The Ups and Downs of Buying Your First House

Buying your first house means working through deposits, loan applications, and government schemes that shift depending on where you live.

The decision you're making now is whether to wait and save more, or move forward with what you have. That choice depends on the deposit options available to you, the grants and concessions you can access in your state, and whether your income and savings pattern puts a loan within reach. You'll need to understand how lenders assess your application, which loan features matter when you're starting out, and how the government schemes actually work when combined with a lender's standard policy.

How Much Deposit Do You Actually Need

You can purchase with a 5% deposit under the Australian Government 5% Deposit Scheme if you meet the eligibility criteria and the property sits within the price cap for your location. Housing Australia guarantees the gap between your deposit and 20%, which removes the need for lenders mortgage insurance. No income limits apply, and applications are made through a participating lender rather than directly to Housing Australia.

A 5% deposit on a property at the current median in a regional centre still requires genuine savings and proof you can service the loan. Consider a buyer in a regional Queensland town looking at a property within the $1,000,000 cap. Even with a smaller deposit, the lender will assess your income, existing debts, and living expenses to confirm you can meet repayments under a stress test rate. Serviceability often determines whether you can borrow enough to make the purchase work, not just the deposit percentage.

If you're using the scheme, confirm your property falls within the applicable price cap using the postcode search tool at firsthomebuyers.gov.au before making an offer. The scheme applies separate caps for capital cities, regional centres, and other areas. Both the purchase price and the lender's valuation must sit at or below the cap, so a valuation shortfall can disqualify the application even if the contract price is within range.

State Grants and Stamp Duty Relief That Apply to Houses

Eligibility for state and territory grants depends on whether you're buying new or established. New South Wales, Victoria, Queensland, South Australia, Western Australia, and the Northern Territory all offer a first home owner grant, but in most states the grant only applies to new builds. The amounts range from $10,000 in New South Wales, Victoria, and Western Australia to $50,000 in the Northern Territory for new homes under the HomeGrown Territory Grant.

Stamp duty concessions vary more widely. In New South Wales, you'll pay no transfer duty on a home valued up to $800,000 and receive a sliding concession up to $1,000,000. Victoria offers full exemption up to $600,000 and a concession to $750,000 on both new and established homes. Queensland separates the treatment: established homes receive a partial concession that reduces duty by up to $17,350 for properties under $710,000, while new homes and vacant land attract a full concession with no price cap from 1 May 2025. Western Australia now applies a single statewide threshold with no duty on homes up to $600,000 and a concessional rate to $800,000, regardless of whether the property is in Perth or a regional area.

The Australian Capital Territory removed both the property value limit and income threshold from 1 July 2026, so all first home buyers now receive full duty exemption regardless of purchase price or household income. Tasmania's stamp duty exemption for established homes ended 30 June 2026, and no equivalent relief is currently in place for resale properties purchased after that date.

How First Home Buyer Eligibility Gets Assessed by Lenders

Lenders assess your application using serviceability calculations that apply a buffer above the actual interest rate. You'll need to demonstrate that your income can cover loan repayments at a rate typically 3% higher than the rate you'll actually pay. If you're applying for a variable rate loan at current market rates, the lender tests your capacity to repay at a rate several percentage points higher to confirm you can manage increases.

Your income, existing debts, and regular expenses all feed into this calculation. A buyer earning $85,000 per year with no dependants and minimal debt will have stronger serviceability than a buyer on the same income with a car loan, childcare costs, and buy now pay later accounts. Lenders also assess your savings history. Genuine savings held in your account for at least three months carry more weight than funds that appeared recently, and gifted deposits need a statutory declaration from the person providing the funds.

Pre-approval gives you a conditional commitment from a lender before you make an offer. It doesn't lock in an interest rate, but it confirms the amount you can borrow and shows sellers you're a serious buyer. Pre-approval is valid for three to six months depending on the lender, and you'll still need a formal valuation and final credit assessment once you have a signed contract.

Fixed or Variable Rates When You're Starting Out

A fixed interest rate locks your repayment amount for a set period, typically one to five years. You'll know exactly what you're paying each month, which helps with budgeting when you're adjusting to mortgage repayments for the first time. The tradeoff is reduced flexibility. Most fixed rate loans don't allow an offset account, limit extra repayments to a set annual amount, and charge break costs if you repay the loan early or refinance before the fixed term ends.

A variable interest rate moves with the market. Your repayments can increase or decrease depending on rate changes, but you'll generally have access to an offset account and unlimited extra repayments with no penalties. An offset account is a transaction account linked to your loan. The balance in the offset reduces the amount of interest charged on your mortgage without locking the funds away, so you keep access to your savings while reducing your interest cost.

Some buyers split their loan between fixed and variable. You might fix 50% or 60% of the loan to secure a portion of your repayments and keep the rest variable to retain the flexibility of an offset and unrestricted extra repayments. This approach doesn't eliminate interest rate risk, but it spreads it. Whether a split structure suits your situation depends on your income stability, your savings buffer, and how much flexibility you need in the first few years of the loan. If you're deciding between loan structures, a broker can model your options and show you the monthly repayment difference under different rate scenarios.

Combining the 5% Deposit Scheme with State Concessions

You can use the Australian Government 5% Deposit Scheme alongside state grants and stamp duty concessions in most cases. A buyer in South Australia purchasing a new home under the scheme's $900,000 cap for capital cities and regional centres could access the $15,000 first home owner grant and the stamp duty relief on new homes, which removes duty entirely on the residential land component with no price cap.

In a scenario like this, a buyer with $45,000 saved could put down 5% on a $900,000 property, receive the $15,000 state grant to offset some settlement costs, and pay no stamp duty on the land portion of the purchase. The government guarantee through the scheme removes LMI, which would otherwise add tens of thousands of dollars to the upfront cost. The same buyer would still need to budget for conveyancing, building and pest inspections, loan establishment fees, and moving costs, but the combination of the deposit scheme and state concessions reduces the total cash required at settlement.

Help to Buy operates differently. It cannot be combined with the 5% Deposit Scheme because both involve a government contribution, but it can be used with applicable state grants and duty concessions. Help to Buy involves the government taking an equity share of up to 40% for a new home or 30% for an existing home in exchange for contributing that percentage of the purchase price. Income caps apply: $100,000 for individuals and $160,000 for joint applicants or single parents. Property price caps vary by location and are confirmed through the postcode search tool at firsthomebuyers.gov.au. Tasmania has opted out of Help to Buy, and the scheme is not available there.

What Happens Between Pre-Approval and Settlement

Once you have a signed contract, the lender orders a valuation. The valuer assesses the property independently, and if their valuation comes in below the purchase price, the lender will only lend against the lower figure. A valuation shortfall means you'll need to cover the difference with additional savings, renegotiate the purchase price, or withdraw from the contract if your finance clause allows.

You'll also need to satisfy any conditions attached to your pre-approval. That might include providing updated payslips, confirming you've paid out a debt, or supplying a completed building and pest report. If you're buying vacant land and building, the process shifts to a construction loan structure with progress draws released as the build reaches each stage. The lender holds funds in a loan account and releases them to the builder based on inspection reports, rather than paying the full amount at settlement.

Your conveyancer or solicitor handles the legal side of the transaction, including title searches, contract review, and registration of the transfer. Settlement is the day ownership transfers, the seller receives their funds, and you become the registered owner. You'll need to have arranged insurance, organised connection of utilities, and prepared your deposit and settlement funds ahead of the settlement date.

The First Home Super Saver Scheme and How It Fits

The First Home Super Saver Scheme lets you make voluntary contributions into your superannuation fund and apply to release eligible amounts toward a house deposit. You can release up to $15,000 from any one financial year, with a total cap of $50,000. Concessional contributions are taxed at 15% rather than your marginal income tax rate, which creates a tax saving if you're earning above the tax-free threshold.

You'll need to apply to the ATO for a determination of your releasable amount before you sign a purchase contract. The determination confirms how much you can withdraw, and you'll need to request the release and have the funds paid to you before settlement. The scheme works alongside other government programs, so you can use released super savings as part of your deposit under the 5% Deposit Scheme or Help to Buy, provided you meet the eligibility criteria for each program. The FHSS is worth considering if you're still 12 to 24 months away from purchasing and want to build your deposit faster in a tax-effective structure, but the ATO processing time and the need to obtain a determination before contracting means it requires forward planning.

Preparing Your Application and Supporting Documents

Lenders require proof of income, savings, and identity as part of the application process. If you're a permanent employee, you'll provide recent payslips and either a letter from your employer or tax returns depending on how long you've been in the role. If you're self-employed, you'll need two years of tax returns, notices of assessment, and business financials. Casual employees generally need 12 months of payslips showing consistent hours, and lenders apply a discount to reported income to account for variability.

You'll need to show genuine savings held for at least three months. That includes balances in transaction accounts, savings accounts, and offset accounts, but not redraw balances or funds that appeared as a lump sum deposit without a clear source. If you're receiving a financial gift from a family member, the lender requires a statutory declaration confirming the funds are a gift and not a loan that needs to be repaid. Some lenders also accept the first home owner grant as part of your deposit, but this depends on the lender's policy and the timing of when the grant is paid.

Bank statements for the last three months show your spending pattern and highlight any undisclosed debts or regular commitments that affect serviceability. Lenders look for regular income, consistent savings behaviour, and an absence of dishonours or missed payments. If you have existing debts, gather loan statements showing the current balance and repayment amount. If you've recently paid out a debt, provide evidence of closure so the lender can exclude it from serviceability calculations. Your application will move faster if you provide complete, current documents upfront rather than waiting for the lender to request each item individually.

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