Buying your first home is one of the biggest financial decisions you’ll ever make. And for most people, it’s the most confusing.
Variable rates, fixed rates, LMI, LVR, stamp duty, pre-approval, conditional approval. Here’s what actually matters.
How much deposit do you actually need?
A 20% deposit is the benchmark. At 20%, you avoid Lender’s Mortgage Insurance (LMI). But most first home buyers don’t have 20%. And that’s fine.
With a 5% deposit you can access a standard lender — you’ll pay LMI unless you qualify for the First Home Guarantee, a government scheme that lets eligible buyers purchase with as little as 5% without paying LMI, because the government guarantees up to 15% of the loan.
Key eligibility checks: you’ve never owned property in Australia, your income is under $125,000 (singles) or $200,000 (couples), the property price is under your state’s cap, and you’ll live in it. Places are limited each financial year. Your broker can check eligibility and apply on your behalf.
What is LMI and how much does it cost?
Lender’s Mortgage Insurance protects the lender — not you — if you default. It kicks in when you borrow more than 80% of the property’s value. On a $600,000 loan at 5% deposit, LMI typically runs $20,000–$25,000. At 10% deposit it drops significantly. At 20% it’s $0.
LMI is usually capitalised into your loan, meaning you pay interest on it over the loan’s life. For some buyers, paying LMI to get into the market sooner still makes financial sense — especially when property values are growing faster than savings. Your broker will model the real cost before you commit.
Pre-approval vs conditional approval
Pre-approval is a borrowing limit assessed by a lender based on your financials. It tells you your budget before you search — but it’s not a guarantee of a loan.
Conditional approval comes after you’ve found a property. The lender assesses the property, orders a valuation, and confirms the loan subject to conditions.
Unconditional approval is the green light. All conditions met. Settlement can proceed. Most pre-approvals are valid for 90 days.
Stamp duty concessions for first home buyers
Stamp duty is often the biggest surprise cost. As a first home buyer you may be eligible for a full exemption or significant concession. In NSW, buying at $800,000 saves you $30,000+ versus a standard buyer. In VIC, full exemption applies under $600,000. In QLD under $700,000. Always confirm current thresholds with your broker — they change annually.
Understanding your borrowing power
Borrowing power is the maximum a lender will offer based on your income, expenses, debts, and dependants. Every lender assesses it differently — which is exactly why a broker who can compare across 40+ lenders makes a real difference.
Key factors: your income (salary, bonuses, casual income averaged over 2 years), your declared expenses, existing debts including credit card limits, and your deposit size. Use the borrowing power calculator for a quick estimate.
Step-by-step: application to settlement
1. Get your finances in order — credit file, debts, documents: payslips, tax returns, bank statements, ID.
2. Speak to a broker — know your budget and the right lenders before you search.
3. Get pre-approval — typically 3–5 business days.
4. Search for property — with a budget you know is real.
5. Make an offer and sign contracts — your conveyancer reviews the contract.
6. Formal application and valuation — lender assesses the specific property.
7. Unconditional approval — all conditions met.
8. Settlement — 30–90 days after contracts. Keys are yours.
From first conversation to settlement typically takes 6–12 weeks. Your broker manages the lender relationship the whole way through.
Frequently asked questions
Can I use the First Home Super Saver Scheme?
Yes. The FHSS lets you withdraw up to $50,000 in voluntary super contributions for a deposit. There are rules around timing and contribution types — speak to your broker or financial adviser first.
Can I buy with a guarantor?
Yes. A guarantor — usually a parent — uses their property equity to guarantee part of your loan, letting you avoid LMI with a smaller deposit. They’re not making repayments but they are liable if you default.
Is a mortgage broker free?
In most cases, yes. Brokers are paid commission by the lender at settlement — not by you. All commissions are disclosed upfront and your broker has a legal obligation to act in your best interests.
How long does pre-approval last?
Most pre-approvals are valid for 90 days. Your broker can usually refresh it if needed.