How to get a home loan in Australia
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- Step 1: Calculate your borrowing power
- Step 2: Save for a home loan deposit
- Step 3: Check your credit history
- Step 4: Avoid big lifestyle changes
- Step 5: Research first home buyer grants
- Step 6: Compare home loan types
- Step 7: Compare home loan deals
- Step 8: Create a shortlist of lenders
- Step 9: Get home loan pre-approval
- Step 10: Home loan settlement
Australia has one of the most expensive property markets in the world, so unless you have the savings to buy your home outright, you’ll need a home loan.
So let’s outline how you can put your best foot forward in the application process. Here’s how to get a home loan in Australia.
Step 1: Calculate your borrowing power
Your borrowing power, sometimes called ‘borrowing capacity’, is how much money a bank will lend you based on your income, debts, and spending.
The lender wants to know how much you can spend on mortgage repayments, and if you have enough wiggle room to absorb costs like interest rate changes. High income and low debt mean more borrowing power.
Typically, your borrowing power is the upper limit of what you can afford, so it’s wise to borrow less than the number you get.
Every lender has different ways of calculating borrowing power – some might be more risk-averse than others. However, you can get a rough idea using a borrowing power calculator.
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Step 2: Save for a home loan deposit
Once you know how much you can borrow, you’ll need to save for a home loan deposit.
A home loan deposit is a downpayment on your home loan. This establishes your loan-to-value ratio (LVR) and home equity, meaning you’ll own part of your home from day dot.
The standard deposit size is 20% of the purchase price. However, given that the average mortgage size in Australia is over $600k, that’s a lot of money.
Home loan deposit amounts on a $600,000 home loan
5% deposit | $30,000 |
10% deposit | $60,000 |
15% deposit | $90,000 |
20% deposit | $120,000 |
Many lenders let you buy with a smaller deposit between 5% and 15%, but this usually comes with penalties like higher interest rates and lenders’ mortgage insurance (LMI). LMI can add thousands to your home loan as an upfront or ongoing charge.
It is also possible to pay a large deposit of 40% or more.
Expert Tip
Don’t just save for the home loan deposit. You may need to also pay stamp duty, mortgage application fees, and solicitor fees.
Step 3: Check your credit history
Your credit score tells a lender how good you are at borrowing money. Higher credit scores show you make timely, full repayments – lower credit scores mean you’re less reliable.
Before submitting your home loan application, request your credit reports from the different credit bureaus (Ilion, Experian, and Equifax) to make sure they’re free of any errors.
You can also check the report for outstanding debt and red marks against you. A bad credit score looks like a red flag to a home loan lender, so if you can, work to improve your credit score before you apply.
Step 4: Avoid big lifestyle changes
Mortgage lenders love certainty, so in the months leading up to your application, avoid lifestyle changes that impact your finances.
This can include:
- Switching jobs.
- Taking out a personal loan or new credit card.
- Large purchases from your savings, like travel.
The idea is to show stability. As unfair as it is, even having a child right before you apply can make home loan lenders nervous.
Step 5: Research first home buyer grants
If you’re a first home buyer, research first home owner grants in your Australian state or territory to see if you’re eligible. These schemes can significantly lower the costs of home buying, so it’s worth it to at least consider.
Typically, a first home buyer grant provides a lump sum payment towards your home loan and an exemption from stamp duty if you’re purchasing new or off-the-plan property under a certain price limit.
Step 6: Compare home loan types
Home loans come in many varieties for homeowners and property investors. The main differences are interest rate type, features, and repayment style.
The classic choices are:
Fixed interest rates stay the same for a period of time, called a fixed term (typically 1-5 years). Variable rates can increase or decrease at the lender’s discretion, but these loans come with more flexibility and interest-saving features like offset accounts than fixed rates.
Split rates combine the best of both worlds: part of your interest rate is fixed and variable.
Each interest rate type has pros and cons, so compare them to see what works best for you.
Most mortgage repayments include principal and interest, but you can choose to make interest-only payments for a short time period. This can lower your costs in the short term, but keep in mind that you’re not accruing equity because you’re not paying down any principal.
Step 7: Compare home loan deals
Even if you’re not quite sure what kind of home loan you want, start comparing home loans to see what options are available.
You don’t have to get a home loan with your bank or even a bank: there are plenty of specialist or online lenders to choose from. The more home loans you see, the easier it is to see what’s interesting or useful to you.
Step 8: Create a shortlist of lenders
After comparing home loans, select a few to seriously consider. This means:
- Crunching potential mortgage repayments.
- Looking at comparison rates, not just interest rates.
- Comparing the features and fees to similar home loans.
This can help you narrow your search to those who tick the right boxes. Organise your final choices in order of preference. If all goes well, the first home loan lender you apply to is the last one you apply to.
Step 9: Get home loan pre-approval
Once you have your ideal home loan, apply for home loan pre-approval (sometimes called conditional approval). This is a statement from the lender indicating how much they’re willing to lend you.
This statement is conditional and temporary, meaning it can be withdrawn or changed if circumstances change.
Home loan pre-approval lets you shop confidently and make an offer when you find the property you want, including bidding at auction.
For more on making offers, read our guides on how to buy your first home and negotiation tips.
Step 10: Home loan settlement
If your offer to buy is accepted, it’s time to pay the deposit, exchange contracts of sale, and arrange formal approval from your home loan lender.
To get formal approval, contact your lender. They will review your mortgage and property details, and then send you a home loan contract to sign. Once you’ve returned the contract to them, the lender transfers the loan payment to the seller.
Once the home loan settlement is complete, your mortgage is officially underway. Congratulations!
Compare first home buyer loans in the table below.
Compare first home buyer home loans - last updated 29 March 2024
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Featured Product
Ultra Low Rate <95% LVR
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.30% p.a. variable6.58% p.a.Only 5% deposit required to apply. Low upfront costs to pay. No LMI Required. Unlimited Redraw and additional repayments. No Application or ongoing fees. No guarantors or equity sharing required. New Purchase - Metro only.
CompareCompareUltra Low Rate <95% LVR
Only 5% deposit required to apply. Low upfront costs to pay. No LMI Required. Unlimited Redraw and additional repayments. No Application or ongoing fees. No guarantors or equity sharing required. New Purchase - Metro only.
- interest rate
- 6.30% p.a. variable
- comparison rate
- 6.58% p.a.
- interest rate
- 6.30% p.a. variable
- comparison rate
- 6.58% p.a.
- upfront fees
- $790
- Ongoing fees
- $0.00
- Discharge Fee
- $795.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 95.00%
- minimum borrowing amount
- $350,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Sucasa Ultra Low Rate <95% LVR
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Mozo experts choice awards won:
- Exceptional Value Home Lender - 2024
Express Home Loan
Owner Occupier, Principal & Interest, LVR <90%
interest rate
comparison rate
Initial monthly repayment6.01% p.a. variable6.14% p.a.Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
CompareCompareExpress Home Loan
Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
- interest rate
- 6.01% p.a. variable
- comparison rate
- 6.14% p.a.
- interest rate
- 6.01% p.a. variable
- comparison rate
- 6.14% p.a.
- upfront fees
- $134
- Ongoing fees
- $10.00 monthly
- Discharge Fee
- $350.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 90.00%
- minimum borrowing amount
- $5,000
- maximum borrowing amount
- $3,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Bendigo Bank Express Home Loan
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First Home Buyer Loan Special
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment5.90% p.a. variable5.93% p.a.A low variable rate loan for home buyers. No establishment or ongoing fees to pay. 100% offset account included. Allows for unlimited repayments, redraws and flexible repayment options.
CompareCompareFirst Home Buyer Loan Special
A low variable rate loan for home buyers. No establishment or ongoing fees to pay. 100% offset account included. Allows for unlimited repayments, redraws and flexible repayment options.
- interest rate
- 5.90% p.a. variable
- comparison rate
- 5.93% p.a.
- interest rate
- 5.90% p.a. variable
- comparison rate
- 5.93% p.a.
- upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - fees apply
- Offset account
- yes
- Maximum loan to value ratio
- 95.00%
- minimum borrowing amount
- -
- maximum borrowing amount
- $5,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- Special Offer Variable Rate available for a limited time.
Read our Mozo Review to learn more about the G&C Mutual Bank First Home Buyer Loan Special
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Basic Home Loan Special Offer
Owner Occupier, Principal & Interest, LVR 80-95%
interest rate
comparison rate
Initial monthly repayment6.69% p.a. variable6.70% p.a.CompareCompareBasic Home Loan Special Offer
- interest rate
- 6.69% p.a. variable
- comparison rate
- 6.70% p.a.
- interest rate
- 6.69% p.a. variable
- comparison rate
- 6.70% p.a.
- upfront fees
- $100
- Ongoing fees
- $0.00
- Discharge Fee
- $350.00
- Extra repayments
- Yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 95.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- Receive $2,000 refinance cashback, min loan size of $250,000 and LVR less than or equal to 80% (excludes refinances from Westpac Group), apply by 30 November 2023 and settle in 120 days.
Read our Mozo Review to learn more about the St.George Basic Home Loan Special Offer
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FHBG Special Offer Classic Home Loan
interest rate
comparison rate
Initial monthly repayment6.24% p.a. variable6.26% p.a.CompareCompareFHBG Special Offer Classic Home Loan
- interest rate
- 6.24% p.a. variable
- comparison rate
- 6.26% p.a.
- interest rate
- 6.24% p.a. variable
- comparison rate
- 6.26% p.a.
- upfront fees
- $195
- Ongoing fees
- $0.00
- Discharge Fee
- $530.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 95.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $800,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the QBANK FHBG Special Offer Classic Home Loan
Your selected home loans
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
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