How to Get a Mortgage as a First-Time Buyer in Australia: A Step-by-Step Guide

5 min.

How to Get a Mortgage as a First-Time Buyer in Australia

Buying your first home is one of the most exciting and significant milestones in life. But let’s be honest—it can also feel overwhelming, especially when it comes to securing a mortgage. Don’t worry; we’ve got you covered!

This step-by-step guide will help you navigate the mortgage process as a first-time buyer in Australia. From understanding how much you can borrow to applying for government incentives, we’ll break it down in a friendly and easy-to-follow way.

Why Buy Your First Home in Australia?

Australia offers plenty of incentives and opportunities for first-time buyers. Here’s why you should consider taking the plunge:

Government Support: Programs like the First Home Owner Grant (FHOG) and the First Home Guarantee Scheme can reduce upfront costs.
Growing Property Market: Owning property is a long-term investment with strong growth potential in Australia’s thriving real estate market.
Stable Economy: Australia’s stable financial system makes securing a mortgage accessible and reliable.

Step 1: Assess Your Financial Situation

Determine Your Budget

The first step is understanding how much you can afford. This includes not only the property price but also related expenses like:

Stamp Duty (although first-time buyers may be eligible for exemptions or concessions).
Lender’s Mortgage Insurance (LMI) if your deposit is less than 20%.
Legal fees, inspection costs, and moving expenses.

Pro Tip: Use an online mortgage calculator to estimate your borrowing capacity and monthly repayments.

Check Your Credit Score

Your credit score plays a big role in determining your eligibility for a mortgage and the interest rate you’ll be offered.

How to Check:

Request a free credit report from Equifax, Experian, or illion.
Ensure your credit history is accurate and free of errors.

Pro Tip: Pay off outstanding debts and avoid taking on new loans before applying for a mortgage.

Step 2: Save for a Deposit

How Much Do You Need?

Most lenders require a deposit of at least 5%–20% of the property’s value. A higher deposit means:

Lower monthly repayments.
Avoiding or reducing LMI costs.

For example, if you’re buying a $500,000 home:

A 5% deposit = $25,000
A 20% deposit = $100,000

Government Assistance for First-Time Buyers

Take advantage of these schemes to reduce your upfront costs:

First Home Owner Grant (FHOG): A one-off payment for eligible first-home buyers purchasing a new home. Check your state’s guidelines here.
First Home Guarantee Scheme: Allows you to purchase with as little as a 5% deposit without paying LMI.
Stamp Duty Concessions: Many states offer discounts or exemptions for first-time buyers.

Step 3: Understand Mortgage Types

Before applying, it’s important to know the different types of mortgages available in Australia:

Fixed Rate vs. Variable Rate

Fixed Rate: Your interest rate is locked in for a set period (e.g., 2–5 years), offering stable repayments.
Variable Rate: Your interest rate can fluctuate, potentially leading to lower repayments when rates decrease.

Pro Tip: Consider a split loan that combines both fixed and variable rates for flexibility.

Principal and Interest vs. Interest-Only Loans

Principal and Interest: You pay off both the loan amount and interest, reducing your balance over time.
Interest-Only: You pay only the interest for a set period, which means lower initial repayments but no reduction in the loan principal.

Step 4: Get Pre-Approved

A mortgage pre-approval shows sellers you’re a serious buyer and gives you a clear idea of your budget.

How to Get Pre-Approved

Gather your financial documents:
- Proof of income (payslips, tax returns).
- Bank statements and proof of savings.
- Details of existing debts or liabilities.
Apply with a lender or mortgage broker.

Pro Tip: Compare lenders for the best interest rates and terms.

Step 5: Choose the Right Lender

Banks vs. Mortgage Brokers

Banks: Direct lenders that handle your loan application and management.
Mortgage Brokers: Act as intermediaries to find you the best loan from a range of lenders.

Factors to Compare

When choosing a lender, consider:

Interest Rates: Even a small difference can save you thousands over the life of your loan.
Fees: Look out for application fees, monthly account fees, and early repayment penalties.
Loan Features: Offset accounts and redraw facilities can help you save on interest.

Step 6: Find Your Dream Home

With your pre-approval in hand, it’s time to start house hunting!

Tips for Finding the Right Property

Research Locations: Consider affordability, amenities, and growth potential.
Attend Open Houses: Visit properties in person to get a feel for the space.
Get a Building Inspection: Ensure the property is structurally sound before making an offer.

Step 7: Apply for the Mortgage

Once you’ve found the perfect home, it’s time to apply for the mortgage.

What You’ll Need:

Contract of sale for the property.
Updated financial documents.
Details of your deposit and any government incentives you’re using.

Loan Approval Timeline

The approval process can take anywhere from a few days to a few weeks, depending on your lender and application complexity.

Pro Tip: Stay responsive to your lender’s requests to avoid delays.

Step 8: Settlement Day

Settlement is the final step in the home-buying process when ownership officially transfers to you.

What Happens on Settlement Day:

Your lender pays the seller.
You receive the keys to your new home.
Celebrate—you’re officially a homeowner!

Common Mistakes to Avoid

Overstretching Your Budget: Don’t borrow more than you can comfortably repay.
Skipping Loan Comparisons: Always shop around for the best deal.
Ignoring Additional Costs: Factor in maintenance, insurance, and council rates.

Call-to-Action

Are you ready to buy your first home? Start your journey by assessing your financial situation and exploring government incentives today. If you found this guide helpful, share it with other first-time buyers or leave a comment below with your questions!

Final Thoughts

Securing a mortgage as a first-time buyer in Australia can feel daunting, but with the right information and preparation, it’s entirely achievable. From saving for a deposit to navigating government grants, every step brings you closer to owning your dream home.

Remember, the journey to homeownership is not just about finding the perfect house—it’s about creating a space where your future begins. So take the leap, and enjoy the exciting process of buying your first home!