Everything You Need to Know About Buying Your First Home

Buying your first home in Northern NSW means choosing between several deposit options, understanding which grants and concessions apply to your situation, and working out how much you can actually borrow before you start looking.

The decision that matters most is whether you're buying new or established. That choice determines which incentives you can access, how much stamp duty you'll pay, and in some cases whether a 5% deposit will be enough. Everything else follows from that.

How Much Deposit Do You Actually Need

You can buy with as little as 5% of the purchase price if you're using the Australian Government 5% Deposit Scheme. Housing Australia guarantees the gap between your deposit and the usual 20% requirement, which means you won't pay Lenders Mortgage Insurance. The scheme has no income cap and no annual place limit, but you need to apply through a participating lender and the property price must fall within the caps for your area. In Northern NSW, properties in regional centres can be valued up to $1,500,000 under the scheme, while properties in other areas are capped at $800,000.

A 10% deposit gives you more lender options but you'll usually pay LMI unless you're eligible for a government-backed scheme. At current variable rates, LMI on a 10% deposit can add several thousand dollars to your upfront costs, though some lenders will let you roll it into the loan.

Saving 20% removes LMI entirely and often unlocks better interest rate discounts, but it also means waiting longer while property values move. We regularly see buyers who've saved 20% only to find they've been priced out of the suburbs they were targeting two years earlier.

New Homes vs Established Homes in NSW

If you're buying a new home or substantially renovated property valued under $600,000 in NSW, you'll receive the $10,000 First Home Owner Grant and pay no stamp duty. For a land and build contract, the combined cap is $750,000 for the grant, and stamp duty relief applies to vacant land valued up to $350,000 with a sliding concession up to $450,000.

If you're buying an established home, there's no grant available, but you'll pay no stamp duty on properties valued up to $800,000 and receive a sliding concession on properties between $800,001 and $1,000,000. You must move in within 12 months of settlement and live there for at least 12 continuous months to keep the concession.

Consider a buyer looking at a renovated cottage in Lismore valued at $650,000. Because it's established, there's no grant, but stamp duty is fully waived under the First Home Buyers Assistance Scheme. That saves around $23,000 compared to a non-first home buyer. The same buyer looking at a new townhouse at the same price would receive the $10,000 grant on top of the stamp duty saving, but the pool of available new stock in regional centres is often smaller and located further from established town centres.

What Your First Home Loan Application Actually Involves

Lenders assess your borrowing capacity using your income, existing debts, living expenses, and the deposit you've saved. Your application needs to show at least three months of genuine savings unless you're using a gifted deposit, which some lenders accept from immediate family with a signed declaration. Gifted deposits are more commonly accepted when combined with some genuine savings rather than making up the entire amount.

Pre-approval gives you a conditional loan offer before you start looking at properties. It's valid for three to six months depending on the lender and can be extended if your circumstances haven't changed. Pre-approval doesn't lock in an interest rate, but it does confirm how much you can borrow and shows agents and vendors you're ready to move quickly.

The application itself involves payslips, tax returns if you're self-employed, bank statements showing your savings history, and identification documents. Lenders will also check your credit file and ask about any existing debts including buy now pay later arrangements, which are now treated as ongoing commitments even if the balance is zero.

Fixed vs Variable Interest Rates for Your First Loan

A fixed interest rate holds steady for one to five years, which means your repayments won't change during that period even if the official cash rate moves. The trade-off is that you'll usually have limited access to features like an offset account or redraw, and you may face break costs if you want to refinance or sell before the fixed term ends.

A variable interest rate moves with the market, which means your repayments can go up or down depending on what your lender does with its rates. You'll typically have full access to offset accounts and redraw facilities, and there are no break costs if you want to refinance or make extra repayments.

Splitting your loan between fixed and variable gives you some rate certainty while keeping access to flexible features on the variable portion. In our experience, buyers who split often fix the amount that covers their essential expenses and keep the rest variable so they can make extra repayments when their income allows it.

How Offset Accounts and Redraw Work in Practice

An offset account is a transaction account linked to your home loan. The balance in the offset reduces the amount of interest you're charged without actually paying down the loan balance. If you have a $400,000 loan and $20,000 in your offset, you're only charged interest on $380,000. Your loan balance stays at $400,000, but you're saving interest every day the offset holds money.

Redraw lets you access extra repayments you've already made on top of your minimum. If your minimum monthly repayment is $2,200 and you pay $2,500, that extra $300 sits in redraw and you can pull it out if you need it. Some lenders charge redraw fees or limit how often you can access it, and redraw isn't always available on fixed rate loans.

Offset accounts are generally more flexible because the money never technically goes into the loan, so there are no restrictions on withdrawing it. Redraw can be useful if your loan doesn't offer offset or if you want to force yourself to save by making the money slightly less accessible.

Borrowing Capacity and What Actually Affects It

Your borrowing capacity is the maximum amount a lender will let you borrow based on your income, expenses, debts and deposit. Lenders use a serviceability buffer, which means they test whether you can still afford repayments if interest rates rise by around 3% above the loan rate you're applying for.

Existing debts reduce your capacity dollar for dollar. A $10,000 car loan with $400 monthly repayments might reduce your borrowing capacity by $80,000 or more depending on the lender's assessment rate. Credit card limits also count as potential debt even if you pay the balance in full each month, so closing or reducing limits before you apply can increase how much you're able to borrow.

In a scenario like this: two applicants earning a combined $120,000 with no dependents, no debt, and a 10% deposit could typically borrow between $650,000 and $700,000 depending on the lender and current rates. The same applicants with a $15,000 car loan, a $10,000 credit card limit, and $300 per month in buy now pay later commitments might see that capacity drop to $580,000 or lower.

What Happens Between Pre-Approval and Settlement

Once your offer is accepted, your lender will move from pre-approval to formal approval. That involves a valuation of the property, a final credit check, and verification that your financial situation hasn't changed since pre-approval. The valuation protects the lender by confirming the property is worth what you're paying for it, and if it comes in lower than the purchase price, you may need to increase your deposit or renegotiate with the vendor.

You'll need to arrange building and pest inspections unless you're buying at auction or the contract is unconditional. These inspections are your responsibility and usually cost between $400 and $800 depending on the property size and location. If the reports show major issues, you can use them to negotiate repairs or a price reduction, or withdraw from the contract if you have a building and pest clause.

Settlement usually happens four to six weeks after contracts are exchanged in NSW, though it can be longer for new builds or land and build contracts. Your conveyancer or solicitor handles the legal side, and your broker coordinates the final loan drawdown with your lender so the funds are ready on settlement day. Once settlement occurs, you receive the keys and the property is officially yours.

Call one of our team or book an appointment at a time that works for you. We'll walk through your situation, talk about which deposit options and home loan options suit where you're looking to buy, and help you pull together everything you need for a solid application.

Frequently Asked Questions