Your First Home in Australia 2026: The No-Nonsense Playbook
Real numbers on borrowing power, deposit strategies, LMI, grants and serviceability for Australian first home buyers in 2026 — at the new 4.35% RBA cash rate.
Your First Home in Australia: The No-Nonsense Playbook (Updated May 2026)
Buying your first home in Australia takes a bigger deposit, more paperwork, and more patience than most people expect — but the process is learnable. The average first home buyer loan is $564,605 (ABS, September 2025), the average deposit nationally is $173,000, and first home buyers now account for roughly 35% of all owner-occupier loans. This guide walks you through every step, every grant, and every trap — with real numbers.
1. How Much Can You Actually Borrow? (The Real Numbers)
Banks don't lend you what you think you can afford. They lend you what their stress test says you can afford.
APRA's serviceability buffer requires lenders to assess your repayments at your contracted rate plus 3%. With the average new owner-occupier variable rate sitting at 5.72% p.a. (RBA Table F6, February 2026), your loan is assessed at 8.72%. On a $550,000 loan over 30 years, that's repayments assessed at roughly $4,340/month — even though your actual repayments at 5.72% would be around $3,200/month.
What This Means in Practice
| Gross Annual Income | Estimated Maximum Loan (approximate) |
|---|---|
| $70,000 | $370,000–$420,000 |
| $90,000 | $490,000–$560,000 |
| $120,000 | $660,000–$750,000 |
| $160,000 (couple) | $900,000–$1,050,000 |
These are estimates only, based on the 8.72% assessment rate, minimal existing debts, and standard living expenses. HECS/HELP debt, car loans, and credit card limits will reduce these figures.
Average Loan and Deposit by State (ABS, Sep 2025)
| State | Average FHB Loan | Average Deposit |
|---|---|---|
| NSW | $637,000 | $206,256 |
| VIC | $551,000 | $169,000 |
| QLD | $523,000 | $160,000 |
| WA | $490,000 | $150,000 |
| SA | $468,000 | $143,000 |
| National | $564,605 | $173,000 |
The RBA cash rate was raised to 4.35% on 6 May 2026, reversing part of the 2025 easing cycle. Variable rates are unlikely to fall significantly in the near term.
2. Deposit Strategies: 5%, 10%, or 20%?
How much you save before you buy changes the cost of the loan itself — not just the size of it.
Lenders Mortgage Insurance (LMI) is triggered any time your deposit is below 20% of the purchase price (i.e., your Loan-to-Value Ratio exceeds 80%). LMI protects the lender, not you, but you pay for it.
LMI Cost Comparison (on a $600,000 purchase)
| Deposit | LVR | LMI Cost (approx.) | Notes |
|---|---|---|---|
| $30,000 (5%) | 95% | $18,000–$23,000 | Highest LMI; added to loan |
| $60,000 (10%) | 90% | $10,000–$14,000 | Significant cost |
| $90,000 (15%) | 85% | $4,000–$7,000 | LMI still applies |
| $120,000 (20%) | 80% | $0 | LMI eliminated |
LMI is typically capitalised onto your loan, so you're paying interest on it for 30 years. On a $20,000 LMI premium, that's close to $12,000 in extra interest over the loan life.
First Home Super Saver (FHSS) Scheme
The FHSS scheme lets you make voluntary super contributions and withdraw them (plus earnings) for a deposit. Rules as of 2026:
- Maximum you can release: $50,000 total
- Maximum voluntary contributions per financial year: $15,000
- Contributions are taxed at 15% going in (vs your marginal rate) — for someone on $80K, that's a 19.5% tax saving per dollar
- Withdrawal is taxed at your marginal rate minus a 30% offset
You need to apply to the ATO for a FHSS determination before signing a contract. Don't skip this step.
Genuine Savings Requirement
Most lenders require at least 5% of the purchase price to have been held in your account for a minimum of three consecutive months. A gift from parents may not qualify as genuine savings. Term deposits, managed funds, and shares held for 3+ months generally do qualify.
3. The First Home Guarantee Scheme (Post-October 2025)
This is the single most valuable scheme available to first home buyers right now — and it changed significantly on 1 October 2025.
What Changed
| Feature | Before Oct 2025 | From Oct 2025 |
|---|---|---|
| Annual places | 35,000 | Unlimited |
| Income cap (single) | $125,000 | No cap |
| Income cap (couple) | $200,000 | No cap |
| Deposit required | 5% | 5% |
| LMI payable | No | No |
The First Home Guarantee (FHG) lets you buy with a 5% deposit and pay no LMI because the government guarantees up to 15% of the loan. You still borrow 95% — this isn't free money — but you skip $10,000–$23,000 in LMI costs.
Property Price Caps (2025–26)
| State/Territory | Price Cap |
|---|---|
| NSW | $1,500,000 |
| VIC | $950,000 |
| QLD | $1,000,000 |
| WA | $850,000 |
| SA | $900,000 |
| ACT | $1,000,000 |
| TAS | $600,000 |
| NT | $600,000 |
Three Variants of the Scheme
| Scheme | Who It's For | Deposit | Guarantor |
|---|---|---|---|
| First Home Guarantee | First home buyers | 5% | Government (15%) |
| Family Home Guarantee | Single parents / single legal guardians | 2% | Government (18%) |
| Help to Buy | Lower-income buyers | 2% | Government equity (30–40%) |
The Help to Buy scheme involves the government taking an equity stake in your home. You own less of it — and repay the government's share when you sell or refinance. It suits buyers who can't save a standard deposit but want to get in.
Apply through a participating lender (not directly through the government). Search lenders at housingaustralia.gov.au.
4. State Grants and Stamp Duty Exemptions
First Home Owner Grant (FHOG) — 2026
| State | Grant Amount | Conditions |
|---|---|---|
| VIC | $10,000 | New homes only; value ≤ $750,000 |
| WA | $10,000 | New homes only (metro); $20,000 regional |
| TAS | $10,000 | New homes only |
| QLD | $30,000 | New homes only; value ≤ $750,000 |
| NSW | $10,000 | New homes only; value ≤ $600,000 |
| SA | $15,000 | New homes only |
| ACT | Not available | Replaced by stamp duty concessions |
| NT | $10,000 | New homes |
FHOG applies to new or substantially renovated homes only. It does not apply to established properties in most states.
Stamp Duty Exemptions and Concessions
Stamp duty is often the largest upfront cost after the deposit. Many states offer first home buyer concessions:
- NSW: Full exemption on properties up to $800,000; concession up to $1,000,000. (On an $800K purchase, this saves approximately $31,000.)
- VIC: Full exemption on new or established homes up to $600,000; sliding scale concession up to $750,000.
- QLD: Concession on homes up to $700,000 (owner-occupier rate applies from first dollar).
- WA: Full exemption on homes up to $450,000; concession up to $600,000.
- SA: No stamp duty concession for first home buyers, but FHOG of $15,000 applies.
- ACT: Stamp duty eliminated for eligible first home buyers under the Home Buyer Concession Scheme (income and asset tests apply).
Check your state revenue office for exact current thresholds — these are updated regularly.
5. Getting Pre-Approval: What It Actually Means
Pre-approval (also called conditional approval or approval in principle) means a lender has reviewed your financials and will lend you up to a specified amount — subject to conditions.
Conditional vs Unconditional Approval
- Conditional pre-approval: Based on your declared income, debts, and credit history. The lender has not yet valued a specific property. Common conditions include satisfactory property valuation, verified income documents, and no material change in your circumstances.
- Unconditional approval: Issued after the lender has assessed a specific property and completed all checks. This is what you need before you exchange contracts.
Pre-approval is not a guarantee the lender will fund your purchase. If property values come in low, your employment changes, or interest rates rise between pre-approval and settlement, the lender can revise or withdraw.
Credit Score and Hard Enquiries
Every time you formally apply for credit — including a home loan pre-approval — the lender runs a hard enquiry on your credit file. Each hard enquiry can reduce your credit score by a small amount and is visible to other lenders for five years.
- Hard enquiry: Formal application; recorded on credit file; impacts score.
- Soft enquiry: Checking your own score, or a lender running an indicative check; not recorded on credit file; no impact.
Don't apply for pre-approval with three different banks simultaneously. Shortlist first, then apply to one or two.
Pre-approvals typically last 60–90 days. In a slow-moving market, you may need to renew before you find a property.
6. Fixed, Variable, or Split? Choosing Your First Home Loan
At 5.72% average variable (RBA Table F6, Feb 2026), rates are elevated. Here's a quick decision framework:
| If you… | Consider… |
|---|---|
| Want payment certainty for 1–3 years | Fixed rate (typically 5.5%–6.5% currently) |
| Want flexibility to make extra repayments | Variable rate |
| Want some of both | Split (e.g., 50% fixed / 50% variable) |
| Are disciplined with savings | Variable with offset account |
Offset Account vs Redraw
- Offset account: A transaction account linked to your loan. Every dollar in it reduces the balance on which interest is calculated. You can access funds freely.
- Redraw facility: Extra repayments stored in the loan itself. You can draw them back, but some lenders restrict access or charge redraw fees.
For most first home buyers, an offset account is more flexible. If you're on a tight budget and want to force savings discipline, a loan without redraw is an underrated strategy.
Fixed loans typically do not include an offset account. If offset is a priority, stay variable or use a split structure.
7. The Home Buying Process: Step-by-Step
- Calculate your budget — Use the APRA buffer (rate + 3%) to set a realistic borrowing ceiling. Factor in upfront costs.
- Build genuine savings — At least 5% of purchase price held for 3+ months. More is better; 10% avoids the highest LMI tiers.
- Check your credit file — Pull your free report via Equifax, Experian, or illion before any lender sees it. Fix errors.
- Get pre-approval — Choose 1–2 lenders or use a broker. Gather 3 months of payslips, 2 years of tax returns, bank statements, and ID.
- Start property search — Filter by your pre-approved limit minus upfront costs. Don't look at properties 20% above your ceiling.
- Make an offer / bid at auction — Private treaty: submit written offer. Auction: unconditional, so have finance confirmed beforehand.
- Sign the contract of sale — In most states, you have a cooling-off period (2–5 business days depending on state) after signing. Waiving it is common at auction.
- Building and pest inspection — Do this before the cooling-off period expires. Budget $400–$800. A structural defect can cost $50,000+ to fix — a $600 inspection is never optional.
- Conveyancing / solicitor — Your conveyancer or solicitor reviews the contract, runs title searches, and handles the legal transfer. Budget $1,200–$2,500.
- Settlement — Typically 30–90 days after exchange. On settlement day, funds transfer, keys are released, and you own the property.
Total time from pre-approval to settlement: typically 3–6 months, though competitive markets can compress this.
8. Common First Home Buyer Mistakes
Underestimating Upfront Costs
Your deposit isn't the only thing you need. Budget for:
| Cost Item | Typical Range |
|---|---|
| Stamp duty | $0 (exempt) – $30,000+ |
| LMI (if < 20% deposit) | $0 – $23,000 |
| Conveyancing / solicitor | $1,200 – $2,500 |
| Building & pest inspection | $400 – $800 |
| Loan application fee | $0 – $800 |
| Moving costs | $500 – $3,000 |
| Utility connections / repairs | $500 – $2,000 |
| Total beyond deposit | $5,000 – $15,000+ |
Many first home buyers arrive at the finish line with the deposit saved but not enough cash to cover settlement costs. Settlement fails are real and expensive.
Overestimating Borrowing Power
Pre-approval figures assume nothing changes. They also assume lenders' expenses benchmarks — which are often lower than your actual spending. A lender using HEM (Household Expenditure Measure) may approve you for more than you can comfortably repay. Run your own numbers at a rate of 8.72% before you decide what you want to borrow.
Skipping the Building Inspection
Established properties can have structural issues invisible to an untrained eye. Termite damage, rising damp, roof defects, and illegal extensions are common. A building and pest report is not optional — it's due diligence.
Applying for Multiple Pre-Approvals Simultaneously
Each application leaves a hard enquiry. Four enquiries in 30 days signals financial stress to lenders and can reduce your borrowing power. Shortlist your preferred lender first.
9. First Home Buyer Checklist
- Calculate maximum loan using 8.72% assessment rate
- Check your credit report (Equifax, Experian, or illion — free once per year)
- Open a dedicated savings account and build 3+ months of genuine savings
- Register for FHSS contributions if building deposit over 12+ months
- Check First Home Guarantee eligibility and participating lenders
- Research your state's stamp duty exemption thresholds
- Research your state's FHOG eligibility (new homes only)
- Shortlist 1–2 lenders or engage a mortgage broker
- Gather documents: payslips (3 months), tax returns (2 years), bank statements (3 months), ID
- Apply for pre-approval
- Set a hard budget ceiling before property searching
- Engage a conveyancer before making an offer
- Book building and pest inspection before cooling-off period expires
- Confirm unconditional finance approval before exchanging contracts
- Budget for settlement costs (beyond deposit): $5,000–$15,000 minimum
Frequently Asked Questions
How much deposit do I need to buy my first home in Australia?
The minimum is 5% of the purchase price, either through a standard lender or the First Home Guarantee scheme. At 5%, you'll pay LMI unless you use the First Home Guarantee. At 10%, LMI drops significantly. At 20%, LMI disappears entirely. The national average first home buyer deposit is $173,000 (ABS, Sep 2025), though this reflects high property prices in Sydney and Melbourne.
Can I use superannuation to buy my first home?
Yes, through the First Home Super Saver (FHSS) scheme. You make voluntary contributions to super and withdraw them (plus earnings) for a deposit. Maximum total release is $50,000, with a $15,000/year cap on eligible contributions. Contributions are taxed at 15%, which is lower than most buyers' marginal rate — the tax saving is the main benefit. Apply to the ATO for a determination before signing a contract.
What is the First Home Guarantee and do I qualify?
The First Home Guarantee lets you buy with a 5% deposit and no LMI, with the government guaranteeing up to 15% of the loan. From 1 October 2025, places are unlimited and income caps have been removed — any first home buyer can apply regardless of income. You must be an Australian citizen or permanent resident, buying a property within the relevant price cap for your state, and it must be your principal place of residence.
Do I have to pay stamp duty as a first home buyer?
It depends on your state and purchase price. In NSW, you pay no stamp duty on purchases up to $800,000 — saving roughly $31,000 on an $800K purchase. In VIC, full exemption applies up to $600,000. In WA, exemption applies up to $450,000. In ACT, eligible buyers pay no stamp duty. In SA, there is no stamp duty concession for first home buyers. Check your state's revenue office for current thresholds.
How much can I borrow with a $70,000 income?
On a $70,000 gross income with no significant debts, most lenders will approve approximately $370,000–$420,000. This is based on the APRA assessment rate of 8.72% (5.72% + 3% buffer). A HECS/HELP debt of $30,000+ or a car loan will reduce this. Use LoanGorilla's borrowing power calculator to model your specific situation with your actual debts and expenses.
What is LMI and will I have to pay it?
Lenders Mortgage Insurance (LMI) is a one-off premium charged when your deposit is less than 20% of the purchase price. It protects the lender — not you — if you default. On a $600,000 purchase with a 5% deposit ($30,000), LMI can cost $18,000–$23,000. It's usually added to your loan, so you pay interest on it for the life of the loan. The First Home Guarantee scheme eliminates LMI for eligible buyers with a 5% deposit.
How long does it take to buy a house from start to settlement?
Realistically, 3–6 months from pre-approval to settlement. Building genuine savings and getting pre-approval ready can take another 3–12 months before that. The property search phase varies widely — in competitive markets, it can take months to successfully bid or have an offer accepted. Settlement itself is typically 30–90 days after exchange of contracts.
What grants are available for first home buyers in 2026?
The main grants: First Home Owner Grant (FHOG) — $10,000 to $30,000 depending on state, for new homes only. First Home Guarantee — not cash, but saves $10,000–$23,000 in LMI by allowing a 5% deposit with no LMI. Stamp duty exemptions — worth up to $30,000+ in NSW and VIC. FHSS scheme — tax savings via super contributions toward deposit. Stacking multiple schemes is possible: for example, a Victorian buyer purchasing a new $600,000 home could use the First Home Guarantee (no LMI), the FHOG ($10,000 cash), and the stamp duty exemption (save ~$31,000).
Should I get pre-approval before looking at properties?
Yes, always. Without pre-approval you don't know your ceiling, you can't bid at auction with confidence, and sellers' agents won't take you seriously in a competitive market. Apply for pre-approval before starting your property search. Just don't apply to five lenders at once — each application leaves a hard enquiry on your credit file.
What upfront costs do I need to budget for beyond the deposit?
Beyond your deposit, budget at minimum $5,000–$15,000 for: stamp duty (if not exempt), conveyancing ($1,200–$2,500), building and pest inspection ($400–$800), loan application fees (up to $800), moving costs ($500–$3,000), and immediate repairs or utility connections. If you're in NSW purchasing above $800,000 and not exempt, stamp duty alone can exceed $30,000. Build this buffer into your savings target — not having it at settlement can cause your purchase to fail.
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loangorilla.com.au is an Australian Credit Representative (ACR) of Access Lending Group, Australian Credit Licence 531308. Rates and information are current as of May 2026 and subject to change. This guide is general information only and does not constitute financial advice.
Run the numbers yourself
Don't take any of this on faith — plug your own figures into the relevant Australian home loan calculators:
- Borrowing Power Calculator
- Deposit Calculator
- LMI Calculator
- Stamp Duty Calculator
- Home Buying Costs Calculator
- Repayments Calculator
Related home loan options
Compare current rates and lender lists for the home loan types most relevant to this guide:
- First Home Buyer Home Loans
- Guarantor Home Loans
- Low Doc Home Loans
- Fixed Rate Home Loans
- Variable Rate Home Loans
- Offset Account Home Loans