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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1.89%

Fixed - 2 years

2.94%

Suncorp Bank

$1.3k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.85

/ 5
More details

2.68%

Variable

2.73%

Heritage Bank

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.23

/ 5
More details

2.29%

Fixed - 3 years

3.13%

Heritage Bank

$1.3k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.64

/ 5
More details

1.95%

Fixed - 3 years

2.27%

UBank

$1.3k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.38

/ 5
More details

2.14%

Fixed - 1 year

2.35%

UBank

$1.3k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.42

/ 5
More details

2.59%

Fixed - 5 years

2.46%

UBank

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.79

/ 5
More details

2.88%

Variable

2.55%

UBank

$720

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.16

/ 5
More details

2.29%

Fixed - 3 years

2.65%

UBank

$1.3k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.51

/ 5
More details

2.74%

Variable

2.74%

UBank

$1.4k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.85

/ 5
More details

2.29%

Variable

2.23%

Athena Home Loans

$1.3k

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.72

/ 5
More details

Learn more about home loans

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

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What if I can't pay off my guaranteed home loan?

If you can’t pay off your guaranteed home loan, your lender might chase your guarantor for the money.

A guaranteed home loan is a legally binding agreement in which the guarantor assumes overall responsibility for the mortgage. So if the borrower falls behind on their mortgage, the lender might insist that the guarantor cover the repayments. If the guarantor fails to do so, the lender might seize the guarantor’s security (which is often the family home) so it can recoup its money.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

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.

Mortgage Calculator, Deposit

The proportion you have already saved to go towards your home. 

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.