Understanding home loans for first home buyers: Your financial guide

Are you looking to build or buy your first home? You’re not alone — thousands of Australians take this exciting (and sometimes overwhelming) step every year. Going from renting or living at home to owning your first property is a big leap, but with the right guidance, it’s completely achievable.

If you're feeling confused by all the financial jargon and options available, don't worry — we’ve created this simple guide to help you understand the process of financing your first home. From deposits and stamp duty to government schemes and choosing the right loan, here’s everything you need to know to start your home ownership journey with confidence.

Understanding the lingo

When you’re new to the property market, the language can feel like a whole different world. Here are a few terms you’re likely to come across — and what they actually mean.

Minimum deposit

Most banks and lenders will ask for a minimum 20% deposit to approve a home loan. For example, if you’re buying a home for $480,000, you’d need to have $96,000 saved.

However, first home buyers (FHBs) may be able to buy with as little as 5–10% deposit, thanks to government initiatives and developer deposit requirements (which are often lower than banks). We'll explain how below.

Lenders mortgage insurance (LMI)

If you have less than a 20% deposit, your lender will likely require Lenders Mortgage Insurance. This policy protects the lender in case you're unable to repay your loan. The cost can be significant (up to 15% of the property’s value), but some government schemes allow eligible first home buyers to avoid this cost altogether.

Stamp Duty

Stamp duty is a government tax paid when purchasing a home. The amount varies based on the property’s price, location, and whether you’re a first home buyer. In Victoria, generous exemptions or concessions are available for eligible buyers purchasing properties up to $750,000.

Conveyancing and legal fees

When buying a home, you’ll need a conveyancer or settlement agent to handle the legal paperwork. These professionals help prepare and lodge the documents needed to legally transfer the property into your name.

Understanding your home loan options

Choosing the right type of home loan is a key step in your journey. Here are the main loan types to consider:

Variable rate home loan

With a variable rate loan, your interest rate can go up or down at any time, depending on market changes. These loans are usually more flexible — you can often make extra repayments, access offset accounts, or redraw funds. Just be aware that if rates rise, your repayments may too.

Fixed rate home loan

A fixed rate loan locks in your interest rate for a set period (usually 1–5 years), which means your repayments won’t change during that time. This makes budgeting easier — ideal for first home buyers who want certainty.

Many people choose a combination of both in what's called a split loan, giving you the stability of a fixed rate and the flexibility of a variable rate.

Help from the Government: First home buyer schemes

1. First home guarantee (Australia-wide)

This Federal Government scheme helps eligible first home buyers purchase with just a 5% deposit, without needing to pay LMI. Up to 35,000 places are available each year, and it can be used for:

• Existing homes

• New builds

• House and land packages

• Off-the-plan apartments or townhouses

To qualify, you must:

• Be an Australian citizen aged 18+

• Intend to live in the property

• Have a taxable income under $125,000 (single) or $200,000 (couples)

• Have saved at least a 5% deposit (but less than 20%)

2. First home super saver Scheme (Australia-wide)

Save your deposit faster through your super! Under this scheme, you can make voluntary contributions to your super fund (before or after tax), then withdraw up to $50,000 (across all years) to put towards your first home.

To be eligible:

• You must live in the home for at least 6 months in the first year

• You can apply to release a maximum of $15,000 per financial year

3. First home owner grant (Victoria)

If you’re building or buying a brand new home, you may be eligible for a $10,000 grant in Victoria. The property must cost less than $750,000, and you’ll need to live there for at least 12 months.

4. Stamp duty concessions (Victoria)

Both the duty exemption and the 50% duty reduction are available to first home buyers when they purchase a new or established property in Victoria with a dutiable value up to $600,000. The duty concession applies where the dutiable value is more than $600,000 but not more than $750,000. Vacant land can also attract the exemption or concession if you are buying it to build your home.

Final tips for first home buyers

• Start budgeting early: Know what you can afford and factor in all costs — not just the property price.

• Get pre-approved: It helps you house hunt with confidence and shows sellers you’re serious.

• Speak to a mortgage broker: They can help you compare loan products, access government schemes, and guide you through the paperwork.

• Think long-term: Choose a location and loan product that works for your current lifestyle and your future goals.

Ready to get started?

Buying your first home might seem daunting, but with the right advice and support, it’s a milestone you can absolutely achieve. Use the government help available, understand your finance options, and take it one step at a time.

At Clara Place, we’re here to support you every step of the way. Ready to explore your options? Contact our team today to discover your perfect land and home choices within our vibrant community, surrounded by stunning scenery and conveniently located near key amenities. You can also email us at claraplace@cedarwoods.com.au. 

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial or legal advice. Home loan terms, interest rates, and government grants may change and vary by lender. Before making any decisions, you should consult with a qualified financial advisor or mortgage broker. The author and website are not liable for any losses or damages arising from reliance on this information.