which allows you to balance repayment certainty with flexibility. Some borrowers describe it as ‘hedging your bets’ because part of your loan is protected if rates rise, while the variable portion can benefit if rates fall. You can choose how to split the loan, whether it’s 50/50, 60/40 or another ratio that suits your needs.

Repayment type

Principal & Interest (P&I) loan	Interest-only loan
Your repayments cover both the loan balance (principal) and interest. This means you pay off your home and build equity over time. This is the most common repayment type for owner-occupiers.	For a set period (usually up to five years), you only repay the interest on the loan. While repayments are lower initially, you’re not reducing the loan balance, meaning you’ll pay more interest over the life of the loan. Interest-only loans are more common among property investors.

Pro tip: As a first home buyer, you typically won’t qualify for a lender’s lowest advertised interest rate straight away. That’s because you’re often borrowing with a smaller deposit (higher LVR) and have less of a track record as a mortgage customer. The good news is that as you build equity and establish a strong repayment history, you may become eligible for sharper rates in the future.

Best home loan features for first home buyers

As a first home buyer, you’ll spend a lot of time comparing interest rates. But some of the biggest savings on your loan can come from the features attached to it. Here are some of the most valuable home loan features to look for, ranked in order of importance.

Offset account: Think of this as a savings account that works double duty. Every dollar in your offset account reduces your loan balance for interest calculations by a dollar. So if you have a $700,000 mortgage and $20,000 in your offset account, you’ll only pay interest on $680,000. Your offset account works like an everyday bank account linked to your home loan. You can deposit your salary, make purchases and access your money whenever you want.

Redraw facility: Similar to an offset account, a redraw facility helps reduce the interest you pay on your mortgage. The key difference is that the money comes from extra repayments you’ve already made on your home loan. If you’ve paid more than the minimum repayments and need some of that money back, you can withdraw it through your redraw facility.

Portability: Allows you to transfer your existing home loan to a new property when you move, so you avoid refinancing costs and fixed-rate break fees. Instead of applying for a new loan, the lender swaps the security tied to your existing mortgage from your current property to the new one you’re purchasing.

Repayment holiday: Some lenders allow you to temporarily pause or reduce your repayments during major life events, like parental leave, redundancy or financial hardship. This is usually only available if you’ve built up a buffer through extra repayments and are ahead on your mortgage. Keep in mind that interest continues to accrue while your repayments are paused.

Cashback offers: Some lenders, including major banks, offer cashbacks of between $2,000 and $4,000 to eligible first home buyers. While the extra cash can help cover moving costs or other expenses, it’s important to compare the long-term interest rate and fees rather than focusing on the cashback alone.

Other costs first home buyers need to budget for

Aside from your deposit and the purchase price, there are several other costs you’ll need to budget for when buying your first home.

Stamp duty: Many first home buyers qualify for a stamp duty exemption or concession, but it’s still important to understand how the tax works and whether you’ll need to pay it.

Stamp duty is a state government tax charged when property ownership is transferred. It’s often the largest upfront cost after your deposit. While the amount varies by state and property value, recent revenue data shows the average stamp duty collected per property transaction nationally is more than $60,000.

Loan fees: Banks often charge fees to process and set up your home loan. These can include application fees, valuation fees, settlement fees and ongoing account-keeping fees.

As a guide, expect to pay between $350 and $750, although the exact amount varies by lender. The good news is that many of these fees can be waived or reduced, particularly if you’re using a mortgage broker to negotiate on your behalf.

Conveyancing fees: A conveyancer or solicitor takes care of the legal paperwork involved in buying your home. They’ll review the contract, conduct property searches and handle settlement. You’ll pay for both their time and a range of third-party costs, like title searches, council certificates and government registration fees. Always ask for an itemised quote upfront, but expect to pay between $1,800 and $3,000, depending on the property and complexity of the transaction.

Lenders Mortgage Insurance (LMI): If you’re borrowing more than 80% of the property’s value and don’t qualify for an exemption, you may need to pay LMI. This can cost anywhere from 1% to 3% of your loan amount, depending on your deposit size and lender. For example, if you’re buying a $700,000 home with a 5% deposit, you could be looking at an LMI bill of around $30,000.

Building and pest inspections: Most property sales contracts are subject to a building and pest inspection. These can help identify structural issues, pest damage or costly repairs before you buy. Depending on the property and location, they typically cost between $200 and $600.

Home insurance: Most lenders require you to have building insurance in place before settlement because they want to protect the property securing the loan. Before approving the loan for settlement, your lender will usually ask for a Certificate of Currency from your insurer as proof the property is covered. As a guide, basic building insurance can start from around $150 per month, although premiums vary depending on the property’s value, location and level of cover.

Moving costs: Removalists, truck hire, furniture, appliances and utility connections can quickly add up. Depending on how much you’re moving and whether you’re doing it yourself, costs typically range from $500 to $2,000 or more.

Ongoing ownership costs: Once you’ve moved in, you’ll need to budget for ongoing expenses like council rates, water/sewerage charges, utilities like electricity, gas and internet, as well as general maintenance and repairs.

Pro tip: Don’t spend every dollar on your deposit. Keeping a cash buffer for these upfront costs and unexpected expenses can make the transition to home ownership much less stressful.

First home buyers assistance schemes available in 2026

First home buyer 5% deposit scheme

The First Home Guarantee (FHG) or 5% deposit scheme allows first home buyers to buy a home with a minimum 5% deposit without paying LMI. The government effectively acts as a guarantor for up to 15% of the property’s value.

The scheme is now available to all eligible first home buyers. While it’s not income-tested, property price caps still apply (see below). Since launching in 2020, more than 248,000 Australians have used the scheme to buy their first home.

FHG property prices caps in 2026

Source: Australian Government/Housing Australia.

Help to Buy shared equity scheme

Help to Buy is a Federal Government shared equity scheme designed to help eligible first home buyers enter the property market with as little as a 2% deposit. Under the scheme, the government contributes up to 40% of the purchase price of a new home or up to 30% of an existing home.

In exchange, the government owns a share of the property, which you’ll gradually buy back over time or repay when you sell the home. Income limits and property price caps apply. The scheme is targeted at lower-income Australians, with income capped at $100,000 for individuals and $160,000 for couples. Another limitation is that only two lenders currently offer Help to Buy loans — Commonwealth Bank and Bank Australia.

Some states and territories also have their own shared equity schemes:

- VIC: Victorian Homebuyer Fund
- QLD: Boost to Buy
- WA: Shared Home Ownership Scheme
- SA: HomeStart
- TAS: MyHome

First Home Super Saver Scheme (FHSS)

The First Home Super Saver Scheme (FHSS) allows first home buyers to save for a deposit through their superannuation fund. You can make pre-tax (concessional) contributions into your super and later withdraw those funds, along with associated earnings, to help purchase your first home.

The main benefit is the tax treatment. Because concessional contributions are taxed at just 15% inside super, many Australians can build a deposit faster than they would through a regular savings account. You can contribute up to $15,000 per financial year and withdraw up to $50,000 in eligible contributions under the scheme. When you withdraw eligible FHSS amounts, they are taxed at your marginal tax rate less a 30% FHSS tax offset.

Pro tip: The FHSS is often one of the most overlooked first home buyer schemes. For someone on an average income, the tax savings alone can add thousands of dollars to their deposit compared to saving through a regular bank account.

First Home Owner Grant (FHOG)

Most states and territories offer a First Home Owner Grant (FHOG), which is a cash contribution towards the purchase of your first home. The catch is that these grants are generally only available for new builds, newly constructed homes or substantially renovated properties. The good news is that there’s no income or assets test to qualify for the FHOG.

State/territory	FHOG amount	Key Conditions
NSW	$10,000	New homes up to $600,000, or land + build up to $750,000
VIC	$10,000	New homes valued up to $750,000
QLD	$30,000	New homes up to $750,000 (for contracts signed before 30 June 2026)
WA	$10,000	New or substantially renovated homes. Property value caps apply and vary by region (up to $800,000 south of the 26th parallel)
SA	$15,000	New homes only (no property price caps)
TAS	$30,000	New homes only
ACT	No cash grant	Assistance available through stamp duty concessions instead
NT	$50,000 (HomeGrown Territory Grant)	New builds (no property price caps)

Stamp duty concessions for first home buyers

Eligible first home buyers may qualify for the following stamp duty concessions and exemptions:

- New South Wales: Full exemption on homes under $800,000 and vacant land under $350,000, with concessions above these thresholds.
- Victoria: Full exemption on homes under $600,000, with concessions available up to $750,000.
- Queensland: A transfer duty concession applies to eligible homes valued under $800,000, while vacant land is fully exempt.
- Western Australia: Full exemption on homes under $500,000 and vacant land under $450,000.
- South Australia: Full stamp duty exemption on eligible new homes, with no property price cap.
- ACT: Stamp duty exemption on eligible homes under $1 million, subject to income and household eligibility requirements.
- Northern Territory: A stamp duty exemption is available through the House and Land Package Exemption scheme.
- Tasmania: A stamp duty exemption is available on properties valued up to $750,000.

House deposit savings strategies for first home buyers: Pros & Cons

There are 4 main savings strategies first home buyers generally use to save for a house deposit. Here’s how they stack up. Assuming a first home buyer starts with $0 and saves $1,000 per month for 3 years ($36,000 total contributions), with monthly compounding:

Strategy	Assumed return p.a.	Total contributions	Value after 3 years*	Pros	Cons
Cash savings (everyday account)	0%	$36,000	$36,000	No risk, immediate access	Doesn’t keep pace with inflation
High Interest Savings Account (HISA)	5%	$36,000	$38,788	Low risk, government-backed deposits, predictable returns	Rates can fall, interest taxed
Diversified ETF Portfolio	8%	$36,000	$40,567	Higher long-term growth potential, diversified across many companies	Market volatility, value can fall when you’re ready to buy
FHSS (including tax benefits)	7% (deemed return, not actual)	$36,000	About $43,252 (depending on tax bracket)	Potential tax savings, long-term growth	Withdrawal rules apply, contribution caps limit flexibility

*For illustrative purposes only. Returns are assumed and do not account for fees, taxes or market fluctuations. The FHSS estimate includes the potential benefit of concessional tax treatment on eligible super contributions.

How much can first home buyers borrow?

As a very general guide, a single borrower earning $100,000 per year with minimal debts and expenses may be able to borrow around $450,000 to $550,000, while a couple earning a combined $180,000 to $200,000 may be able to borrow around $800,000 to $1 million.

Here’s what lenders look at when they assess your borrowing capacity as a first home buyer:

Your income

Your income is the starting point for calculating borrowing power. This includes your salary, wages, bonuses, commissions and, in some cases, government benefits or rental income. Generally, the higher and more stable your income, the more you can borrow.

Your living expenses

Lenders will review your bank statements and analyse your day-to-day spending, including groceries, utilities, transport, subscriptions, childcare and entertainment. The more you spend each month, the less income you have available to service a mortgage, which can reduce your borrowing capacity.

Your existing debts

Any existing debt will affect how much you can borrow. This includes personal loans, car loans, and Buy Now Pay Later (BNPL) accounts. Lenders assume you’ll continue making repayments on these debts, which reduces the amount they are willing to lend.

Credit card limits

Many first home buyers are surprised to learn that lenders assess your credit card limits, not just your outstanding balance. Even if you owe nothing, lenders typically assume a monthly repayment based on your available credit limit, which can reduce your borrowing power.

As a general rule, every $1 of available credit card limit can reduce your borrowing capacity by around $5. For example, a credit card with a $10,000 limit could reduce the amount you’re able to borrow by around $50,000, depending on the lender.

HECS/HELP debt

While HECS/HELP debt doesn’t appear on your credit report, lenders still take it into account because compulsory repayments reduce your disposable income. However, some lenders (e.g. NAB and CommBank) may disregard your HECS/HELP debt when assessing borrowing capacity if you’re expected to repay it within the next 12 months or the remaining balance is relatively low.

Dependants

Having children or other financial dependants generally reduces borrowing power because lenders factor in the additional cost of supporting your household. The more dependants you have, the higher your assumed living expenses will be.

Interest rate buffers

Lenders don’t assess your ability to repay a loan at the advertised interest rate. Instead, they apply a serviceability buffer, typically around 3% above your actual rate. For example, if your home loan rate is 6%, the lender may assess your application as though the rate were 9%. This helps ensure you can still afford the repayments if interest rates rise in the future.

How to apply for a home loan as a first home buyer

Applying for a home loan is mostly about proving two things to the lender: who you are and that you can afford the repayments. Here’s how the process works.

1. Speak to a mortgage broker

If you’re a first home buyer, speaking to a mortgage broker should be your first step. Brokers are free to use because they’re paid a commission by the lender once your loan settles.

Your broker will ask you to complete a Fact Find, which is a detailed overview of your income, expenses, assets, liabilities and financial goals. They’ll use this information to assess your borrowing capacity, explain your options and recommend suitable home loans from their lender panel.

2. Fill out your loan application

Your mortgage broker will help you complete the loan application and submit it to the lender on your behalf. You’ll need to provide supporting documents like your ID, payslips, bank statements and evidence of your deposit. If you’re using the Government’s 5% deposit scheme, let your broker know upfront.

3. The lender will assess your borrowing capacity

The lender will review your income, expenses and existing debts to work out how much you can borrow. They’ll then apply a serviceability buffer of around 3%. In simple terms, if your interest rate is 6%, they’ll assess whether you could still afford the loan if rates were closer to 9%.

4. Get pre-approval

The lender will assess the information and documents you’ve provided and may issue a pre-approval (also known as conditional approval). This gives you an indication of how much you can borrow before you start house hunting. Most pre-approvals are valid for around 90 days, although they can be withdrawn if your financial circumstances change.

5. Credit checks and verification

The lender will review your credit history for any missed payments, defaults or outstanding debts. They’ll also look at your credit score, with scores above 700 generally viewed favourably by most lenders. A lower score doesn’t necessarily mean you’ll be declined, but it may reduce your lending options or result in a higher interest rate.

The lender will also verify the information you’ve provided, including your employment, income, expenses and existing liabilities.

6. Property valuation

Once you’ve found a home, the lender will arrange a property valuation to confirm it’s worth what you’re paying and to calculate your LVR and final interest rate.

7. Receive formal approval

If everything checks out, you’ll receive unconditional approval and a formal loan offer outlining your interest rate, repayments and loan terms. Review the loan offer carefully with your conveyancer.

What documents do first home buyers need to provide?

Most lenders will ask first home buyers to provide:

- Proof of income, including 2–3 recent payslips or tax returns if you’re self-employed.
- Proof of assets and liabilities, including savings, shares, credit cards, personal loans and other debts.
- Identification documents, typically 100 points of ID (e.g. driver’s licence, passport and Medicare card).

If you’re buying with a deposit of less than 20%, the lender may also ask for evidence that you’ve demonstrated a strong savings or repayment history, like:

- Bank statements showing your deposit has been gradually built up and held in your account for at least three months (known as genuine savings); or
- A rental ledger or reference letter from your property manager confirming you’ve consistently paid rent on time. This should include your name, lease start date and weekly rental amount.

Looking for more first home buyer tips and guidance?

Download our FREE First Home Buyers Complete Guide.

FAQs

Can first home buyers avoid LMI?

Yes. First home buyers can avoid paying LMI even if they have less than a 20% deposit. There are two main ways to do this:

1. Use the First Home Guarantee (FHG) 5% deposit scheme or a shared equity scheme
2. Use a family guarantor loan

How does a guarantor loan work?

A family guarantor loan allows a parent or close family member to use the equity in their property as additional security for your home loan. This allows you to borrow more than 80% of the property’s value without paying LMI.

For example, if you’re buying an $800,000 home with a $40,000 deposit (5%), you would normally need to borrow 95% of the property’s value and pay LMI. With a guarantor loan, your parent’s property can provide security for the additional 15% needed to bring your effective LVR down to 80% and avoid LMI.

The guarantor doesn’t provide cash or make repayments on your loan. However, they’re legally responsible for the guaranteed portion of the debt if you’re unable to meet your repayments and the property is sold for less than the outstanding loan balance.

Can I use gifted funds as a deposit?

Yes. Most lenders allow first home buyers to use gifted funds from parents or immediate family members as part, or all, of their home loan deposit.

The lender will usually require a signed gift letter confirming that the money is a genuine gift and does not need to be repaid. They may also ask for evidence showing the funds have been transferred into your account.

However, lenders still require you to demonstrate a genuine savings history, particularly if you’re borrowing more than 80% of the property’s value. In these cases, the lender may want to see that you’ve been regularly saving money yourself or have maintained a strong rental payment history.

Can first home buyers buy an investment property?

Absolutely. Some first home buyers choose to buy an investment property as their entry into the property market. It’s often because they don’t yet earn enough to buy a home in the area they want to live in, but can afford a property in a cheaper location.

This strategy, known as rentvesting, allows them to get a foot on the property ladder while continuing to rent where they want to live and work. Lenders can also factor in a portion of the expected rental income when assessing the loan, which may boost borrowing power by up to $100,000 in some cases.

What loan do I need for off-the-plan purchases?

For an off-the-plan purchase, you generally need a standard home loan, though you may need a split construction loan if you are purchasing a house and land package rather than an apartment. The process involves two distinct stages: putting down your deposit and finalising the loan at settlement.

How is the FHOG paid?

If you’re applying through your lender, the grant will be paid directly to them once your eligibility has been confirmed. The funds are then applied towards the purchase of your home to help reduce the amount you need to contribute from your deposit at settlement.

Can I remove the First Home Guarantee from my home loan?

Yes. While the government doesn’t own any part of your property under the First Home Guarantee, the guarantee remains attached to your loan. If you refinance or no longer need the guarantee because your LVR has fallen below 80%, you can ask your lender to have the guarantee discharged.

Are there mortgage brokers who specialise in first home buyers?

All mortgage brokers can help first home buyers, but some specialise in this area and work with first home buyers every day. These brokers often have a deeper understanding of government grants and schemes, low-deposit lending options, guarantor loans and other strategies that can help buyers get into the market sooner.