The epic step of buying your first home is finally here. There are plenty of sweet home loans out there in the bustling home loan market that offer no ongoing fees, a low interest rate and let you borrow at least 90% of the property value. Start your search below.
Read moreLoan to value ratio or LVR basically equates to how much deposit you have. For example if you're buying a $300,000 apartment, you should aim for a deposit of $60,000 (20% of the value of the property), which would make your LVR 80%. Generally, if your LVR is more than 80% , which it often is for first home buyers, you'll have to pay lenders mortgage insurance.
Taking the plunge into the property market and investing in your future is exciting. But for mortgage newbies selecting the right home loan can be a bit of a daunting task. Take a glance at the table below to compare the variable and fixed rate home loans on offer right now for first home owners. Look for a home loan with a low application fee and no ongoing fees.
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2.79% p.a. variable
2.81% p.a.
Owner Occupier, Principal & Interest
2.79% p.a. variable
2.81% p.a.
This low-rate home loan that could save you thousands! With no monthly or ongoing fees and the ability to make unlimited additional repayments. This home loan from popular online lender loans.com.au also features unlimited free redraws with no minimum redraw amount.
2.78% p.a. variable
2.79% p.a.
LVR<90%, Owner Occupier, Principal & Interest
2.78% p.a. variable
2.79% p.a.
No monthly account keeping fee, no ongoing annual fee and no loan establishment fee on new lending of $150,000 or more. Get a $2,000 cash bonus when you refinance with an eligible Suncorp Bank Home Loan of $250k+. T&Cs & eligibility criteria apply. Minimum 10% deposit.
2.34% p.a.
fixed 3 years
3.67% p.a.
Owner Occupiers with Orange Advantage, Principal & Interest
2.34% p.a.
fixed 3 years
3.67% p.a.
Know exactly what your repayments will be, and you can fix your rate for up to 5 years. No monthly, annual or transaction fees and it's free to make extra repayments.
2.39% p.a.
fixed 3 years
3.08% p.a.
Owner Occupier, Principal & Interest
2.39% p.a.
fixed 3 years
3.08% p.a.
The IMB Fixed Rate Home Loan gives you peace of mind with the security of fixed loan repayments. You can also pay up to 12 months repayments in advance without penalty.
2.74% p.a. variable
2.75% p.a.
Owner Occupier, Principal & Interest, 80-90% LVR
2.74% p.a. variable
2.75% p.a.
Get smart, flexible and cost-effective rates from homeloans.com.au. Complimentary 100% offset account and free online redraw. Unlimited additional repayments. Zero application or annual fees. Fast online application process. Only 10% deposit required.
2.65% p.a. variable
2.68% p.a.
Owner Occupier, Principal & Interest
2.65% p.a. variable
2.68% p.a.
Yard’s low-rate variable home loan is packed with all features – unlimited additional repayments, free redraw, 100% offset account. Enjoy a simple online application. Only a 10% deposit needed.
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Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
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Congrats, you've started your journey to purchasing your first home - an exciting time indeed! So what's next?
We understand that purchasing your first home and getting a mortgage can be a daunting prospect, that's why we've created this quick cheat sheet to run you through everything you need to know about getting your first home loan.
We also suggest you take some time to have a read through our First Home Buyers hub, as we've developed a number of in depth articles and checklists that cover all the first buyer steps from saving for your deposit, working out how much you can borrow to organising insurance once you've found your dream home.
There's a lot of financial jargon that gets thrown around in the property buying sphere and as a first time borrower it can be a bit daunting. Read on and we'll get you up-to-speed on Australian lending acronyms and the terms you'll need to understand to get a great home loan deal.
The recommended deposit for a property is a 20% down payment, though there are some options for first home buyers to have less (more on this later in the article). Most mortgage lenders now have a mandatory genuine savings policy which means that as an applicant you need to demonstrate that you can save consistently. Genuine savings is classified as having a growing balance (at least 3 months worth) in a savings account, term deposit or managed fund, and not relying on things like a tax refund, government first home owner grant or gift from family for your deposit.
LVR stands for loan to value ratio and the easiest way to explain it is by giving an example. Say you're a first time buyer looking to buy a property for $300,000. If you have saved $30,000 you have a 10% deposit. This means your LVR would be 90% as you are borrowing 90% of the money needed to purchase the property.
The LVR is a way lenders determine whether or not you as a borrower will need to take out lender's mortgage insurance. Any loan with an LVR of 80% or more will require this insurance.
Banks have a range of home loan products and each loan will have different LVR requirements. Generally, loans with an LVR of 80% and under have the lowest interest rates. In the past it was possible for first home buyers to borrow up to 100% of the loan amount but after the GFC lending criteria was tightened and the maximum major banks will now lend is up to 95%.
As mentioned above if your first home loan deposit is less than 20% of the property value, you will have an LVR of over 80% and be required to pay lenders mortgage insurance (LMI), which is added to the cost of your home loan.
Don't confuse LMI with mortgage protection insurance because lenders mortgage insurance doesn't protect you the home loan borrower, instead it protects the home loan lender if you default on your loan. If you want to get protection in case you are unable to make repayments at some point in the future, you should consider mortgage protection or income protection insurance.
Another key aspect of lender's mortgage insurance you should be aware of as a first time buyer is that LMI is not transferable between loans. This means that if in a couple of years, you want to switch to another lender because your current deal isn't as competitive, unless you have got to the situation where you've built up 20% equity in your home, you will need to pay the insurance again. This is a major drawback as it can mean that the cost of paying the insurance a second time is likely to negate any savings you'd make by switching loans.
You've probably noticed that all advertised home loans display a comparison rate. The comparison rate is a government requirement and it is designed to show you the true cost of a loan. It is not, as many people think, a comparison between say Bank A's interest rate and other home loans. The comparison rate includes the interest rate (the amount you will be charged in interest) as well as any fees that you may have to pay upfront such as application, valuation or ongoing fees for a home loan.
You should use this rate, rather than the headline interest rate, to compare home loans as this will give you a truer indication of how much your loan will cost.
It is important to note however, that the advertised comparison rate displayed is an example only, based on monthly and principal interest repayments on a $150,000 loan over 25 years. If you are borrowing more or less than this, your comparison rate will be different and all lenders will be required to tell you what this will be based on your situation when you enquire about a home loan.
Now that you're in the know when it comes to bank lending jargon, it is time to run through the key features to look for in a home loan.
A great interest rate should be high on your priority list, as the lower your ongoing interest rate, the lower your monthly repayments will be. As a first home buyer you'll have the choice between choosing a variable and a fixed interest rate.
While your LVR can determine which home loan option you will be eligible for, the other factor that can determine which interest rate you are charged will be the amount of money you are borrowing. Banks usually have lower rates for higher value home loans. It is important to realise however that just because it's your first home loan, this doesn't mean that you should accept the advertised rate from a bank or lender. The home loan market is very competitive and lenders are vying for your business so don't be shy in negotiating for a reduction in rates or fees.
Mozo has a free service that can help first home buyers get a better deal on their home loan. Our in-house experts can explain your home loan options, negotiate with banks on your behalf and secure you a top deal. See here for more info.
If you can limit the fees you pay, you can reduce the cost of your home loan. All home loans will have some fees attached so it is about finding a loan that has the least amount of fees for the features you require or the financial situation you're in.
Fees fall into two categories, upfront fees and ongoing fees. Buying a home isn't cheap so if you can limit the amount of upfront fees you can put more money towards things like furniture and appliances for your new home.
Common upfront fees include:
Ongoing fees
There are a number of other fees that you may have to pay depending on your loan. A loan termination or loan discharge fee is a fee payable at the end of the loan to transfer the title into your name.
With fixed rate home loans, if you decide to pay out the loan early you would be up for break cost fees which can be expensive. These fees will be determined by the lender, see our page on fixed rate home loans for more information on break costs.
This is going to be your first home loan and it is likely that in the years to come your financial situation (as well as your personal one, a.k.a kids) will change, which is why you'll want a loan with flexible features that can help you reduce your interest repayments and time it takes to repay your loan and offer some repayment flexibility. However, not all of these features will come 'free' with the loan so if you are not going to use them, then you could be better off opting for a basic home loan with a low rate and less features. Here's the top ones you should look for:
The standard term for a home loan is 25 years but most lenders have a maximum loan term of 30 years. As a first home buyer it can be tempting to opt for a 30 year loan term as this will reduce your ongoing monthly home loan repayments but the catch is over the life of the home loan you'll pay more in interest. If you do take out a home loan over 30 years, be sure to get some of the flexible features like free extra repayments and an offset account that will allow you to pay off the loan faster if you are able to.
Whether you are borrowing as an individual or you are a joint applicant with a partner, friend or family member, how much you will be able to borrow will depend on your combined income, current assets and liabilities. To get a ballpark for how much you will be able to borrow from a bank or lender, try Mozo's borrowing calculator. Plug in your income and expenses, and it will tell you how much you can afford to borrow at today's average rate and how much your monthly repayments will be.
Another cost you will need to factor in to your home buying budget is stamp duty. This is a fee charged by state and territory governments in Australia. But did you know you could avoid this cost completely if you're a first time buyer eligible for your state's First Home Owner Grant, where you'll receive a one off grant and pay no stamp duty?
If you find you're not eligible for the first home owner grant, then you can use Mozo's home loan stamp duty calculator which will give you an estimate of how much stamp duty will cost you on your first property.
Pros: they offer a range of great fixed and variable rates. Cons: focus needs to be a little more on customers and returning calls, emails more efficiently.
Read full reviewPros: they offer a range of great fixed and variable rates. Cons: focus needs to be a little more on customers and returning calls, emails more efficiently.
I'm shocked and disgusted by the way this bank handles itself. Last year whilst overseas my card was used fraudulently to the tune of 14k all at a venue I was at for a short period of time. I asked them to investigate and send me the dockets which should highlight that the transactions were fraudulent and I was not in the same venue for 19 hours!!!.. which should have been an obvious giveaway something was not right in the first place! After 20 or so calls and emails they admitted they did not access the dockets/receipts and as most of the transactions used a pin it was down to me to pay and that was that, after reading the other reviews on here it seems like they just can't be bothered doing their job properly. I will be chatting to the ombudsman now as I can see I'm not on my own here. Move onto this year, as with most of us COVID has affected us all in some ways, after I put my mortgage on hold for a few months to see how things played out I just called to see what my options were moving forward and wanted to change from interest only to interest and principle which you think would be music to their ears given the current state of the economy and to decrease the interest that has accrued over the past few months but no! By way of background I have 9 months left of a fixed interest only mortgage and was told there is no way of me swapping to principal and interest without paying 11k break fees even though I was willing to keep the mortgage with them and lock in a new 3 or 5 year deal. How short sighted and economically irresponsible they are, they should be trying everything they can to assist long term customers especially with the current COVID financial climate but instead they look to make things harder. Surely someone at a senior level must have the hindsight to see their policies serve nothing but to annoy and drive customers away...? Come July I won't be a customer that's for sure... Shame on you Bankwest & Commbank for letting this happen and hopefully a potential customer reads this and goes with a bank with ethics.
Read full reviewI'm shocked and disgusted by the way this bank handles itself. Last year whilst overseas my card was used fraudulently to the tune of 14k all at a venue I was at for a short period of time. I asked them to investigate and send me the dockets which should highlight that the transactions were fraudulent and I was not in the same venue for 19 hours!!!.. which should have been an obvious giveaway something was not right in the first place! After 20 or so calls and emails they admitted they did not access the dockets/receipts and as most of the transactions used a pin it was down to me to pay and that was that, after reading the other reviews on here it seems like they just can't be bothered doing their job properly. I will be chatting to the ombudsman now as I can see I'm not on my own here. Move onto this year, as with most of us COVID has affected us all in some ways, after I put my mortgage on hold for a few months to see how things played out I just called to see what my options were moving forward and wanted to change from interest only to interest and principle which you think would be music to their ears given the current state of the economy and to decrease the interest that has accrued over the past few months but no! By way of background I have 9 months left of a fixed interest only mortgage and was told there is no way of me swapping to principal and interest without paying 11k break fees even though I was willing to keep the mortgage with them and lock in a new 3 or 5 year deal. How short sighted and economically irresponsible they are, they should be trying everything they can to assist long term customers especially with the current COVID financial climate but instead they look to make things harder. Surely someone at a senior level must have the hindsight to see their policies serve nothing but to annoy and drive customers away...? Come July I won't be a customer that's for sure... Shame on you Bankwest & Commbank for letting this happen and hopefully a potential customer reads this and goes with a bank with ethics.
I like this bank because everybody is treated the same, there are no discounts for "better" customers, the ethos from the non profit credit union it emerged from still rings true. There is only one bricks and mortar branch but they do everything they can to ensure that you don't need to go into it. All banking can be done online or by phone and they will accomodate these needs with excellent service representatives.
Read full reviewI like this bank because everybody is treated the same, there are no discounts for "better" customers, the ethos from the non profit credit union it emerged from still rings true. There is only one bricks and mortar branch but they do everything they can to ensure that you don't need to go into it. All banking can be done online or by phone and they will accomodate these needs with excellent service representatives.
