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Getting your first home loan can seem daunting. Working out how much you can afford to borrow, how much you need to save, and where you can find a good deal can be stressful for a first home buyer. Plus, there’s the uncertainty of whether a lender would even approve your mortgage application. 

But getting your first mortgage doesn’t have to be as complex as it sounds. Right here at RateCity, you can compare home loan options from a wide variety of mortgage lenders side by side, before reading through our step by step guide that walks you through some of the important questions to answer when you’re getting your first home loan.

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First home loan checklist

Planning to buy your first home? Here’s our step by step checklist to help walk you through the questions you’ll need to answer before you sign on the dotted line:

1. How much can I afford to borrow?

When you apply for a home loan, the mortgage lender will assess whether you’ll be able to realistically afford the repayments on your household budget. The higher your income and the lower your expenses, the more money you may be able to borrow.

For example, if you and your partner apply for a mortgage jointly as a couple, you may be able to afford a bigger loan as you’ll have two incomes to help cover the repayments. But if you have dependent children together, your extra expenses could limit the maximum size of your home loan.

You can estimate the size of your first home loan using RateCity’s Borrowing Power Calculator. Simply enter a few details about your finances to estimate how much a bank may agree to lend you. This can give you a better idea of what type of properties and locations you may be able to consider for buying your first home.

2. How much do I need to save for a deposit and upfront fees?

To get some of the best home loan interest rates, your lender may want you to pay a deposit of 20 per cent or more of the property’s value. This can be a big ask for a first home buyer, especially if you’re purchasing property in one of Australia’s capital cities where house prices are high.

You may be able to apply for a home loan with a deposit of 10 or even 5 per cent of the property’s value, which could take less time and effort to save up. However, this means your lender will take out a lender’s mortgage insurance (LMI) policy, which helps cover their financial risk if you default on the loan.

LMI protects the lender, not the borrower, and lenders typically pass the cost of LMI on to the borrower – the lower your deposit, the more you may have to pay for LMI. RateCity’s LMI Calculator can give you an estimate of what you’ll need to pay, either as an upfront cost or added to your home loan balance (which may cost you more in long-term interest charges).

You may also need to budget for other upfront costs when you apply for your first home loan, such as: 

  • Stamp duty
  • Conveyancing fees
  • Application fees
  • Valuation fees

The cost of these fees and charges may vary depending on your location and situation.

3. What do I want from my first home loan?

Rather than going straight to your local bank, consider comparing home loan options from a range of different mortgage lenders. You may be surprised by the number of alternatives available!

A lot of first home buyers start by comparing the interest rates of different home loans, as the lower the interest rate, the cheaper the loan’s repayments. However, there may also be annual fees or other charges to consider – look at the comparison rate to get an indication of a loan’s overall cost.

Some home loans offer extra features and benefits that can help you manage your repayments and enjoy more value from the mortgage. For example:

  • A home loan that lets you make extra repayments means you have the option to clear your balance faster, so you pay less in interest charges.
  • A redraw facility lets you take any extra repayments you make back out of your mortgage, in case you need to access this money in a hurry.
  • An offset account is a savings or transaction account linked to your home loan. Any money saved in this account is used to “offset” your loan when calculating your interest charges. For example, if you had a $500,000 mortgage, and had $20,000 saved in your offset account, you’ll be charged interest as if you only owed $480,000.

Keep in mind that home loans which offer more features and benefits often charge higher interest rates and fees.

4. Where can I get more help?

Applying for your first home loan can be tough, but you don’t have to go it alone:

  • A guarantor is a family member who offers to guarantee your home loan using the value of their own property as security. This may allow you to apply for a mortgage with low or no deposit without having to pay LMI. However, if you don’t keep up with your repayments and end up defaulting on your loan, the guarantor will become responsible for your mortgage.
  • The Bank of Mum & Dad is a nickname for when your parents (or other relatives or close friends) offer to help pay for your mortgage, such as covering part or all of your deposit. While this offer can be very generous, it may not always be helpful. Lenders often prefer that your deposit is mostly made up of income earned at your job, as this demonstrates your financial responsibility. Gifted money may need to stay in a savings account for six months or longer to be counted as “genuine savings” for use as a house deposit. Alternatively, you could draw up a formal agreement to repay the gifted money as a loan, to show your bank you’re taking this responsibility seriously.
  • First home owner grants (FHOGs) are available from state and territory governments. These may help cover part of the cost of a deposit, or waive some of the other upfront fees and charges. Contact your local government office to learn more about what grants and support services may be available to you, and what you may be eligible to claim.
  • A mortgage broker can offer more personal advice on your best first home loan options. It’s usually free to visit a mortgage broker, who can walk you through finding a loan, and take care of managing your application. They may even be able to tell you about special home loan offers that aren’t normally advertised.

Frequently asked questions

Can first home buyers apply for an ING home loan?

First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan. 

First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates. 

First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.

How do I apply for Westpac’s first home buyer loan?

If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan. 

You can use Westpac’s online mortgage calculators to estimate your borrowing power. You can also work out the time it might take to save up for the deposit, and the size of your home loan repayments

When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for. 

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

Where can I get all the information about an ANZ first home buyer’s loan?

As a first home buyer, you may require help and hand-holding, and as such ANZ has the buying your first home section on its website full of important information. ANZ also has a form in this section you can fill out to get a free consultation from an ANZ First Home Coach and create your own plan for buying your first home. This coach will help you understand where your current income is being spent and plan for your home loan repayments. You’ll get a clear picture of the costs involved in purchasing a property and how to budget or save for these costs. The coach will help you understand different deposit options and manage your accounts to enhance your savings.

There are three types of ANZ first home loans - Standard Variable, Fixed, and Equity Manager. The features, interest rates, and terms for each are different, and you can compare them here.

When they apply for an ANZ home loan, first home buyers can also get guidance on applying for the First Home Owner Grant (FHOG). This is a one-off government grant that may be available to you when you’re buying your first home. The eligibility criteria for FHOG differs between the different states and territories, which is why it’s helpful to have expert advice when applying.

I can't pick a loan. Should I apply to multiple lenders?

Applying for home loans with multiple lenders at once can affect your credit history, as multiple loan applications in short succession can make you look like a risky borrower. Comparing home loans from different lenders, assessing their features and benefits, and making one application to a preferred lender may help to improve your chances of success

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor. 

What is upfront fee?

An ‘upfront’ or ‘application’ fee is a one-off expense you are charged by your bank when you take out a loan. The average start-up fee is around $600 however there are over 1,000 loans on the market with none at all. If the loan you want does include an application fee, try and negotiate to have it waived. You’ll be surprised what your bank agrees to when they want your business.

What is a cooling-off period?

Once a home loan’s contracts are exchanged between the borrower and the lender, a five-day cooling-off period follows, during which the contracts may be cancelled if needed.

What is a debt service ratio?

A method of gauging a borrower’s home loan serviceability (ability to afford home loan repayments), the debt service ratio (DSR) is the fraction of an applicant’s income that will need to go towards paying back a loan. The DSR is typically expressed as a percentage, and lenders may decline loans to borrowers with too high a DSR (often over 30 per cent).

What is an ongoing fee?

Ongoing fees are any regular payments charged by your lender in addition to the interest they apply including annual fees, monthly account keeping fees and offset fees. The average annual fee is close to $200 however there are almost 2,000 home loan products that don’t charge an annual fee at all. There’s plenty of extra costs when you’re buying a home, such as conveyancing, stamp duty, moving costs, so the more fees you can avoid on your home loan, the better. While $200 might not seem like much in the grand scheme of things, it adds up to $6,000 over the life of a 30 year loan – money which would be much better off either reinvested into your home loan or in your back pocket for the next rainy day.

Example: Anna is tossing up between two different mortgage products. Both have the same variable interest rate, but one has a monthly account keeping fee of $20. By picking the loan with no fees, and investing an extra $20 a month into her loan, Josie will end up shaving 6 months off her 30 year loan and saving over $9,000* in interest repayments.

How does an offset account work?

An offset account functions as a transaction account that is linked to your home loan. The balance of this account is offset daily against the loan amount and reduces the amount of principal that you pay interest on.

By using an offset account it’s possible to reduce the length of your loan and the total amount of interest payed by thousands of dollars. 

Example: If you have a mortgage of $500,000 but holding an offset account with $50,000, you will only pay interest on $450,000 rather then $500,000.

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

What are extra repayments?

Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 


While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

What is break fee?

Break fees are charged when a customer terminates a fixed-rate mortgage. The amount is determined at the time you decide to break the loan and is based on how much your bank stands to lose by you breaking the contract. As a general rule, the more the variable rate has dropped, the higher the fee will be.

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

How much debt is too much?

A home loan is considered to be too large when the monthly repayments exceed 30 per cent of your pre-tax income. Anything over this threshold is officially known as ‘mortgage stress’ – and for good reason – it can seriously affect your lifestyle and your actual stress levels.

The best way to avoid mortgage stress is by factoring in a sizeable buffer of at least 2 – 3 per cent. If this then tips you over into the mortgage stress category, then it’s likely you’re taking on too much debt.

If you’re wondering if this kind of buffer is really necessary, consider this: historically, the average interest rate is around 7 per cent, so the chances of your 30 year loan spending half of its time above this rate is entirely plausible – and that’s before you’ve even factored in any of life’s emergencies such as the loss of one income or the arrival of a new family member.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What is a credit limit?

The maximum amount that can be borrowed from a lender, as per the home loan contract.