First Home Buyer Loans

Lender’s mortgage insurance protects the lender if the property is sold for less than the debt. You pay the premium, it is usually capitalised onto the loan, and the insurer can still pursue you for a shortfall. It is not a scam and it is not a favour. It is the price of buying with a smaller deposit.

Waiting to save the full twenty per cent is a legitimate choice, and sometimes the right one. It is only the right one if the saving outpaces the market you are buying into, which is a question worth modelling rather than assuming.

There is help available, and the detail sits with each state or territory rather than with a lender. Amounts, price caps and eligibility rules change, sometimes at short notice and sometimes mid-year, so we describe what exists rather than quote figures that would be out of date by the time you read them. Always confirm the current position with the relevant revenue office before you sign a contract.

Lenders assess your repayment at a buffer above the actual rate, apply a household expenditure benchmark if your declared living costs look low, and count credit card limits at the limit rather than the balance. Add a car loan and two buy-now-pay-later accounts and the capacity moves a long way.

1. 01Close or reduce credit cards you do not use. This is the fastest lever most first home buyers have.
2. 02Clear or reduce small personal and buy-now-pay-later debts before applying.
3. 03Keep three to six months of clean account conduct. No overdrawn accounts, no dishonours.
4. 04Declare your living costs honestly. Understating them is caught by the statements and reads badly.
5. 05Do not apply anywhere until the file is ready. Every enquiry is visible for five years.

1. 01

   Position

   Deposit, income, commitments and target suburbs. We model an indicative capacity and the total cash you will need at settlement.

2. 02

   Pre-approval

   A properly assessed pre-approval, lodged with one lender rather than several. It typically holds for about three months and is still subject to a valuation.

3. 03

   Search and offer

   You buy. Get the contract reviewed before you sign, and understand whether a cooling-off period applies. At auction there is none.

4. 04

   Full approval

   The contract goes to the lender, the valuation is ordered, and conditions are cleared to unconditional approval.

5. 05

   Documents and duty

   Loan documents signed, duty and any concession lodged by your conveyancer, insurance arranged.

6. 06

   Settlement

   Funds move electronically, the title transfers, and the keys are released.

Two structures do most of the work here, and they are not the same thing. A gifted deposit is money given with no expectation of repayment, evidenced by a statutory declaration from the giver. A security guarantee is a relative offering part of their property as additional security so you can borrow with a smaller deposit.

A guarantee is generous and it carries real risk. If the loan is not paid, the guarantor’s property can be sold to cover the guaranteed portion. Lenders require the guarantor to obtain independent legal advice before signing for exactly that reason. Our guarantor loans page sets out how the exposure is limited, and how the guarantee is released once the loan falls below 80 per cent LVR.

• Bidding at auction without unconditional finance or a genuine understanding of the risk. There is no cooling-off period at auction.
• Treating an automated online pre-approval as approval. If no credit officer has assessed it, it tells you very little.
• Applying to three lenders at once to see who says yes. The enquiries are visible for five years and the pattern is read.
• Buying a car during the purchase process. It moves borrowing capacity more than most people expect.
• Forgetting that the deposit and the cash required at settlement are different numbers.
• Choosing the loan on the headline rate rather than on whether it has an offset you will actually use.