A first home purchase can feel like a race between your savings balance, property prices and the fear of missing out. The right decision is rarely about finding the loan with the lowest advertised rate alone. Understanding your first home buyer loan options gives you a clearer view of what you can afford now, what risks you are taking on and how the loan may work for your life over the years ahead.
For some buyers, waiting until they have a 20 per cent deposit is sensible. For others, a low-deposit loan, government-backed guarantee or family guarantor arrangement may bring home ownership within reach sooner. The best path depends on your income, deposit, spending habits, employment circumstances and the type of property you plan to buy.
Start with your deposit and borrowing position
Your deposit influences more than the amount you need to borrow. It can affect whether lenders mortgage insurance is payable, the interest rate and loan features available, and your capacity to compete when buying property.
A 20 per cent deposit has traditionally been viewed as the benchmark because it keeps your loan-to-value ratio at 80 per cent or below. For a $700,000 property, that means a $140,000 deposit before allowing for stamp duty, conveyancing, building inspections and other purchase costs. It is a meaningful savings target, particularly in higher-priced markets.
But a 20 per cent deposit is not a universal requirement. Many lenders will consider applications with a smaller deposit, provided you meet their serviceability and credit criteria. Before choosing an option, look beyond the deposit itself. Your regular income, existing debts, household expenses, credit history and the expected repayments all matter.
First home buyer loan options to consider
Standard home loans with a larger deposit
A standard owner-occupier home loan with a deposit of 20 per cent or more is often the most straightforward option. Because the lender is taking on less risk relative to the property value, you may avoid lenders mortgage insurance, commonly called LMI.
This approach can reduce upfront and ongoing borrowing costs. The trade-off is time. Saving a larger deposit may mean delaying your purchase, and property values can change while you wait. It may suit buyers with stable savings capacity who prefer to begin with more equity and lower repayments.
Low-deposit loans with lenders mortgage insurance
A low-deposit loan may allow eligible buyers to purchase with less than 20 per cent saved. In many cases, the lender requires LMI when the deposit is below that threshold. LMI protects the lender if the loan cannot be repaid. It does not protect the borrower.
The premium can often be added to the loan amount, which reduces the cash required at settlement but increases the total amount borrowed. A low-deposit loan can be appropriate if buying sooner has a clear benefit and the repayments remain comfortable under realistic interest-rate scenarios. It is less suitable if the purchase would leave no financial buffer for repairs, moving costs or changes in income.
Government home guarantee schemes
Eligible first home buyers may be able to purchase with a smaller deposit through an Australian Government home guarantee scheme. Under these arrangements, the government guarantees part of the loan, which can help eligible borrowers buy with a low deposit without paying LMI.
Places, property price caps, income limits and eligibility rules apply, and requirements can differ by scheme and location. Some options are designed for first home buyers generally, while others support eligible regional buyers. These schemes can be valuable, but they are not automatically the cheapest or most suitable loan path. You still need to assess the lender’s rate, fees, product features and repayment structure.
Family guarantor loans
A family guarantor loan involves a family member, often a parent, offering security from equity in their own property. This can help reduce the amount of cash deposit required and may avoid LMI.
The practical appeal is clear, but the responsibility is significant. A guarantor should understand exactly what they are guaranteeing, how much of their property is at risk and when they may be released from the arrangement. A limited guarantee tied to a defined portion of the loan is often preferable to an open-ended commitment. Independent legal and financial advice can help everyone enter the arrangement with clarity.
Shared equity arrangements
In some states and territories, eligible buyers may have access to shared equity programs. These arrangements involve a government body or other participant contributing a portion of the purchase price in exchange for an equity share in the property.
This can lower the size of the home loan and improve affordability. However, there may be restrictions around income, property type, future refinancing, buying out the equity share or selling the property. It is worth considering where affordability is the main barrier, but it requires careful attention to the long-term rules.
Construction loans for a new home
If you are buying land and building, or arranging a house-and-land package, a construction loan works differently from a standard purchase loan. Funds are generally released in stages as work is completed, rather than being provided in one lump sum.
Construction lending can suit buyers who want a new home and may be eligible for grants or concessions available in their state or territory. It also has added moving parts: land settlement, builder contracts, valuation requirements, progress payments and potential construction delays. Your budget should include a contingency rather than relying on every figure going exactly to plan.
Choose a loan structure, not just a lender
Once you know how you will fund the deposit, the loan product itself needs attention. A variable-rate loan may offer flexibility, including offset accounts and redraw facilities, but repayments can rise when rates change. A fixed-rate loan provides repayment certainty for an agreed period, although it can be less flexible and may carry break costs if you need to exit early.
A split loan combines fixed and variable portions. This can suit borrowers who want some certainty while retaining access to useful variable-loan features. There is no structure that is right for every buyer. The key question is whether you could still manage the repayments if rates increased, your household costs rose or one income was temporarily interrupted.
An offset account can be particularly useful for borrowers who expect to keep savings available for emergencies. Money held in the account offsets the loan balance used to calculate interest, while remaining accessible. Its value depends on the loan rate, account fees and how consistently you maintain a balance.
Include purchase costs in your plan
The deposit is only part of the cash needed to buy. Costs can include stamp duty, lender fees, conveyancing, building and pest inspections, valuation fees, moving expenses and home insurance. First home buyer stamp duty concessions and grants may be available depending on your state or territory, property value and eligibility. These measures can change, so they should be checked against current rules before you rely on them.
A useful starting point is to separate your funds into three amounts: the deposit, purchase costs and a post-settlement buffer. Using every dollar to settle the purchase can make the first few months of ownership unnecessarily stressful.
Prepare for the lender’s assessment
Lenders want to see that the loan is affordable and that your finances are managed consistently. Payslips, tax returns, bank statements, identification, details of debts and evidence of savings may all form part of the application. Self-employed borrowers may need business financials and tax documentation that shows a sustainable income position.
Avoid taking on new credit commitments shortly before applying, and be realistic about recurring expenses. A lender’s approval figure is an important guide, but it should not become your automatic spending limit. The home loan needs to work alongside your actual lifestyle, future plans and capacity to save.
A finance specialist can compare suitable lending pathways, explain the conditions attached to each option and help present your application clearly. At MAK Finance Experts, the focus is on matching the structure to your circumstances rather than pushing a one-size-fits-all product.
Your first loan does not need to be perfect forever. It needs to be a well-understood decision that leaves room for real life, protects your financial footing and gives you confidence when it is time to make an offer.