First home buyer guide

Lenders describe a deposit as the other side of the loan to value ratio, or LVR. If you borrow $560,000 against a $700,000 property, your LVR is 80% and your deposit is 20%. That single ratio drives almost everything about your application: whether you pay mortgage insurance, which lenders will look at you, and what rate you are offered.

Twenty per cent is the number everyone quotes because it is the point at which Lenders Mortgage Insurance stops applying. It is a threshold rather than a requirement. Loans are routinely written at 90% and 95% LVR, and the guarantee schemes go further again. What changes below 20% is not whether you can buy, it is what the borrowing costs you.

Two details catch first home buyers out. The deposit you need to complete the purchase is not the same as the deposit you hand over at exchange, which is typically 10% of the price and is part of, not additional to, your total. And most lenders want to see genuine savings, meaning funds you accumulated yourself over roughly three months rather than a sudden lump sum, although a documented gift or an inheritance is usually acceptable with the right paperwork.

Lenders Mortgage Insurance is a one-off premium charged when your LVR is above 80%. The most important thing to understand about it is who it covers. If you default and the property sells for less than the outstanding debt, the insurer pays the lender, then pursues you for the shortfall. You pay the premium, the lender receives the protection.

The premium is not a flat percentage. It rises steeply as LVR climbs and as the loan gets larger, so the jump from 90% to 95% costs far more than the jump from 85% to 90%. It is almost always capitalised, meaning added to the loan balance rather than paid in cash, which is convenient at settlement and expensive over 30 years because you pay interest on it.

LMI is also not portable. If you refinance to another lender while still above 80% LVR, a fresh premium applies. That makes the equity position a large part of the cost of switching in the first few years.

Four ways buyers reduce or avoid the premium:

• A larger deposit. Even a small increase can drop the loan into a lower premium band, and each lender sets where its bands sit.
• A guarantor. A family member offers equity in their own property as additional security, which brings the effective LVR under 80%. It is genuinely useful and genuinely serious: the guarantor is liable for the guaranteed portion.
• A government guarantee scheme. The guarantee stands in for the deposit shortfall, so no premium is charged. Since 1 October 2025 the Home Guarantee Scheme has had no limit on places and no income cap, but property price caps and other eligibility rules still apply.
• Professional waivers. A handful of lenders waive LMI up to 85% or 90% for specific occupations, most commonly in medicine, law and accounting. Terms vary widely and change often.

Several separate systems of assistance exist, run by different levels of government, and they are frequently confused with one another. Most can be used together, although Help to Buy is generally an alternative to the 5% Deposit Scheme rather than an addition to it.

• The 5% Deposit Scheme, formerly the Home Guarantee Scheme, administered federally by Housing Australia through a panel of participating lenders. The government guarantees part of the loan so that an eligible first home buyer can borrow with a deposit as small as 5% without paying LMI. Property price caps apply and differ by city and region. Since 1 October 2025 there has been no cap on the number of places and no income test, and the separate regional guarantee has been folded into the main scheme.
• The First Home Owner Grant, run by every state and territory except the ACT, which stopped paying it on 1 July 2019. It is generally restricted to newly built homes and substantial renovations rather than established properties, and the amount and cap differ in every jurisdiction.
• Stamp duty concessions and exemptions, also state by state, and usually the largest single saving available to a first home buyer. Most states waive duty entirely below one price threshold and taper the concession above it.
• The First Home Super Saver Scheme, run through the tax system, which lets you make voluntary superannuation contributions and later withdraw them, plus deemed earnings, towards a first home. It is used mainly by buyers who are still a year or more away from purchase.
• The Help to Buy scheme, a federal shared equity scheme run by Housing Australia since December 2025. The government takes an equity share of up to 30% of an existing home or 40% of a new one, so an eligible buyer can purchase with a deposit from 2%. Income caps, property price caps and a limited number of places each year apply.

The practical effect of a stamp duty exemption is worth spelling out, because it is larger than most buyers assume. On a mid-priced established home, full duty can run well into five figures. Where a first home buyer exemption applies, that entire amount stays in your deposit, which can be the difference between a 10% and a 15% deposit and therefore between two very different LMI premiums.

The deposit is the number people save towards. The costs below are the ones that eat into it in the final fortnight before settlement, and they are the most common reason a purchase gets tight at the end.

The main items, each of which can be quoted in writing:

• Stamp duty, unless a first home buyer exemption applies. The largest item by far in most states, and it is due at or shortly after settlement rather than at exchange.
• Transfer and mortgage registration fees, set by the state land registry. Flat in some states, but they scale with the price in Victoria, Queensland and South Australia, where the transfer fee on a $700,000 purchase is about $1,740, $2,670 and $7,180.
• Conveyancing or solicitor fees of roughly $800 to $2,500, plus title and planning search costs.
• Building and pest inspection, about $400 to $800 for a house. For an apartment, a strata report of $200 to $400 does the equivalent job.
• Lender fees, from nothing to about $800 depending on the product, plus a valuation fee where it is not absorbed.
• Building insurance, which lenders require on the property from settlement, or from exchange where the contract passes the risk to you then, rather than the day you move in.
• Council and water rate adjustments at settlement, reimbursing the seller for the portion of the period you will own the property.
• Moving and immediate setup costs, which are not part of the transaction but arrive in the same week.

As a planning figure, costs commonly run to 4% to 6% of the purchase price in a state where you pay full duty, and closer to 1% to 1.5% where a first home buyer exemption removes it. The total is the difference between a property that can be bought and one that can be settled.

A first purchase usually runs three to six months from serious searching to settlement:

1. What can be borrowed and what can be settled. These are different numbers. The second one includes duty and costs and is the one that sets the price cap.
2. Pre-approval. It is a lender’s conditional indication, generally valid around three months, and always subject to a valuation and final checks. It shows agents the buyer has finance lined up and marks the ceiling for bidding.
3. The search. Auction results and asking prices both drift upwards during a search, so a cap set at the limit tends to get squeezed.
4. Due diligence, before the commitment. Contract review by a conveyancer, a building and pest inspection or strata report, and a check of what is actually included in the sale.
5. The offer. At a private treaty sale it can be made conditional on finance and inspections. At auction it cannot: a winning bid is unconditional with no cooling-off period, so everything happens beforehand.
6. Exchange contracts and pay the deposit, usually 10%. Cooling-off periods and their length differ by state, and do not exist at auction.
7. Convert pre-approval into formal approval. The lender values the property and issues unconditional approval, then loan documents are signed and returned.
8. Settle, typically four to six weeks after exchange. A final inspection usually happens in the days before, and the first loan statement shows the rate, term and any offset account.

The rate at settlement is not the rate held for 30 years, because discounts expire and lenders reserve their lowest pricing for new customers. Loans that are never reviewed tend to drift above the market.