Key Takeaway: Getting your first home loan in Australia involves saving at least a 5 per cent deposit (though 20 per cent avoids lenders mortgage insurance), obtaining pre-approval to know your borrowing limit, comparing variable and fixed-rate products using the comparison rate, and checking eligibility for government schemes like the First Home Guarantee that can reduce or eliminate LMI. The process typically takes 4 to 8 weeks from pre-approval to settlement.

Buying your first home is one of the biggest financial decisions you will make, and navigating the Australian home loan market can feel overwhelming. This guide breaks down the process into clear, actionable steps so you know exactly what to do, what to expect, and how to position yourself for approval.

1. Work Out How Much Deposit You Need

The deposit is the upfront cash you contribute toward the property price. Most lenders require a minimum 5 per cent deposit, but the standard benchmark is 20 per cent because it lets you avoid lenders mortgage insurance (LMI), a one-off premium charged when your loan-to-value ratio (LVR) exceeds 80 per cent. According to ASIC MoneySmart, LMI can cost thousands of dollars and protects the lender, not you (MoneySmart, 2026).

If you have a smaller deposit, government schemes such as the First Home Guarantee allow eligible buyers to borrow up to 95 per cent of the property value without paying LMI, subject to income caps and property price limits (NHFIC, 2026).

Action step: Calculate your target deposit amount (20 per cent of the property price you can afford), and if that is out of reach, check whether you meet the criteria for the First Home Guarantee or state-based first-home buyer grants.

2. Understand Your Borrowing Capacity and Serviceability

Lenders assess serviceability by looking at your income, expenses, existing debts, and living costs to determine how much you can afford to repay each month. They stress-test your application using a higher interest rate (often 3 percentage points above the advertised rate) to ensure you can manage repayments if rates rise.

Your borrowing capacity depends on your gross income, employment type (permanent, casual, or self-employed), any other loans or credit card limits, and your regular expenses. The higher your income and the lower your commitments, the more you can borrow.

Action step: Use an online borrowing calculator to estimate your limit, then reduce your credit card limits and pay down personal loans before applying to improve your serviceability position.

3. Get Pre-Approval (Conditional Approval)

Pre-approval is a conditional agreement from a lender stating how much they are willing to lend you, subject to final valuation and verification. It typically lasts 90 days and signals to sellers and agents that you are a serious buyer with finance ready to go.

Pre-approval is not a guarantee, but it gives you a clear budget and speeds up the settlement process once you find a property. You will need to provide payslips, tax returns, bank statements, and proof of savings.

Action step: Apply for pre-approval with at least two lenders (or use a mortgage broker to compare multiple options) before you start house hunting.

4. Compare Loan Types: Variable, Fixed, or Split

Australian home loans come in three main structures:

  • Variable-rate loans: the interest rate moves up or down with the Reserve Bank of Australia (RBA) cash rate and lender pricing decisions. You benefit when rates fall, but repayments increase when rates rise. Variable loans often include features such as offset accounts and unlimited extra repayments.
  • Fixed-rate loans: the rate is locked for a set period (commonly 1 to 5 years), giving you certainty over repayments. You cannot access features like offset or redraw on most fixed products, and breaking the loan early can trigger significant break costs.
  • Split loans: you divide the loan amount between variable and fixed portions, balancing rate certainty with flexibility.

As foundational texts such as Principles of Finance explain, fixed-rate products reduce interest-rate risk but sacrifice flexibility, while variable products expose you to rate movements but offer greater control over repayments.

Action step: Decide which structure suits your risk tolerance and cash-flow needs, then compare products using the comparison rate (which includes most fees and charges) rather than the advertised rate alone.

5. Factor in All Upfront and Ongoing Costs

The deposit is only part of the upfront expense. You also need to budget for:

  • Stamp duty: a state-based tax on property purchases, with concessions or exemptions available for first-home buyers in most states (check your state revenue office for current thresholds and rates as of August 2026).
  • Conveyancing or legal fees: typically A$1,200 to A$2,500 to handle contracts and settlement.
  • Building and pest inspections: around A$400 to A$600 combined.
  • Lender valuation fee: some lenders charge A$200 to A$400 upfront.
  • Lenders mortgage insurance (LMI): if borrowing above 80 per cent LVR and not covered by a government guarantee.

Ongoing costs include council rates, strata fees (for apartments), home and contents insurance, and loan repayments.

Action step: Add at least A$10,000 to A$20,000 on top of your deposit to cover settlement costs, and confirm your state’s first-home buyer stamp duty concession before signing a contract.

Read also: Home Loan Pre-Approval in Australia: What Lenders Check and How Long It Lasts

6. Choose Between Principal-and-Interest or Interest-Only Repayments

Most first-home buyers take principal-and-interest loans, where each repayment reduces the outstanding loan balance. Interest-only loans (where you pay only the interest for a set period, commonly 1 to 5 years) are less common for owner-occupiers and result in no equity build-up during the interest-only term.

Interest-only can lower initial repayments, but the loan balance stays the same, and you face higher repayments once the interest-only period ends.

Action step: Unless you have a specific cash-flow or investment strategy, choose principal-and-interest repayments from day one to build equity faster.

7. Decide Whether You Want an Offset Account or Redraw

An offset account is a transaction account linked to your home loan. The balance in the offset reduces the interest charged on your loan (for example, if you have a A$400,000 loan and A$20,000 in offset, you pay interest on A$380,000). Offset accounts are common on variable-rate loans and offer full flexibility.

Redraw facilities let you withdraw extra repayments you have made above the minimum, but access can be restricted and fees may apply.

Action step: If you plan to park savings or your salary in a linked account, choose a loan with a 100 per cent offset account to maximise interest savings.

8. Submit Your Full Application and Prepare for Valuation

Once you have signed a contract (subject to finance), lodge your formal loan application with all supporting documents. The lender will order a property valuation to confirm the purchase price aligns with market value. If the valuation comes in below the contract price, the lender may reduce the loan amount or require a larger deposit.

Processing time is typically 7 to 14 days for a straightforward application, longer if you are self-employed or the property is unusual.

Action step: Respond quickly to any lender requests for extra documents, and have your conveyancer ready to exchange contracts as soon as finance is unconditionally approved.

9. Review and Sign the Loan Contract

Before settlement, the lender sends you a formal loan contract detailing the interest rate, repayment amount, loan term, fees, and any conditions. Read the terms carefully and confirm the comparison rate, early exit fees, and whether the loan includes features you need (offset, extra repayments, redraw).

Australian law requires lenders to provide a Credit Guide and a Key Fact Sheet outlining the main loan terms (Finder, 2026).

Action step: If anything is unclear, ask your mortgage broker or lender to explain it before signing. Once you sign, you are legally bound to the terms.

10. Settle and Move In

Settlement is the final step where ownership transfers from the seller to you. Your conveyancer coordinates with the lender to release funds, pay the seller, and register the property in your name. You receive the keys on settlement day, and your first loan repayment is typically due within 30 days.

Action step: Arrange home and contents insurance before settlement (most lenders require it), organise utilities and internet connection, and set up your loan repayments via direct debit to avoid missing a payment.

Conclusion

Getting your first home loan in Australia is a structured process: save your deposit, obtain pre-approval, compare loan types and rates using the comparison rate, budget for all upfront costs including stamp duty and LMI, and confirm eligibility for government schemes. Rates and eligibility criteria change frequently, so verify current terms with a licensed mortgage broker or lender before making any decisions. Start by calculating your borrowing capacity and pre-approval options today.

General Advice Warning: The information in this article is general in nature only and does not consider your objectives, financial situation, or needs. You should consider obtaining personal advice from a licensed mortgage broker or financial adviser before acting on it. This is not personalised financial, lending, or legal advice. Advertised rates differ from the comparison rate, which includes most fees and charges. Rates and product features are current as of August 2026 and change frequently. Eligibility, loan limits, LMI, and government scheme availability vary by lender, product, and your personal circumstances. Stamp duty and grants differ by state and territory. Confirm current terms with a licensed lender or mortgage broker for your situation.