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First Home Buyers and Home Loan Finance: What You Need to Know

Buying your first home is a dream for many Australians — a milestone that symbolises stability, independence, and long-term investment. However, the process can often feel overwhelming, especially when you're faced with unfamiliar financial terms, complex paperwork, and an ever-changing property market. One of the most important aspects of this journey is understanding home loan finance — what it is, how it works, and what support is available for first home buyers in Australia.

In this comprehensive guide, we break down everything you need to know about home loan finance as a first-time buyer in Australia in 2025.

What Is Home Loan Finance?

At its core, home loan finance is a financial arrangement where a lender (usually a bank or financial institution) provides the funds needed to purchase a property. In return, the borrower agrees to repay the loan amount, plus interest, over a set period — typically 25 to 30 years.

For most first home buyers, purchasing a property outright is not financially feasible, so a home loan becomes essential. The lender assesses your ability to repay the loan based on your income, expenses, credit history, and the amount of deposit you can contribute. The difference between the deposit and the property price is what you borrow — this is your home loan.

Home loans in Australia typically fall into two categories:

Fixed-rate loans, where the interest rate remains the same for a specified period (e.g., 1–5 years).

Variable-rate loans, where the interest rate fluctuates based on market conditions and changes to the official cash rate set by the Reserve Bank of Australia (RBA).

Many lenders also offer split loans, combining both fixed and variable portions.

How Much Can First Home Buyers Borrow?

Your borrowing power — or the amount you can borrow — depends on several factors, including:

Your income (salary, bonuses, and other sources)

Your monthly expenses and existing debts

Your credit score and repayment history

Your deposit amount

Employment status and stability

In 2025, most Australian lenders are still comfortable lending up to 80% of the property’s value without requiring lenders mortgage insurance (LMI). However, through government-supported schemes, some first home buyers may qualify for loans with deposits as low as 5%.

Understanding Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance is a premium that protects the lender (not you, the borrower) in case you default on your loan. It's typically required when your deposit is less than 20% of the property’s value.

While LMI allows you to enter the property market sooner, it can add thousands of dollars to your overall loan cost. Fortunately, some government schemes (explained below) allow eligible buyers to avoid paying LMI, even with a low deposit.

Government Schemes and Grants for First Home Buyers in Australia The Australian government, along with individual state and territory governments, offers several incentives to support first home buyers:

First Home Owner Grant (FHOG) Available in most states and territories, the FHOG is a one-time payment for eligible first home buyers purchasing a newly built home or building their own. The grant amount and eligibility criteria vary by state. For example:

In Queensland, eligible buyers can receive $30,000 (2025 update)

In Victoria, it’s $10,000 for new homes valued up to $750,000

First Home Guarantee (FHBG) Under this scheme, part of the Home Guarantee Scheme (HGS), eligible buyers can purchase a property with as little as 5% deposit without needing to pay LMI. The government guarantees the remaining 15%.

In 2025, 35,000 places are allocated annually for this scheme. To qualify, applicants must meet income thresholds and purchase price caps.

Help to Buy Scheme This shared equity scheme allows eligible buyers to purchase a home with a smaller deposit by having the government contribute up to 40% of the property price (new homes) or 30% for existing homes. The government retains a stake in the property, which is repaid when you sell or refinance.

Stamp Duty Concessions and Exemptions Stamp duty can add tens of thousands of dollars to your purchase cost. Fortunately, most states offer concessions or full exemptions to first home buyers:

In NSW, no stamp duty is payable on properties under $800,000

In Victoria, stamp duty is waived for homes under $600,000, with discounts for properties up to $750,000

Steps to Applying for a Home Loan as a First Home Buyer

Step 1: Save Your Deposit The more you save, the less you borrow — and the less you pay in interest. Aim for at least 20% of the property’s value, or 5% if you're eligible for government-backed schemes.

Step 2: Understand Your Budget Use online calculators to work out:

Your borrowing power

Loan repayments

Total purchase costs (including stamp duty, legal fees, inspections)

Step 3: Get Pre-Approval A home loan pre-approval is a conditional offer from a lender that gives you a clear budget. It helps you make serious offers and speeds up the final approval process once you’ve found a property.

Step 4: Prepare Your Documents To apply, you’ll need:

ID (passport, driver’s licence)

Proof of income (payslips, tax returns)

Bank statements

Details of liabilities (credit cards, personal loans)

Step 5: Compare Lenders and Choose Your Home Loan Look beyond just interest rates. Consider:

Offset accounts

Redraw facilities

Loan fees and charges

Customer service ratings

Flexibility (e.g., additional repayments, break fees)

Common Mistakes First Home Buyers Should Avoid

Underestimating additional costs – Think stamp duty, building inspections, legal fees, and moving expenses.

Overborrowing – Just because you can borrow a certain amount doesn’t mean you should.

Not doing enough research – Comparing loans and understanding conditions is key to saving money.

Failing to get pre-approval – You could lose your dream home if you're not financially prepared.

Skipping professional help – A good mortgage broker or financial adviser can make a huge difference.

Should You Use a Mortgage Broker?

A mortgage broker is a licensed professional who compares loan products from various lenders to find one that suits your needs. In most cases, their service is free to the borrower, as they are paid a commission by the lender.

For first home buyers, a broker can:

Help you understand your options

Navigate complex paperwork

Secure pre-approval faster

Identify grants or schemes you may qualify for

Conclusion

Stepping into the world of property ownership as a first home buyer can seem overwhelming, but with the right knowledge and preparation, it’s entirely achievable. Understanding home loan finance — from borrowing limits and loan types to government support — empowers you to make informed decisions and avoid costly mistakes.

By taking advantage of the grants and schemes available in Australia in 2025, and working with trusted professionals, you can start your property journey on strong financial footing.

[newyfinance]

Newy Finance is a Newcastle based mortgage brokerage led by local expert Jon Jones. Serving the Hunter Valley and NSW, they specialize in finance home loan solutions, including home loan financing, investment property loans, personal loans, and car loans—plus refinancing and debt consolidation. With access to 30+ lenders and a client-first, end-to-end approach, they’re committed to helping individuals, families, and investors find the best home loans tailored to their needs, from initial planning to settlement and ongoing support.

[newyfinance]

How to Choose the Best Home Loan for Your Financial Goals

Buying a home is one of the biggest financial decisions you'll ever make—and choosing the best home loan can make all the difference. Whether you're a first-home buyer, an upgrader, or a seasoned investor, the right loan should align with your financial goals, lifestyle, and long-term strategy.

In this guide, we’ll break down how to choose the best home loan for your unique needs in Australia.

💰 Step 1: Define Your Financial Goals

Before comparing lenders or interest rates, be clear about your financial objectives. Ask yourself:

Do I want to minimise repayments right now?

Am I looking to pay off my mortgage faster?

Do I need flexibility, like making extra repayments?

Am I planning to invest in more properties later?

Is long-term stability more important than saving short-term?

Knowing your goals will help narrow down which loan features are essential.

🔍 Step 2: Understand the Main Loan Types

Different types of loans suit different financial strategies: Loan TypeBest ForFixed RateBudget certainty; protection from rate hikesVariable RateFlexibility; potential savings if rates dropSplit LoanA mix of stability and flexibilityInterest-OnlyInvestors wanting short-term lower repaymentsLow-Doc LoansSelf-employed borrowers

👉 Tip: Fixed loans give certainty. Variable loans offer more freedom—but also risk.

⚖️ Step 3: Compare Key Features (Not Just Interest Rates)

While interest rates are important, they’re not the only factor that matters.

Key features to compare:

Comparison rate: Reflects true cost, including fees

Offset account: Reduces interest on your loan

Redraw facility: Access extra repayments if needed

Loan portability: Take your loan with you if you move

Extra repayments: Save interest by paying more when you can

💡 Step 4: Think Long-Term

If you plan to upgrade homes, refinance, or invest, your current loan should be flexible enough to support these goals. Consider:

Can the loan adapt if your income increases or decreases?

Are there break costs if you pay it off early or refinance?

Will you need to access equity in the future?

🤝 Step 5: Talk to a Mortgage Broker or Lender

You don’t have to navigate the loan maze alone. A mortgage broker can:

Compare loans from multiple lenders

Tailor options to your financial goals

Help with paperwork and pre-approval

🧠 Final Thoughts

Choosing the best home loan isn't just about snagging the lowest interest rate—it's about finding the right fit for your financial strategy. By understanding your goals and comparing the right features, you can set yourself up for long-term success (and peace of mind).

✅ Ready to Get Started?

Explore your loan options with our free comparison tool or chat with a trusted mortgage broker today. Your dream home—and a smarter financial future—could be closer than you think.

[newyfinance]

5 Common Mistakes to Avoid When Applying for a Home Loan

Applying for a home loan can be an exciting yet stressful process, especially if it's your first time buying a property. With so many lenders, loan types, and eligibility criteria to consider, it’s easy to make mistakes that could cost you in the long run. To help you navigate this journey, we’ve compiled a list of five common mistakes to avoid when applying for a home loan.

1. Failing to Check Your Credit Score Early

Your credit score is one of the most important factors lenders consider when deciding whether to approve your home loan application. A higher score typically results in better loan terms, such as lower interest rates, which can save you thousands of dollars over the life of your loan.

Why it’s a mistake: Many applicants wait until they’re ready to apply for a home loan to check their credit score. However, a low credit score can significantly hinder your chances of getting approved, or worse, you might be offered a loan with unfavorable terms.

How to avoid it: Before even considering a loan application, check your credit report. In many countries, you can get a free credit report annually from major credit bureaus. If your score is lower than you'd like, take time to improve it by paying off outstanding debts, reducing credit card balances, or even disputing any inaccuracies in your report.

2. Not Shopping Around for the Best Rates

It’s easy to assume that your bank is the best place to get a home loan, but this isn’t always the case. Different lenders offer different interest rates, loan terms, and fees. Even a small difference in the interest rate can add up to significant savings over the life of your loan.

Why it’s a mistake: Choosing the first lender you come across or staying loyal to your bank might result in you missing out on better deals elsewhere. A higher interest rate means more money spent on interest payments, which could strain your finances over time.

How to avoid it: Shop around for the best loan offers. Compare rates from at least 3-4 lenders, including banks, credit unions, and online lenders. Consider factors like the interest rate, loan fees, prepayment penalties, and customer service. Use online tools like mortgage calculators to understand the true cost of the loan.

3. Underestimating the Total Cost of Home Ownership

While you may have a clear idea of your home loan repayment amount (EMI), many homebuyers overlook the additional costs associated with buying and owning a home. These can include property taxes, home insurance, maintenance costs, and utilities.

Why it’s a mistake: By focusing only on the loan repayment amount, you might end up with financial strain after taking on the home ownership burden. If you aren’t financially prepared for these extra costs, it could lead to a serious budget imbalance and potential difficulty in meeting mortgage payments.

How to avoid it: Before committing to a home loan, make sure you have a complete understanding of all potential costs. This includes upfront costs like the down payment, closing costs, and ongoing costs like property taxes, home insurance, maintenance, and utilities. Factor these into your monthly budget to ensure you can comfortably afford your new home.

4. Ignoring the Importance of a Good Down Payment

A down payment is a significant part of the home-buying process. Typically, lenders require a down payment of at least 10-20% of the property’s value. Many homebuyers make the mistake of either putting down too little or borrowing too much.

Why it’s a mistake: A smaller down payment means you’ll have to borrow more, resulting in higher monthly payments and more interest paid over the life of the loan. On the other hand, a large down payment can drain your savings, leaving you with little financial flexibility.

How to avoid it: Aim for a balance. While 20% is ideal to avoid private mortgage insurance (PMI), a smaller down payment might still be feasible with certain types of loans. However, putting down at least 10-15% could help you secure a lower interest rate and avoid PMI fees. Additionally, consider keeping enough savings aside for emergency expenses, even after making the down payment.

5. Failing to Understand Loan Terms and Conditions

Many homebuyers focus only on the interest rate and overlook the full details of the loan agreement. Terms like repayment period, loan type (fixed or variable), prepayment penalties, and other conditions can have a big impact on your ability to manage the loan effectively.

Why it’s a mistake: A low-interest rate may seem appealing, but if the loan terms are unfavorable (such as hidden fees, balloon payments, or high prepayment penalties), it could cost you more in the long run. Failing to read the fine print can lead to unpleasant surprises after you’ve already signed the loan agreement.

How to avoid it: Thoroughly review the loan agreement before signing anything. If you’re unsure about any terms, ask the lender for clarification. Take the time to fully understand the repayment schedule, fees, and any penalties for early repayment. If you’re unsure, it’s worth consulting a financial advisor or a mortgage broker to help you navigate the complexities of loan agreements.

Conclusion

Applying for a home loan doesn’t have to be overwhelming if you take the time to prepare properly. Avoiding these common mistakes can save you money, reduce financial stress, and ensure that you’re making the best decision for your future. By checking your credit score early, shopping around for the best rates, understanding all associated costs, saving for a reasonable down payment, and thoroughly reviewing the loan terms, you’ll set yourself up for a smooth and successful home-buying experience.

Remember, a home loan is a long-term financial commitment, and being informed is key to making the right choice. So, take your time, do your research, and ensure you’re fully prepared before signing on the dotted line.

[newyfinance]

Newy Finance is a Newcastle-based mortgage brokerage led by local expert Jon Jones. Serving the Hunter Valley and NSW, they specialize in finance home loan solutions, including home loan financing, investment property loans, personal loans, and car loans—plus refinancing and debt consolidation. With access to 30+ lenders and a client-first, end-to-end approach, they’re committed to helping individuals, families, and investors find the best home loans tailored to their needs, from initial planning to settlement and ongoing support.