First Home Buyer: What Not to Overlook When Entering Today's Market

Getting into the property market as a first home buyer involves more than saving a deposit and finding a property you like.

The combination of federal schemes, state concessions, and lender requirements creates a framework that either supports or restricts your entry depending on how you structure your application. Understanding which deposit options align with which concessions, and how your loan structure affects both upfront costs and ongoing flexibility, changes what you can afford and when you can move.

What Counts as Your Deposit Under the 5% Deposit Scheme

The Australian Government 5% Deposit Scheme allows eligible buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance. Your deposit must be genuine savings, which most lenders define as funds held in your account for at least three months. Gifted deposits from immediate family members are generally accepted, but the amount and source must be declared upfront. Some lenders allow a combination of savings and a gift, while others set a cap on the gifted portion.

Consider a buyer purchasing at the applicable price cap for their location. With a 5% deposit, they also need to cover settlement costs including legal fees, building and pest inspections, and adjustment costs. These additional costs sit outside the deposit and cannot be financed under most loan structures. Buyers who calculate their deposit based solely on 5% of the purchase price without accounting for these other costs often face delays at settlement or need to request family assistance at the last moment.

The scheme applies across all states and territories, and you can combine it with applicable state stamp duty concessions and grants. A buyer in New South Wales purchasing an established home valued under $800,000 pays no transfer duty and enters the market with a 5% deposit and no LMI. A buyer in Victoria purchasing a new home under $750,000 could access the $10,000 grant, a full stamp duty exemption on properties up to $600,000, and the 5% deposit structure in a single transaction.

Fixed or Variable: What the Rate Type Changes Beyond Your Repayment

Your interest rate structure affects more than your monthly repayment. A variable rate loan typically includes an offset account, which reduces the interest you pay by offsetting your savings balance against your loan balance. A fixed rate loan generally does not include an offset account, though some lenders offer a redraw facility that allows you to access extra repayments you have made.

An offset account gives you full access to your savings while reducing your interest costs. A redraw facility may involve processing times, minimum withdrawal amounts, or restrictions during certain loan events. Buyers who choose a fixed rate for repayment certainty but expect to keep savings in an offset account often find the feature unavailable and lose the interest saving they anticipated.

Split loan structures allow you to fix a portion of your loan and keep the remainder on a variable rate with an offset account. You get repayment stability on the fixed portion and flexible access to an offset on the variable portion. The split does not need to be equal. You might fix 60% and leave 40% variable, or reverse that depending on your circumstances and outlook.

How State Concessions Change Your Upfront Cost

Stamp duty concessions and grants vary by state, property type, and purchase price. These concessions directly reduce what you pay at settlement and determine whether a property is within reach.

In Queensland, a first home buyer purchasing a new home under the first home new home concession pays no transfer duty regardless of the property value, provided the contract was signed after 1 May 2025 and at least one applicant is an Australian citizen or permanent resident. The same buyer may also access the $15,000 grant if the property is valued under $750,000 and the contract was signed from 1 July 2026. A buyer purchasing an established home receives a partial concession that reduces duty but does not eliminate it, and no grant applies.

In South Australia, buyers of new homes and vacant land access both the $15,000 grant and full stamp duty relief with no price cap for eligible contracts from 6 June 2024. Buyers of established homes receive neither the grant nor duty relief regardless of the property value. The difference in upfront cost between purchasing a new home and an established home in South Australia can exceed $30,000 on a property valued at $600,000 once the lost grant and duty relief are combined.

In Western Australia, the distinction between metropolitan and regional areas was removed from 7 May 2026. A single statewide threshold now applies. First home buyers pay no duty on homes valued up to $600,000 and a concessional rate on homes between $600,001 and $800,000 regardless of whether the property is in Perth, the Peel region, or elsewhere in the state. The $10,000 grant applies only to new homes valued under the applicable cap, which is $800,000 south of the 26th parallel and $1,000,000 to the north.

Pre-Approval: What It Confirms and What It Doesn't

Pre-approval confirms your borrowing capacity based on your income, expenses, liabilities, and credit history. It does not confirm the loan will settle. The lender still needs to assess the property, verify your financial position has not changed, and complete a formal valuation.

Buyers who receive pre-approval and then change jobs, take on new debt, or reduce their income before settlement may find their loan application declined or reduced at the formal assessment stage. Pre-approval is conditional, and the conditions matter. If your pre-approval requires you to maintain your current employment and income level, changing roles or reducing hours before settlement can void the approval even if your new income still supports the loan amount.

Pre-approval also confirms your borrowing capacity at a point in time. If interest rates rise between pre-approval and formal application, lenders reassess your capacity at the higher rate. Your borrowing limit may reduce even though your income and expenses have not changed. Buyers relying on pre-approval amounts calculated months earlier without confirming current serviceability often bid to their original limit and then find they no longer qualify for that amount.

What a 10% Deposit Changes in Your Loan Application

Increasing your deposit from 5% to 10% reduces your loan-to-value ratio and may unlock additional lender options, lower interest rates, or faster approval times. Some lenders reserve their lowest rates for borrowers with at least a 10% deposit. Others apply additional serviceability buffers or restrict certain loan features for borrowers at 5% deposit levels.

A buyer with a 10% deposit applying outside the government scheme will pay LMI unless they meet specific lender exemptions. LMI on a 10% deposit loan is lower than on a 5% deposit loan, but it still adds several thousand dollars to your upfront cost. Buyers using the 5% Deposit Scheme avoid LMI entirely but must purchase within the applicable price cap and meet the scheme's eligibility criteria. A buyer with a 10% deposit who exceeds the price cap for their location cannot access the scheme and will pay LMI unless they increase their deposit to 20% or access a lender-specific LMI waiver.

For buyers who can save a 10% deposit without delaying their entry into the market, the additional deposit may reduce ongoing loan costs and increase the range of home loan options available. For buyers who would need an additional year or more to reach 10%, entering at 5% under the government scheme may be the more effective approach, particularly in markets where property values are rising.

First Home Super Saver Scheme: When It Works and When It Doesn't

The First Home Super Saver Scheme allows you to make voluntary contributions into your super fund and withdraw up to $50,000 toward your deposit. Concessional contributions are taxed at 15% rather than your marginal rate, which creates a tax saving if your marginal rate exceeds 15%.

The scheme requires planning. You need to make contributions over at least one financial year, apply for a determination from the ATO, and receive the funds before signing a contract in most cases. Buyers who discover the scheme during their property search and try to access it immediately generally cannot meet the timing requirements.

The scheme works when you are 12 to 24 months away from purchasing and can salary sacrifice or make personal concessional contributions during that period. It does not work when you are ready to purchase within the next few months and need access to your deposit now. Funds released under the scheme are also subject to tax and ordering requirements that reduce the final amount you receive, so the amount you contribute is not the amount you withdraw.

What Happens If You Purchase in the Australian Capital Territory from July 2026

From 1 July 2026, eligible first home buyers in the Australian Capital Territory pay no conveyance duty regardless of the property value or household income. The previous property value cap of $1,020,000 and the income threshold have both been removed. A buyer purchasing a home valued at $900,000 in Canberra receives the same full exemption as a buyer purchasing at $500,000, provided they meet the residency and ownership requirements.

Buyers must own and occupy the property as their principal place of residence continuously for at least one year starting within 12 months of settlement. The removal of the value cap makes the ACT one of the most accessible jurisdictions for first home buyers purchasing at higher price points, though the requirement to occupy the property excludes buyers intending to purchase an investment property as their first purchase.

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