First time buyer home loans

Buying your first home is an exciting prospect that can also be a little daunting, but Finty has you covered. Find out everything you need to know about first time buyer loans and compare your options right here.

By   |   Updated 18th June 2020

Comparing first time buyer home loans for $450,000 over 30 years

HSBC Exclusive 2 Year Fixed Rate Home Loan (Owner, Principal and Interest)

On HSBC's website

HSBC Exclusive 2 Year Fixed Rate Home Loan (Owner, Principal and Interest)

Interest rate (p.a.)

2.09%

Comp rate^ (p.a.)

2.98%

Max LVR

80.00 %

Application fee

$0.00

Monthly repayment

$1,683.61

Total repayment

$606,099.60

Highlights

  • A Relationship Manager to guide you through the application process.
  • The ability to make $10,000 extra repayments per year with no ongoing monthly service fees or annual fees.
  • The option to split with one of our variable home loans.

Bank promo

  • Promotional offer of 2.09% p.a.. Excludes LVR above 80%. Available on borrowings from $50,000, interest rate available as at 01 June 2020, apply by 31 July 2020, settle by 30 September 2020 and is subject to change. Reverts to HSBC's Standard Variable Rate. Maximum loan amount $7,500,000. Terms and conditions apply.
CUA Accelerate Variable Home Loan (Owner Occupier, Principal and Interest)

On CUA's website

CUA Accelerate Variable Home Loan (Owner Occupier, Principal and Interest)

Interest rate (p.a.)

3.14%

Comp rate^ (p.a.)

3.19%

Max LVR

95.00 %

Application fee

$835.00

Monthly repayment

$1,931.36

Total repayment

$695,289.60

Highlights

  • Get a premium home loan complete with 100% offset.
  • Reach your property goals with a competitive rate.
  • Enjoy $0 ongoing fee and free redraw.
  • Maximum LVR is inclusive of LMI.
CUA Accelerate Variable Home Loan - Construction (Owner Occupier, Interest only)

On CUA's website

CUA Accelerate Variable Home Loan - Construction (Owner Occupier, Interest only)

Interest rate (p.a.)

3.24%

Comp rate^ (p.a.)

3.20%

Max LVR

90.00 %

Application fee

$835.00

Monthly repayment

$1,955.96

Total repayment

$704,145.60

Highlights

  • Get a premium home loan complete with 100% offset.
  • Reach your property goals with a competitive rate.
  • Enjoy $0 ongoing fee and free redraw.
  • Maximum LVR is inclusive of LMI.
HSBC Home Value Loan (Owner, Principal and Interest) LVR Up to 80% Promotional Offer

On HSBC's website

HSBC Home Value Loan (Owner, Principal and Interest) LVR Up to 80% Promotional Offer

Interest rate (p.a.)

2.65%

Comp rate^ (p.a.)

2.66%

Max LVR

80.00 %

Application fee

$0.00

Monthly repayment

$1,813.34

Total repayment

$652,802.40

Highlights

  • A Relationship Manager to guide you through the application process.
  • Unlimited free extra repayments with flexibility to redraw additional payments for free online.
  • No ongoing monthly service fee.

Bank promo

  • Promotional offer available on new borrowings from $50,000, rate available from 23 March 2020 and apply by 31 July 2020. Rate not available to non-residents.
CUA Accelerate Variable Home Loan (Owner Occupier, Interest only)

On CUA's website

CUA Accelerate Variable Home Loan (Owner Occupier, Interest only)

Interest rate (p.a.)

3.64%

Comp rate^ (p.a.)

3.21%

Max LVR

80.00 %

Application fee

$835.00

Monthly repayment

$2,056.03

Total repayment

$740,170.80

Highlights

  • Get a premium home loan complete with 100% offset.
  • Reach your property goals with a competitive rate.
  • Enjoy $0 ongoing fee and free redraw.
  • Maximum LVR is inclusive of LMI.

Learn about first time buyer home loans

Our team share how first time buyers can get a home loan.

  • FAQs

How much will I need as a deposit as a first-time buyer?

The amount you will need as a deposit is not determined by the fact that you are a first time buyer. Instead, it depends on your income and creditworthiness (as reflected in your credit history and credit score) and the value of the property you are aiming to buy. The lender will usually request a valuation report on the property, and then work out a Loan to Value Ratio (LVR).

For example, if the valuation report says that the property is worth $750,000, and the lender decides, after reviewing your income and credit score, to offer an LVR of 80%, your maximum loan amount would be $600,000. If you were paying $750,000 for the property, you would need a deposit of $150,000 (20% of the value). But if you were paying, say, $765,000 for a property valued at $750,000, your deposit amount would be $165,000.

What are the upfront costs I should budget for when buying my first home?

Buying your first home can be quite daunting, and it’s easy to overlook some of the costs you will need to cover in addition to your loan. They can include:

  • Building and pest inspection: It’s a good idea to have a property checked by a licensed builder and a pest control specialist before you commit to buy. You need to know that the building is structurally sound and free of termite infestation. The combined cost is likely to be between $400 and $800.
  • Conveyancing fees: This is the cost of having your sale contract prepared by either a solicitor or a professional property conveyancer.
  • Stamp duty: This is a government tax that varies from state to state, payable as a percentage of the property value. First-time buyers may be able to access stamp duty exemptions or concessions in some states.
  • Moving costs: Even if you are going to DIY your removal, you’ll probably need to hire a van or small truck. Professional removalists cost much more.
  • Insurance for home and contents: You may already have home contents insurance if you’re renting, but you’ll need to contact your insurer to advise your new address, and perhaps increase the insured value of your contents if you’re buying new furniture and appliances. And you’ll certainly need new separate cover for your home’s structure, in case of storms, fires and other risks.
  • Utility connection fees: Some telcos, electricity and gas companies and household water providers charge an upfront fee (refundable or transferrable if you move) before they will connect services to your new home.
  • Renovation costs: Many first home buyers can only afford a property that is something less than a dream home. It may need quite a bit of ‘fixing up’ before it becomes a pleasure to live in. But don’t worry. This is just your first step on the property ladder, and your dream home is likely to become more affordable as your home equity increases as a result of your repayments.

What if I can’t come up with the deposit amount dictated by the LVR?

If your lender needs a 20% deposit (as calculated by the LVR) and you can’t come up with the required amount, you still have a few options.

  • Lender’s mortgage insurance (LMI):. This is an insurance policy which protects the lender from financial losses arising from a borrower’s failure to meet home loan repayments. If the lender repossesses the property because of repayment default, then sells it, and the sale price achieved is less than the outstanding loan amount, the lender can recover the remaining balance via the insurance policy. The borrower must pay the LMI premium, but the cost can often be added to the loan amount and repaid over time.
  • Loan guarantor: Another option is to have your mortgage repayments guaranteed by another person. This will usually be a close family member, such as one or both of your parents. They will need to own a property themselves (or have a large amount of equity in it) because the lender will require a charge over their property as additional security for your loan. It is not something to be undertaken lightly by the guarantor, since once again if you default on your repayments, the lender will seek to recover any losses from the guarantor. In extreme cases this could mean that the lender enforces a sale of the guarantor’s property in order to recover its losses.
  • First Home Loan Deposit Scheme (FHLDS): This is a new scheme coming into effect at the beginning of 2020. The federal government will guarantee up to 10,000 low deposit home loans per year, meaning that borrowers can avoid either paying LMI or asking a family member to act as guarantor. See details at the National Housing Finance and Investment Corporation (NHFIC).
  • First Home Owner Grant: Australian state and territory governments offer first-home-buyer grants, varying state-by-state at the time of writing from $10,000 to $26,000. The grant may be added to your existing savings in order to fulfil the lender’s deposit requirements. There are different eligibility rules in each state, and in some states you will need to be buying a brand new property rather than an established one. Some states have other concessions available to first-time buyers. These may include stamp duty concessions and LMI insurance duty concessions. Check with your local state government for the details that apply to your situation.

What is a comparison interest rate?

Lenders are obliged by law to quote two interest rates for each loan they offer. The first rate quoted is the face value rate, the percentage interest rate that will be applied continuously to your remaining loan principal. The second rate, the comparison rate, has factored in the cost of the lender’s fees (such as an application fee, property valuation fee, loan establishment fee, monthly or annual account keeping fee, loan discharge fee) over the life of the loan, and expressed this as an equivalent monthly interest rate so that you can compare loans on a level playing field.

For example, both Lender A and Lender B may be offering an interest rate of 2.90%. But Lender A’s comparison rate is 2.91%, lower than Lender B’s comparison rate of 2.93%, because Lender B’s loan fees are much higher. A small difference in the interest rate percentage can add up to thousands of dollars of extra interest cost over the life of a loan.

What is a first time buyer home loan?

It’s a home loan with features suited to someone dipping their toe in the property market for the first time. But, because there are many different types of first home buyers, the features that suit one first-time buyer may not suit another. So you need to decide what combination of the following features will work best for you.

  • Lowest price: The lowest price combination of interest rates and fees (Tip: Look for the lowest comparison interest rate.)
  • Flexible loan terms: A choice of loan terms so that you can choose a longer term (e.g. 30 years) if you need smaller monthly repayments to suit your budget, or a shorter term (e.g. 25 years) if you can afford larger monthly repayments, meaning that you’ll pay much less in interest charges over the life of the loan.
  • Other features: You may be interested in facilities such as an offset bank account (to minimise interest charges) or a loan redraw option (in case you get ahead with your repayments but then find you need access to some of the cash you have already handed over).

What types of interest rate are available for first time buyer home loans?

There are five interest rate options:

  • Variable interest rate: The interest rate may go up or down during the life of your loan, usually more or less in line with changes in the official cash rate set by the Reserve Bank of Australia. Your required monthly repayment amount will vary as the interest rate changes, but you can make repayments higher than the required amount if you wish.
  • Fixed interest rate: The interest rate on your loan is fixed and will not vary during a set period, which may be between one and five years. Choose a fixed rate only if you are fairly sure that interest rates generally will not go down during the period that your rate is fixed. During the fixed period, your monthly repayment amount is also fixed, making it easier to budget.
  • Split interest rate: In this case, a part of the loan is subject to a fixed rate, while the remainder is subject to a variable rate.
  • ’Honeymoon’ interest rate: This is an introductory rate, a lower rate which may be offered by some lenders during the first one or two years of the loan term. It allows you to ease your way into your loan with lower repayments at first, particularly useful during those early years when you may have additional expenses like stamp duty, buying new furniture or renovation expenses. But before you commit to a loan, be sure to check what the revert interest rate (the rate that kicks in when the honeymoon period is over) is likely to be.
  • Interest-only loan: Most home loan repayments include the interest cost and a portion of the principal. In the early years of the loan, the amount of principal repaid is small, but in the later years, as the loan principal gradually declines, there is a shift in the ratio between principal an interest, with loan principal taking up an increasingly large share of the repayments. However, an interest-only loan requires you to repay only the interest cost and none of the loan principal. This is a particularly risky type of loan, especially if property market values are declining, leaving the borrower open to the possibility of negative equity (owing more on the property than it is actually worth). Lenders may be very reluctant to offer interest-only loans to first time buyers.

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