FIRST HOME BUYERS GUIDE - Your first home buyer journey starts here. 2021 ed - eChoice
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FIRST HOME
BUYERS
GUIDE
Your first home buyer
journey starts here.
2021 ed.
1CONTENTS__
What is a first home buyer? 03
First Home Buyers Assistance Scheme 04
First home buyer loan with no deposit 05
Government loans and schemes for first home buyers 05
Which home loans are best home for first home buyers? 06
First home buyer benefits 06
First home buyers’ checklist 06
First Home Super Saver Scheme 07
What to think about when buying your first home 07
Calculators for first home buyers 08
Tips for first home buyers 09
First home buyers grants by state 10
Stamp duty for first home buyers 11
2WHAT IS AII
FIRST HOME BUYER?__
The term ‘first home buyer’ refers to a person who has never purchased a dwelling before and is entering the property
market for the first time. In Australia, first home buyers currently represent around a third of the market, with housing
commitments in this segment hovering around 30%.
But when it comes to first home buying, many people get confused. Research shows that 80% of aspiring home buyers
feel under-educated in the process of saving for and buying a home. According to the findings, this knowledge gap
could leave buyers financially worse off.
However, as a first home buyer, you could avoid these difficulties by learning about the market, finance and the costs of
home buying. Having this knowledge will enable you to make calculated decisions, reduce your financial risk, and possibly
save yourself thousands when buying your first home.
Many first-time home buyers make costly decisions. They don’t know enough about government assistance and
what they’re entitled to or why it’s vital to have their finances in order before applying for a loan. By understanding
these factors, and many more, as a first home buyer you could purchase a property with greater confidence and avoid
unnecessary stress.
3First Home Buyers Assistance Scheme
There are several First Home Buyer Assistance Schemes in Australia. These policies typically discount the cost of
transfer duty (stamp duty), a state government tax incurred when buying property or land.
The revenue office in the state or territory where the property is situated has the most up-to-date information about
these policies. Current schemes available are as follows:
NSW Revenue Office
https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer
The New South Wales First Home Buyers Assistance Scheme provides a full or partial exemption on stamp duty to
people who have never owned property in Australia. Property valued at $1,000,000 or less is eligible.
QLD Revenue Office
https://www.qld.gov.au/housing/buying-owning-home/financial-help-concessions/qld-first-home-grant
When you buy a home for under $550,000 or less in Queensland, a stamp duty concession of up to $15,925.00
may apply. Homes valued over $550,000 may be eligible for a duty discount of up to $7,175 for the first $350,000.
VIC Revenue Office
https://www.sro.vic.gov.au/
New or established homes valued up to $600,000 may be eligible for a duty exemption in Victoria. Property valued
between $600,001 and $750,000 may be eligible for a duty concession.
WA Revenue Office
https://www.wa.gov.au/organisation/department-of-finance/fhog
A duty exemption may apply to first home buyers purchasing a home in Western Australia for $430,000 or less, or
land valued at $300,000 or less. Whereas homes valued between $430,001 to $530,000, or land valued between
$300,001 to $400,000 may also be eligible for a duty concession.
TAS Revenue Office
https://www.sro.tas.gov.au/
A stamp duty concession of up to 50% may apply to the purchase of an established home of up to $500,000 in
Tasmania. Specific purchase dates and other eligibility criteria will need to be met to obtain the concession.
NT Revenue Office
https://treasury.nt.gov.au/dtf/revenue
Northern Territory home buyers may be eligible for $18,601 off stamp duty until 30 June 2021 under the Territory
home owner discount. The home must be $650,000 or less and be the principal place of residence for at least six
months.
ACT Revenue Office
https://www.revenue.act.gov.au/home-buyer-assistance/home-buyer-concession-scheme
After June 30, 2019, the Home Buyer Concession Scheme applies to first home buyer property purchases in the
Australian Capital Territory. First home buyers may be eligible to pay no duty, provided their gross income (including
any partners) falls under a sliding threshold, beginning at $160,000 and increasing based on the number of dependent
children (if any).
4First home buyer loan with no deposit
While buying a home without a deposit sounds unbelievable, it is possible if you have a guarantor to offer additional
security on your loan by signing a limited guarantee. Typically, guarantors are family members or friends who use assets,
usually property, to secure your home loan.
This approach reduces a lender’s risk. However, if you cannot cover the cost of the mortgage and your loan defaults, then
your guarantor becomes responsible for the payment of your mortgage.
Guarantor loans might sound like a good idea at the time, but they are a riskier way of buying a property. Firstly, you’re
borrowing the full value of the property, which means that the interest you’ll repay may be higher and it might take you
longer to pay off the loan. Secondly, you’ll have to involve another party in the purchase of your home, and they’ll have to
prove they can repay your mortgage if you can’t, which could complicate the home buying process.
Finally, you’ll have more exposure to property value decreases and minus equity situations should you be looking to sell.
Government loans and schemes for first home buyers
Most Australian state governments and territories offer residents an affordable way to buy their first home. Although,
it’s important to note while these agencies have competitive rates, these are often higher than conventional lenders.
HomeStart Finance
An initiative of the South Australian government, HomeStart helps home buyers in this state to break into the market
with a 3% deposit plus upfront costs (when buying an existing property for residential use). An 8% deposit loan is
available to those who wish to build.
Queensland Housing Finance
The Queensland government offers first home buyers purchasing property in this state an affordable finance option. To
be eligible, households must earn under $141,000 per year, have a sound credit and savings history and minimal debts,
as well as earn enough to cover the term of the loan.
Home Build Access
The Northern Territory government offers its residents a low deposit home loan for new builds and buying land to
build. To be eligible for a loan, the property’s value needs to under $550,000 for a three-bedroom residence or under
$475,000 for a two-bedroom property.
HomeVic Shared Equity
Designed for first home buyers, this Victorian government initiative available to a capped number of eligible applicants
and offers home loans for those who have a 5% deposit or more. Applicants must have lived in Victoria for the
past two years and be buying a home in the state. Applicants must earn no more than $84,555 as an individual or
$107,105 for multiple person households.
KeyStart Home Loans
The Western Australian government offers 2% deposit home loans for eligible first home buyers. Home buyers must
be over 18 and be buying a home in the state. A sliding income threshold applies based on family size as well as region
of the state.
5Which home loans are best for first home buyers?
The best home loans for you as a first home buyer could be those that offer you competitive interest rates, flexible loan
terms and the features that you want. But to find the right loan, you need to understand the lending market and know
what represents value.
To familiarise yourself with first home buyer loans, search ‘owner-occupier home loan’ and then review the results. When
considering mortgages, always look at the advertised and comparison rate.
Also, make sure you compare the loan-to-value ratio (LVR) as this indicates how much of a deposit you’ll need to secure
the loan. For example, an LVR of 90% means that you’ll have to come up with a 10% deposit to acquire the loan.
First home buyer benefits
Apart from having access to first home buyer grants, stamp duty concessions and public and private lender options, first
home buyers also have access to introductory rates and specialised low deposit loans.
Some lenders may also waive establishment fees and allow first home buyers to split their home loan rates so they
can leave a proportion of their home loan variable while fixing the rest. Other lenders may also give first home buyers
incentives such as ‘cash-back’ offers, and conveyancing rebates.
First home buyers’ checklist
As the saying goes, ‘only fools rush in.’ Rather than making quick decisions, take the time to assess your situation. This
approach could help you to avoid making costly mistakes.
To assist you in making strategic decisions follow this checklist.
Consider your budget: Calculate what you could afford to buy before starting your home search. Use a borrowing
calculator and factor in current debts and living costs. Be realistic and don’t overestimate what you can afford, or
you may find you’ll stretch your finances.
Estimate borrowing costs: Stamp duty, conveyancing, utilities, mortgage title transfer and document searches
may add thousands to a home loan. To cater to these costs, estimate what these fees are before buying.
Assess government scheme & grant eligibility: Many state and territory governments offer first home buyers
stamp duty exemptions and concessions, as well as grants that make buying property more affordable. Be sure to
visit the Revenue Office in the state or territory you’re buying in to determine if you’re eligible.
Verify Lenders Mortgage Insurance: Check your deposit size to determine if it’s large enough for you to avoid
paying lenders mortgage insurance (LMI), which could add thousands to the cost of your mortgage.
Compare home loan options: Review mortgages to determine your needs then compare loans to assess whether
you have the right product for your circumstances.
Determine property needs: Look at home types such as new and established houses, units and apartments
to determine which property type suits you. Make a list of your preferences such as number of bedrooms,
bathrooms and property size.
Consult a broker: To gain greater insight into the home loan industry, speak to a mortgage broker. They could
help you understand the market and compare lenders and products, apply for schemes, grants and – if you’re
eligible – assist in applying for a home loan.
6First Home Super Saver Scheme
Looking to assist Australians save for their first home, the Australian Government introduced a First Home Saver Scheme
in the Federal Budget 2017-18. This policy enables Australians to make voluntary contributions to their superannuation
fund, which could then be used to buy their first home.
Under this scheme, only voluntary funds submitted to your super fund after July 1, 2017, are eligible for withdrawal.
These funds may be ‘concessional’ (before-tax) or ‘non-concessional’ (after-tax) contributions of up to $30,000, excluding
any earnings.
What to consider about when buying your first home
Buying a home is one of the most substantial financial investments that you’ll ever make, so you need to think with
your head when you buy. All financial decisions must be research-based. Buy a home that fits your budget and needs,
not one that stretches your finances by including everything on your wish list.
According to property experts, some advice they could have done with when buying their first property includes:
1. Look to buy in affordable suburbs: Often first home buyers look to buy in suburbs they like but cannot afford. Yet
affordable suburbs on the outskirts of their suburbs - often within a short commute - are overlooked. Plus, these
suburbs on the boundaries frequently turn into the next ‘hot spot.’
2. Research the market thoroughly: Visit suburbs you’re interested in, talk to people who live in these communities
and go to open inspections. Don’t just rely on statistical information published on leading property market sites
too.
3. Gain home loan pre-approval: Gaining home loan pre-approval often gives you a confidence boost when
purchasing your first home. But, it’s vital to remember that pre-approval only indicates that your lender views you
as a worthwhile risk at a specified budget. Don’t look for homes outside of this price range; otherwise, you may
find that you won’t gain full loan approval.
4. Always sign a contract ‘subject to’: If you’re buying a home via a standard residential transaction, also known as
a ‘private treaty’, then be sure to include a ‘subject to finance approval, and building and pest inspection’ clause in
the contract. This addition reassures you that if you cannot secure finance through a conventional lender, or if the
property has termite or other damage that’s expensive to repair then you could pull out of the contract.
5. After loan approval take out insurance: Once your lender has approved your loan and the property has met your
terms, then it’s time to insure the property. You may not have the keys but you still have a vested interest in the
property and you’ll need to protect the dwelling against damage.
6. Master the art of negotiation: Just because a home gets listed at a specified value, this doesn’t mean that you
have to pay this price. By learning how to make a realistic offer confidently, you could reduce your costs and land
a bargain.
7. Never feel pressured: If you ever find a sales agent to be pushy, back away from the deal. You should never feel
rushed to make any financial decision.
8. Understand the auction process: Buying a home at auction is entirely different from purchasing a property
via private treaty. You won't be able to fall back on any ‘subject to’ clauses in a contract because if you win the
auction, then the property is yours. You’ll need to have your finances approved and have carried out any required
property inspections before auction day. Plus, you’ll need a 10% deposit to secure the property on the day of
the auction. For instance, if you’re buying a property worth $550,000, then you’ll need to hand over a $55,000
cheque to meet auction requirements.
7CALCULATORS FORII
FIRST HOME BUYERS__
Before you look at buying a home, you need to work out precisely what you may be able to afford based on your
current income and debts. It’s also essential that you calculate any home buying costs such as stamp duty or lender
mortgage insurance so that you can budget for these. Often your deposit or home loan won’t cover these additional
expenses and you’ll need to cover the shortfall. You should also consider how much you can afford towards Mortgage
Repayments as part of your lifestyle preferences.
Mortgage Calculator
Using a mortgage calculator to estimate home loan repayments gives you a clear indication of your financial
commitment when purchasing a home. An excellent calculator will include the amount borrowed, rate of interest,
repayment frequency and duration of the loan, as well as fees. On top of this, the calculator enables you to compare
loans and understand how making additional repayments could help pay your home loan faster.
By experimenting with different payment options, you’ll gain a better understanding of how your money works for you.
Plus, you’ll save yourself thousands in interest over the term of your loan.
Stamp duty Calculator
Stamp duty could add thousands to the cost of buying a home. However, many Australian states offer first home
buyers stamp duty concessions and exemptions. To know what your expenses are, make sure that you use a ‘current’
stamp duty calculator that considers changes to legislation so you can budget for the payment of any stamp duty.
Borrowing power Calculator
Before you use a borrowing power calculator, you’ll need to know how much you earn, what your living expenses are
and the details of your loan. To give you an accurate estimate of your borrowing power you’ll need to carefully work
these figures out.
Repayment Calculator
Home loan repayment calculators are one of the easiest ways to help estimate if you could afford to meet the cost
of your home loan when it’s due. This calculator will also help you to assess whether you could afford to repay your
home loan at higher interest rates.
By calculating home loan repayments at higher rates, you could help to futureproof your finances if your circumstances
remain unchanged. For instance, while a loan for a $550,000 home is affordable at 3.7% interest, you may find that at
4.7% interest, a home loan of this size is unaffordable. So, rather than borrowing $550,000 you may decide to borrow
less as this will give you far more room financially to meet future rate rises.
LMI Calculator
Lenders Mortgage Insurance (LMI) covers your lender against home loan repayment default when you borrow more
than 80% of your property’s value. This type of insurance reduces a lender’s risk and is usually required if you don’t
have at least 20% deposit.
For instance, let’s say you want to buy a home worth $450,000, but you only have a deposit of $25,000. This scenario
means that you’re borrowing 94.44% of the property’s value or Loan to Value Ratio (LVR).
LMI can be a costly expense when buying a home. By using an LMI calculator before purchasing, you can work out
if you could afford this additional expense or whether you’re better off saving the rest of the deposit as a first home
buyer. For example, if you buy the home for $450,000 with a $25,000 deposit, then the cost of LMI is $14,280.00,
which, in this case, adds $72.35 monthly to the loan cost based on an interest rate of 4.50%.
8TIPS FORII
FIRST HOME BUYERS__
When it comes to buying your first home, you need to be aware of what to expect and how to negotiate your way
around any difficulties as they arise. Here are some tips and advice:
1. Find out if you qualify for a home loan: By assessing your home loan eligibility, you’ll find out how much you
could afford to borrow and repay, and the sum of your deposit. To assess your eligibility use the ‘borrowing power’
calculator found in the calculate section of this guide. If the results look favourable, then contact a broker and ask
if they can assess your home loan eligibility further.
2. Reduce your debt: Your borrowing power gets drastically reduced by other financial obligations which you are
tied to. A lender may view other commitments as more financial pressure on someone, making them more likely
to default on payments. You may be denied a loan altogether. To avoid this scenario, pay off outstanding debts
before looking to borrow.
3. Save, save, save: We know that saving a deposit to buy a home can seem daunting, especially when you love
buying a coffee on your way to work. But the more you save, the less you’ll have to borrow. And, you’ll get better
interest rates which could save you thousands.
4. Review and compare home loans: There are many types of home loans available, each with a variety of features.
Now is the time to get smart. By understanding the difference between fixed and variable rates, interest only and
principal and interest loans, you may save thousands when it comes to borrowing for a home.
5. Work out costs and entitlements: Know what additional charges you’ll have to pay to buy a home and how much
these are - don’t leave anything to guesswork. Also, calculate grant and scheme entitlements so your finances are
on point. You don’t want any surprises.
6. Be organised: Timing is essential when buying a property as it may allow you to make an offer before other buyers.
Make sure you get home loan pre-approval and that your paperwork is in order before you start home shopping.
7. Always have the property inspected: While a home can look fantastic, it’s vital to get it inspected by a professional
before you buy. Then if the property has issues and needs repairs, you can get a quote for the renovation, and
make an offer based on these extra costs.
8. Seek out expert advice: If you’re not sure of how to approach buying a home then turn to experts such as a buyers’
agent and mortgage broker to help you. A buyers’ agent assists you to find the right home and could help negotiate
an affordable price. A mortgage broker enables you to understand the home loan industry better. Plus, brokers they
can help to fill out all of your paperwork, apply for grants and find a competitive home loan.
9FIRST HOME BUYERII
GRANTS BY STATE__
Funded by state and territory governments, this grant’s monetary value varies depending on each government’s
budget and policy. Therefore, it’s essential that as a first home buyer you know what you’re entitled to under your
property’s location.
First Home Buyers Grant NSW
NSW Revenue Office: New South Wales offers a $10,000 first home owner grant for new homes or builds. New
homes must not have been previously lived-in and must be valued at no more than $600,000. Purchased land with
intention to build is eligible if the combined value is below $750,000.
First Home Buyers Grant QLD
QLD Revenue Office: For contracts dated on or after 1 July 2018, the Queensland first home owner grant contributes
$15,000 towards the buying or building of a new home to eligible applicants. The home’s value must be under
$750,000.
First Home Buyers Grant VIC
VIC Revenue Office: The first home owner grant in Victoria is worth up to $10,000 if you buy a new home valued up
to $750,000. Regional homes that are new builds may be eligible for a grant of up to $20,000.
First Home Buyers Grant WA
WA Revenue Office: The Western Australia first home owner grant is up to $10,000 and is available for new homes
valued below $750,000 in the metropolitan area or up to $1,000,000 in regional areas. To be eligible for the grant you
must be an Australian citizen who will live in the property as their principal place of residence.
First Home Buyers Grant TAS
TAS Revenue Office: A $20,000 first home owner grant is available to eligible applicants who purchase or build a new
home between 1 July 2016 and 30 June 2022. The home must be not have been previously occupied or sold and
must be in Tasmania.
First Home Buyers Grant SA
SA Revenue Office: The first home owner grant in South Australia and is only relevant to new homes equal to or under
$575,000. To be eligible you must be a first time buyer and the property you’re building must be your principal place
of residence.
First Home Buyers grant NT
NT Revenue Office: The Northern Territory offers eligible first time buyers a $10,000 first home owner grant is buying
or building a new home.
First Home Buyers Grant ACT
ACT Revenue Office: The Australian Capital Territory has replaced its first home owner grant with the Home Buyer
Concession Scheme. Instead of offering a grant, it provides a full duty concession to eligible applicants.
10STAMP DUTY FORII
FIRST HOME BUYERS__
Stamp duty is a state government tax that is payable when purchasing a property. This tax is based on the purchase
price of a property and can be sizable.
Stamp Duty NSW
Stamp duty NSW, governed by Revenue NSW, applies to all property purchased in the state of New South Wales.
Duty rates get calculated on the property’s sale price or current market value, whichever is greater. Revenue NSW
charges a standard transfer duty rate, as well as a premium duty rate for residential properties worth more than $3
million. Furthermore, if the buyer and seller are related or associated or you’re not transferring the whole property,
then the property must be valued by a suitably qualified person.
Stamp Duty QLD
All property purchased in Queensland will incur stamp duty QLD rates, which are governed by the Queensland
Government. These duty rates apply to all residential and commercial property. In Queensland you’ll generally need to
pay stamp duty at settlement – a transfer of land usually cannot be lodged unless it has been stamped first.
Stamp Duty VIC
Stamp duty VIC applies to all residential property bought in the state. Governed by the state government, this duty
varies depending on the use of the property purchased. For instance, principal places of residence attract a different
duty rate than an investment property.
Stamp duty WA
Stamp duty WA is payable on all property purchased in Western Australia. The Western Australian Department
of Finance collects this tax, which is payable within two months settlement. Duty won’t be charged twice on two
transactions relating to the same matter.
Stamp Duty TAS
Stamp duty TAS, governed by the Department of Treasury and Finance, applies to property bought in Tasmania. Transfer
duty rates are charged either on the value of the property or the purchase price, whichever is higher. Duty is payable
within three months of a transfer occurring and is payable on the greater amount of the consideration paid or the
encumbered value of the property.
Stamp Duty SA
Stamp duty SA centres on the date of property sale and the purchase price of the property. The South Australian
Revenue Office collects the tax, which is payable at the time of settlement. There is no liability to duty in relation to a
conveyancer or transfer of an interest in non-residential and non-primary production land executed on or after 1 July
2018 (conditions apply).
Stamp Duty NT
Stamp duty NT is payable on all property purchased in the Northern Territory. Rates are based on the purchase price of
a property and governed by the Territory Revenue Office. The revenue is paid into the Central Holding Authority of the
Territory and is used to meet the costs of essential public services such as education, health, law and order, and public
safety.
Stamp Duty ACT
Stamp duty applies to all residential property bought in the Australian Capital Territory and is payable to the ACT
Revenue Office. Duty rates are calculated using the purchase price of the property.
11Things you should know: Our information acts as a guide only and does not constitute as financial advice. In preparing it we did not take into account your lending objectives, financial situation or
particular needs. Before making a decision on the basis of this information, you should consider how appropriate it is to your particular lending needs and objectives. Terms and conditions, fees and
charges, normal lending criteria apply.
Publication Date May 2021.
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