First Home Buyer Home Loans: How to Get the Best Deal
Buying your first home is an exciting milestone, but it can also feel overwhelming with the wide range of loan options, lender requirements, and government programs available. To secure the best home loan deal, you need to know how to compare lenders, minimise costs, and take advantage of first home buyer incentives.
While most first-time buyers focus on finding the lowest interest rate, other factors such as fees, loan features, and flexibility can significantly impact the total cost of your mortgage. Government assistance programs can also help reduce upfront expenses, making homeownership more affordable.
This guide will help you navigate the home loan process, understand your options, and position yourself to secure the best deal as a first home buyer.
Understanding Home Loan Types for First Home Buyers
Before choosing a mortgage, it’s essential to understand the different types of home loans. Each option has unique advantages and drawbacks depending on your financial situation and goals.
Fixed-Rate Home Loans
- Locks in your interest rate for a set period (usually 1–5 years)
- Predictable repayments for easier budgeting
- Protection from interest rate rises during the fixed term
- No benefit if rates fall; break costs apply if you refinance early
Variable-Rate Home Loans
- Interest rate fluctuates with the market
- Repayments decrease if rates fall
- Allows extra repayments without penalties
- Risk of higher repayments if rates rise
Split Home Loans
- Combines fixed and variable components
- Offers repayment stability plus flexibility
- Reduces exposure to market rate fluctuations
Low-Deposit Home Loans
- Designed for buyers with less than a 20% deposit
- Enables earlier entry into the property market
- Some lenders offer discounted Lenders Mortgage Insurance (LMI)
- Usually comes with higher interest rates
How to Compare First Home Buyer Loans
Finding the best mortgage requires looking beyond headline interest rates.
Look at the Comparison Rate
The comparison rate includes both the interest rate and standard fees, giving a clearer picture of the loan’s true cost.
Assess Fees and Charges
Common fees include:
- Application fees (up to $1,000)
- Annual package fees ($300–$400 per year)
- Redraw or offset account fees (up to $20 per month)
Ask lenders if they offer fee discounts or waivers for first home buyers.
Evaluate Loan Features
- Offset accounts reduce interest by linking a savings account to your mortgage.
- Redraw facilities allow access to extra repayments if needed.
- Extra repayment options help pay off the loan faster without penalties.
Government Grants and Assistance
First home buyers in Australia may be eligible for several programs to reduce upfront costs.
First Home Owner Grant (FHOG)
- Available in most states and territories
- Typically $10,000 to $20,000 for newly built homes
First Home Guarantee (formerly First Home Loan Deposit Scheme)
- Allows eligible buyers to purchase with a 5% deposit without paying LMI
- Government guarantees the remaining 15%, helping secure better loan terms
Stamp Duty Exemptions and Discounts
- Offered in many states
- Can save buyers tens of thousands in upfront costs
First Home Super Saver Scheme (FHSSS)
- Enables withdrawal of voluntary super contributions for a home deposit
- Provides a tax-effective savings pathway
Getting Pre-Approval Before House Hunting
Pre-approval helps clarify your budget and strengthens your position with sellers.
- Confirms borrowing capacity, so you focus on realistic property options
- Boosts your credibility when making offers
- Locks in an indicative interest rate for budgeting
Most pre-approvals last for 90 days, so compare lenders carefully before finalising your choice.
Common First Home Buyer Mistakes to Avoid
Borrowing Beyond Your Budget
- Just because you qualify for a large loan doesn’t mean you should borrow the maximum
- Consider how rate increases could affect your repayments
- Account for additional costs like council rates, insurance, and maintenance
Forgetting Additional Costs
- Stamp duty (if applicable)
- Legal fees ($1,500–$3,000)
- Building and pest inspections ($400–$800)
- Moving costs and utility connections
Overlooking Valuable Loan Features
- Don’t focus only on interest rates—offset accounts or extra repayment flexibility can save money long-term
Negotiating Your Home Loan Terms
Many first home buyers don’t realise they can negotiate with lenders.
Ask for a Better Rate
You may secure a lower rate if you have:
- A strong credit score
- A larger deposit (10% or more)
- Stable employment and income
Work With a Mortgage Broker
Mortgage brokers compare multiple lenders and often access rates not publicly advertised. They can also assist with applications and paperwork, streamlining the process.
Finding the Best First Home Buyer Loan
Getting the right home loan as a first home buyer involves more than chasing the lowest rate.
- Compare loans based on rates, fees, and features
- Check eligibility for first home buyer grants
- Get pre-approval to understand your budget
- Budget for costs beyond the deposit
- Negotiate with lenders or use a mortgage broker
By comparing options and using government assistance, you can secure a home loan that supports long-term financial success.
