Common Mistakes First Home Buyers Make Buying a House

How Much Do You Actually Need to Save?

You can buy a house with a 5% deposit under the Australian Government 5% Deposit Scheme, and you won't pay lenders mortgage insurance. The scheme is uncapped, meaning there's no limit on the number of places available each year, and there's no income limit either. In Victoria, the price cap sits at $950,000 for capital city and regional centres, and $650,000 for other areas.

The catch is that your lender still needs to approve the loan. A 5% deposit might get you through the door, but your borrowing capacity depends on your income, existing debts, and living expenses. If you're earning $85,000 and have a car loan with $15,000 outstanding, that repayment will reduce how much you can borrow by more than you'd expect.

Consider a buyer looking at a house in Werribee. They've saved $50,000 and want to use the 5% deposit scheme. The property is listed at $650,000, so the deposit requirement is covered. But when the lender assesses their application, their buy-now-pay-later accounts and a personal loan for furniture reduce their borrowing capacity to $580,000. The deposit was never the problem. The debt was.

Before you start looking at properties, work out what you can borrow, not just what you've saved. A mortgage broker in Werribee or your local area can run those numbers with you before you waste time at open homes.

What Stamp Duty Concessions Apply in Victoria?

Victoria offers a full stamp duty exemption on properties valued up to $600,000 for first home buyers. A sliding scale concession applies on properties valued between $600,001 and $750,000. Above $750,000, you pay the standard rate.

The concession applies to both new and established homes, as long as you're buying the property as your principal place of residence. You need to move in within 12 months of settlement and live there for at least 12 months continuously.

If you're buying a house valued at $620,000, you'll pay reduced duty under the concession. If you're buying at $800,000, you'll pay full duty. The difference can be tens of thousands of dollars, and it's one reason why properties just under the $600,000 threshold are popular with first home buyers.

The first home owner grant in Victoria is $10,000, but it only applies to new homes valued up to $750,000. If you're buying an established house, you won't receive the grant. The stamp duty concession is what matters for most buyers purchasing existing homes.

Should You Fix Your Interest Rate?

A fixed rate locks in your repayment amount for a set period, usually between one and five years. A variable rate can move up or down depending on what the Reserve Bank and your lender decide to do.

The decision depends on what you value more: certainty or flexibility. Fixed rates mean you know exactly what you'll pay each month, which helps if your budget is tight or you prefer predictable expenses. Variable rates give you access to features like offset accounts and the ability to make extra repayments without penalty.

In our experience, buyers who fix their entire loan often regret it when rates drop or when they realise they can't make extra repayments without hitting a cap. A split loan, where part of your borrowing is fixed and part is variable, gives you some certainty while keeping flexibility on the variable portion.

As an example, a buyer purchasing in Tarneit with a loan of $550,000 might fix $350,000 for three years and leave $200,000 on a variable rate with an offset account. They get predictable repayments on the majority of the loan, but they can still throw extra cash into the offset to reduce interest on the variable portion. If rates fall, they benefit on part of the loan. If rates rise, they're protected on the larger portion.

Don't assume you need to pick one or the other. Most lenders allow splits, and it's worth considering if you want a middle ground.

What Loan Features Actually Matter?

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. If you have a loan of $500,000 and $20,000 sitting in your offset, you only pay interest on $480,000.

Redraw is different. It lets you access extra repayments you've made on your loan, but the money is technically part of the loan, not sitting in a separate account. Some lenders restrict how often you can redraw or charge fees to access it.

Offset accounts give you faster access to your money and more control. Redraw can be useful if you're making extra repayments but don't need regular access to those funds. For most first home buyers, an offset account is the more flexible option, especially if you're building up savings for renovations or other expenses down the track.

Not all loans come with an offset. Some lenders charge a higher rate for loans with offset accounts attached. You need to weigh up whether the interest saving from the offset balance justifies the higher rate. If you're not going to keep much in the account, it might not be worth it.

How Does Pre-Approval Work?

Pre-approval is a conditional loan approval based on the information you've provided to the lender. It's not a guarantee, but it gives you a clear idea of how much you can borrow before you start making offers.

Most pre-approvals are valid for three to six months. The lender will still need to approve the specific property you choose, and they'll verify your financial situation again before settlement. If your circumstances change, such as losing your job or taking on new debt, the pre-approval can be withdrawn.

Pre-approval helps when you're ready to make an offer. Sellers and agents take you more seriously if you've already spoken to a lender. It also means you're not scrambling to organise finance after you've signed a contract.

If you're looking at properties in areas like Point Cook or Hoppers Crossing, where stock moves quickly, having pre-approval in place means you can move fast when the right property comes up.

What Happens at Settlement?

Settlement is when ownership of the property transfers from the seller to you. Your lender pays the purchase price to the seller, and you become the registered owner. It usually happens 30, 60, or 90 days after you sign the contract, depending on what was agreed.

Before settlement, your lender will order a valuation to confirm the property is worth what you're paying. If the valuation comes in lower than the purchase price, the lender might reduce the amount they're willing to lend. You'd need to make up the difference with a larger deposit.

You'll also need to pay for things like conveyancing, building and pest inspections, and any adjustments for rates or water charges. These costs sit on top of your deposit, and they're easy to underestimate.

If you're using the 5% deposit scheme, your lender will arrange the guarantee with Housing Australia as part of the settlement process. You don't need to apply to Housing Australia directly. Your broker or lender handles that side of things.

Call one of our team or book an appointment at a time that works for you. We'll walk through the numbers, compare your home loan options, and make sure you're set up with a loan structure that fits how you want to manage your money.

Frequently Asked Questions