A first home buyer loan helps aspiring homeowners borrow the funds they need to purchase their very first home.

Buying a home for the first time is a significant financial step; often one of the biggest purchases that individuals will make within their lifetime. First-time homebuyers don’t always have the personal funds required to make such a big purchase upfront, which is where a first home buyer loan can help.

With a first home buyer loan, the lender will allow a buyer to take on a higher loan amount in order to help them purchase the property (with a smaller deposit compared to a standard home loan). Deposit amounts can be as low as 5% of the purchase price - most first home buyer loans will include options to waive or reduce the cost of lender’s mortgage insurance (which usually applies for home loans with deposit amounts under 20%.

What kind of financial support is there for a first home buyer?

To help first home buyers manage the costs of the property purchase, the Australian Government offers several financial initiatives that can apply to a first home buyer loan:

First Home Owner Grant (FHOG)

The FHOG awards eligible buyers with a lump sum amount of cash (up to $30,000) that can be used toward the purchase costs of buying a home, reducing the amount that needs to be borrowed on a first home buyer loan.

Stamp Duty Concessions/Exemptions

Stamp duty is a tax that is payable for all types of property transactions and is calculated based on the value of the purchased property. Certain states and territories offer concessions or exemptions on the cost of stamp duty for first time home buyers, helping to reduce the expenses involved with the home purchase. 

Home Guarantee Scheme

Eligible first time home buyers can purchase a new home with a deposit of as little as 5%, or as little as 2% for eligible single parents, without the need for lenders' mortgage insurance.

To apply for a first home buyer loan, applicants must:

  • Be over 18 years of age.
  • Have at least one applying person be an Australian citizen or permanent resident.
  • Not have previously held ownership of any property in Australia, even as a joint owner.
  • Have the intention to live in the home as a primary place of residence.
  • Meet the lender’s income requirements to repay the loan.

Each state and territory in Australia will also have specific regulations and criteria that apply to the region, and first home buyers should check if they will apply to their purchase and loan application.

What are the costs involved in buying your first home?

Deposit

To take out a first home buyer loan, a buyer will need to pay an upfront deposit amount that is measured as a percentage of the property’s value. With most lenders, this deposit amount can be as low as 5%.

Stamp duty

Stamp duty is a government tax that applies to all property transactions. First time home buyers can enjoy a concession or exemption from the cost of stamp duty, depending on the value and type of property purchase. 

Lenders mortgage insurance (LMI)

Regular home mortgages usually require borrowers to pay LMI if the deposit amount is less than 20%. On a first home buyer home loan, however, LMI is usually waived to help buyers manage costs.

Conveyancing fees

Property purchases will usually require conveyancing services to handle the legal aspects of the property transfer.

Building inspection fees

First time buyers will be advised to carry out a building inspection to assess the condition of the property (usually for pests or structural defects), which will incur its own set of fees.

Mortgage repayments

After taking on the first home buyer loan, buyers will be expected to make regular repayments to the lender based on the loan terms, including the cost of interest. This ongoing cost will continue until the total cost of the borrowed amount is fully repaid.

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