Your 2024/2025 First Home Buyer’s Guide
A Clear Path to Owning Your First Home
Why This Guide Matters
Buying your first home is one of the most exciting yet daunting decisions you’ll ever make. Between understanding deposits, navigating loan options, and figuring out government grants, the process can seem overwhelming.
With expert guidance, this journey doesn’t have to be stressful. At Mountain Mortgages, we’ll simplify every step so you can focus on the joy of owning your own home. Our goal is to give you the knowledge, tools, and confidence to make informed decisions as you work toward securing your dream property.
This guide is designed to walk you through the entire process, step by step. Whether it’s creating a savings plan, choosing the right mortgage, or taking advantage of government incentives, we’re here to support you. Buying your first home is a major milestone, and while there will be challenges, you don’t have to face them alone. Let’s get started!
Why Work with a Mortgage Broker?
More than 70% of Australians use mortgage brokers to secure their loans, and for good reason. Mortgage brokers provide access to a wide range of lenders and loan products, ensuring you get the best deal for your situation. Unlike banks, which offer only their own products, brokers work for you, not the lender.
Benefits of Using a Broker:
Choice: Brokers work with multiple lenders, giving you access to a variety of loan options.
Negotiation: Brokers can negotiate on your behalf to secure better rates and terms.
Convenience: From paperwork to loan applications, brokers handle the process, saving you time.
Expert Advice: Brokers stay up-to-date with market trends, interest rates, and lending policies.
Ongoing Support: Brokers help you from pre-approval to settlement and beyond.
A mortgage broker simplifies the home loan journey by matching you with the right loan product based on your goals, income, and financial circumstances. Whether you’re unsure where to start or overwhelmed by choices, working with a broker means you’ll have an expert in your corner every step of the way.
Step 1: Saving for Your Deposit
Saving for a deposit is the first big step toward home ownership. Generally, lenders require a deposit of at least 10% to 20% of the property price. A 20% deposit allows you to avoid paying Lenders’ Mortgage Insurance (LMI), which is an additional cost if your deposit is below this threshold. While LMI can add thousands to your loan, it may still be worth considering if you want to enter the market sooner.
How to Save Effectively:
Create a Budget: Track your income and expenses to understand where your money goes.
Automate Savings: Set up direct debits into a separate savings account to eliminate temptation.
Cut Back on Non-Essentials: Reducing dining out, subscriptions, or other non-critical expenses can make a big difference.
Increase Income: Consider extra work, freelancing, or selling unwanted items to boost your savings.
Reduce Living Costs: Moving back with family or finding cheaper rent can accelerate your savings.
Saving for a deposit requires discipline and sacrifice, but watching your balance grow will motivate you. Remember, the sooner you start, the faster you’ll reach your goal of owning a home.
Step 2: The True Costs of Buying a Home
While saving for a deposit is critical, don’t forget about the additional costs that come with buying a home. These expenses can add up quickly and must be factored into your savings plan.
Key Costs to Plan For:
Stamp Duty: This is a significant upfront cost, but many states offer discounts or exemptions for first homebuyers.
Conveyancing and Legal Fees: You’ll need a solicitor or conveyancer to manage the legal transfer of property ownership (typically $1,000 to $3,000).
Building and Pest Inspections: Essential for ensuring the property has no hidden issues ($400 to $1,000).
Lenders’ Mortgage Insurance (LMI): Required if your deposit is less than 20% of the property value.
Home and Contents Insurance: Protect your investment with adequate insurance.
Moving Costs: Include furniture removal, cleaning, and utility connection fees.
Loan Application Fees: Some lenders charge fees for loan processing.
Planning ahead ensures there are no surprises. A mortgage broker can provide a detailed breakdown of these costs, helping you budget effectively and confidently prepare for home ownership.
Step 3: Understand Your Borrowing Power
Your borrowing power determines how much you can afford to spend on a home. Lenders assess your borrowing capacity based on several factors, including your income, living expenses, existing debts, and credit history.
Key Factors That Influence Borrowing Power:
Income: Your salary, bonuses, and additional income streams are considered.
Living Expenses: Lenders evaluate your spending habits to understand affordability.
Debts: Credit card limits, car loans, and personal loans reduce your borrowing capacity.
Deposit Size: A larger deposit can improve your borrowing potential.
Credit Score: A strong credit history increases your chances of approval and favourable loan terms.
While online calculators can provide a rough estimate, a mortgage broker can assess your finances more accurately. Pre-approval is a great first step. It not only gives you clarity about what you can borrow but also positions you as a serious buyer when making offers on a property. Knowing your borrowing capacity helps you narrow your search to homes within your budget and avoid disappointment.
Step 4: Choosing the Right Loan
There are many loan products available, each with its own features, benefits, and drawbacks. Choosing the right loan is about balancing flexibility, affordability, and security based on your financial goals.
Types of Home Loans:
Variable Rate Loan: Your interest rate fluctuates with market conditions, offering flexibility if rates drop but higher repayments if they rise.
Fixed Rate Loan: Lock in your interest rate for 1–5 years, ensuring consistent repayments for better budgeting.
Split Loan: Combines fixed and variable rates, offering both stability and flexibility.
Interest-Only Loan: Lower repayments initially, but you won’t reduce the loan principal.
Line of Credit: A flexible loan allowing you to draw funds as needed, similar to a credit facility.
Low Doc Loan: Suitable for self-employed borrowers with limited income documentation.
Each loan type has pros and cons. For example, fixed loans provide stability but lack flexibility, while variable loans can save you money when rates drop. A mortgage broker will explain the differences and help you choose the right loan for your circumstances.
Step 5: Exploring Government Grants
First homebuyers in Australia have access to financial incentives, including the First Home Owner Grant (FHOG) and stamp duty concessions. These schemes are designed to help you enter the property market sooner.
What is the FHOG?
The FHOG is a state-funded grant available for first homebuyers purchasing or building a new home. Grant amounts and eligibility criteria vary between states, so it’s important to check what’s available in your area. For example:
VIC: Up to $10,000 for new homes under $750,000.
NSW: $10,000 for new homes valued up to $600,000.
QLD: $15,000 for new homes under $750,000.
Stamp Duty Concessions:
Many states offer stamp duty exemptions or discounts for first homebuyers, significantly reducing upfront costs. Visit firsthome.gov.au for up-to-date information tailored to your location.
Understanding these incentives can save you thousands, so it’s worth exploring all available options. Your broker will guide you through eligibility requirements and help you maximise these benefits.
Step 6: Rentvesting – A Creative Approach
For first homebuyers priced out of their preferred suburbs, rentvesting offers an alternative pathway to property ownership. Rentvesting involves renting a property where you want to live while purchasing an investment property in a more affordable area.
Benefits of Rentvesting:
Location Flexibility: Live in desirable areas close to work, family, and lifestyle amenities.
Property Ownership: Start building equity and take advantage of property market growth.
Potential for Passive Income: Rental income from your investment property can help cover mortgage costs.
Tax Benefits: Negative gearing and depreciation can reduce your taxable income.
Considerations:
Choose an investment property based on financial potential, not emotion. Look for strong rental yields and capital growth prospects.
Understand the costs of being a landlord, including maintenance, insurance, and property management fees.
Rentvesting can be a smart strategy for first homebuyers who want to enter the market sooner without sacrificing lifestyle. Speak to a financial advisor to understand how this approach can fit into your long-term goals.
Step 7: Family Assistance – ‘The Bank of Mum & Dad’
Rising property prices mean many first homebuyers turn to family for financial support. The ‘Bank of Mum and Dad’ can help you boost your deposit, avoid LMI, or secure a better loan. Family assistance typically comes in two forms:
Gifts: A financial gift toward your deposit that doesn’t need to be repaid.
Guarantor Loans: Parents use their home equity as security for part of your loan, reducing your risk to the lender.
Important Considerations:
Always have open, honest discussions about expectations and responsibilities.
Seek legal and financial advice to formalise any agreements.
Understand the risks for guarantors, including potential financial strain if repayments are missed.
Family support can make buying a home easier, but it’s important to ensure everyone is clear on the financial and emotional implications. Proper planning and advice will help avoid misunderstandings and protect your relationships.
Step 8: Finding the Right Property
Once you know your budget, it’s time to find the perfect home. Start by prioritising your needs versus wants and focusing on the long-term benefits of your investment.
What to Consider:
Location: Proximity to work, schools, public transport, and amenities.
Property Type: House, unit, or apartment? New build or established home?
Future Growth: Research suburbs with strong capital growth potential and planned infrastructure projects.
Lifestyle Needs: Balance convenience, community, and commuting time.
Do Your Research:
Use property websites, attend inspections, and monitor suburb trends. Tools like CoreLogic and realestate.com.au offer insights into median prices, rental yields, and demographics.
Remember, your first home doesn’t have to be your forever home. Focus on affordability, practicality, and the property’s potential to grow in value over time.
Step 9: Get Expert Help
The journey to home ownership can feel complex, but you don’t have to navigate it alone. At Mountain Mortgages, we’re here to simplify the process and help you every step of the way.
How We Can Help:
Assess your financial situation and borrowing capacity.
Find competitive home loan options tailored to your needs.
Guide you through pre-approval, loan applications, and settlement.
Answer any questions and provide expert advice to ensure you make informed decisions.
Working with a broker means having someone in your corner who understands the market, the lenders, and your unique circumstances. Our goal is to save you time, money, and stress so you can focus on the excitement of buying your first home.
