Fact Checked
First home buyers in Australia
Despite what you might have heard on social media or from your co-workers, things are starting to look a bit better for first home buyers in Australia. According to Australian Bureau of Statistics data (ABS) released in September 2022, lending to first home buyers occupied a market share of 27.4%.
Australian First Home Owner Grants (FHOG) were first introduced in July 2000 through a national scheme separately legislated, funded, and administered by the different states and territories. The purpose? To provide a one-off payment to prospective first home buyers to help them break into the property market.
Is it really that easy? Let’s explore.
First home owners stamp duty concessions
In recent years, stamp duty costs – aka the transfer tax you pay when purchasing a property or vacant land – have increased significantly. For example, a $500,000 owner-occupied dwelling in New South Wales will set you back almost $18,000 in stamp duty fees based on current regulations.
To alleviate this cost, the different states and territories also offer stamp duty concessions to prospective new home buyers.
Of course, these reductions and discounts assume you already meet the eligibility criteria, which we’ll discuss below. There are also broader stamp duty concessions available to more than first time buyers.
At the time of writing, these are the available concessions:
| State | Stamp duty concessions |
| New South Wales |
No stamp duty on properties up to $650,000 and vacant land up to $350,000. Discounted stamp duty for properties between $650,000-$800,000 and vacant land between $350,000 and $450,000. From 12 November 2022, eligible first home buyers will be able to access the First Home Buyer Choice scheme. It gives first home buyers of properties worth less than $1.5 million two options:
|
| Victoria | No stamp duty on properties under $600,000 and discounted stamp duty on properties between $600,000-$750,000. |
| Queensland | No stamp duty on properties under $550,000 and vacant land under $400,000. |
| Western Australia | No stamp duty on properties up to $430,000 and land up to $300,000. Discounted stamp duty on properties between $430,000-$530,000 and vacant land between $300,000 and $400,000. |
| South Australia | No stamp duty concessions. |
| Tasmania |
If you buy or build a new home, you're eligible for the FHOG, but cannot receive stamp duty concessions. On the other hand, if you buy an established home, you may be eligible for savings on stamp duty, but cannot claim the FHOG. You can receive a 50% discount on stamp duty on established homes up to $600,000. |
| ACT | Under the new Home Buyer Concession Scheme, full stamp duty concessions are available for applicants who earn below a certain amount for properties up to $585,000 – see the link above for more detailed information. |
| Northern Territory | As of 30 June 2021, there are no tamp duty concessions for first home buyers in NT. |
What is the First Home Guarantee Scheme?
Under the First Home Guarantee Scheme (FHBG), first home buyers can purchase a home with a deposit as low as 5%, without the need to pay Lenders' Mortgage Insurance (LMI). This means you can borrow up to 95% of the property value, with the federal government providing the lender with a guarantee of up to 15% of the property's value.
The FHBG exists alongside the Regional First Home Buyer Guarantee and the Family Home Guarantee.
Each financial year, the scheme offers 35,000 places for Aussies across the country until 30 June 2025.
For first home buyers looking to take advantage of the scheme, there are specific price caps on the property you can purchase. To find out more information, head to our guide on the First Home Guarantee.
Using first home owners grant as deposit
If you are eligible for the grant, then this injection of cash can potentially make a difference to your ability to buy a home.
According to CoreLogic's national Home Value Index, the median home price across the country in November 2022 is just over $714,000. Remember, this rises and falls depending on where you live. Adelaide, for example, has a median home price of roughly $650,000, whereas Sydney's average home will set you back by just over $1 million.
While cutting down on eating out, coffee, electricity, and other luxury items is seen as the best course of action by some, it isn’t always that easy. For a young couple, it takes an average of five years and eight months to save a 20% deposit across all capital cities.
This is where either the First Home Owner Grant or the First Home Guarantee Scheme can come in handy. If your 20% deposit on a $600,000 house is $120,000, then a $10,000 or $15,000 contribution you can get in certain states can seriously offset some of this cost. Likewise, reducing the deposit you need from $120,000 to $30,000 (5%) can also make it much easier to make that first step.
Does anyone actually use the First Home Owners Grant?
It would seem that yes, lots of aspiring first home buyers do use the First Home Owners Grant.
Using State Revenue Office data and comparing it to the ABS’ Lending Indicators data for First Home Buyers, we can see just how many people actually used the grants across Victoria and New South Wales over the 2019/20 financial year as a percentage of total buyers.
| First Home Buyer Grants & Commitments | New South Wales | Victoria |
|---|---|---|
| Number of First Home Buyer Commitments (2019/20) | 28,152 | 37,244 |
| Number of First Home Owner Grants (2019/20) | 6,724 | 16,470 |
| % of grants to home loan commitments | 24% | 44% |
Source: ABS Lending Indicators data, Victoria State Revenue Office, Revenue NSW. Investment loans excluded.
So based on this data the First Home Owners Grant is still pretty widely used, with about one-third using it between these two states. Victorian first home buyers appear to have a higher grant usage rate of over 40%, which may have something to do with the state government’s comparatively generous offering of up to $20,000 for properties in regional Victoria.
What is a first home buyer loan?
While some lenders offer home loans specifically marketed towards first home buyers, there isn’t really such thing as a ‘first home buyer loan’ – first home buyers simply take out regular owner-occupier home loans. But there are some specific things a first home buyer might want to seek out when searching for a good value home loan, such as:
- A relatively low interest rate
- Low, reduced or waived fees
- Flexible features – e.g. offset account or redraw facility
- Guarantor options
Compare First Home Buyer Loans
Lender | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Variable | More details | ||||||||||||
| FEATUREDOnline ExclusiveUp To $4K Cashback Includes NOV RBA Rate Increase | loans.com.au – Variable Basic Cashback Home Loan (Principal and Interest) (LVR < 70%)
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loans.com.au – Variable Basic Cashback Home Loan (Principal and Interest) (LVR < 70%)
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| Variable | More details | ||||||||||||
| FEATUREDRefinance OnlyApply In Minutes | Unloan – Variable Rate Home Loan – Refinance Only
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Unloan – Variable Rate Home Loan – Refinance Only
| |||||||||||||
| Variable | More details | ||||||||||||
| FEATUREDUnlimited Redraws | ubank – Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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ubank – Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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| Variable | More details | ||||||||||||
| FEATURED | Up – Up Home Variable (Principal & Interest) (LVR ≤ 90)
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Up – Up Home Variable (Principal & Interest) (LVR ≤ 90)
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| Variable | More details | ||||||||||||
| 4.6 Star Customer RatingsIncludes Nov RBA Rate Increase | |||||||||||||
loans.com.au – Variable Home Loan (LVR < 90%) | |||||||||||||
| Variable | More details | ||||||||||||
Macquarie Bank – Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)
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Macquarie Bank – Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)
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| Variable | More details | ||||||||||||
ubank – Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%) | |||||||||||||
| Variable | More details | ||||||||||||
Macquarie Bank – Basic Home Loan (Principal and Interest) (LVR 70%-80%)
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Macquarie Bank – Basic Home Loan (Principal and Interest) (LVR 70%-80%)
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| Fixed | More details | ||||||||||||
Reduce Home Loans – Home Owners Dream Fixed Cashback 1 Year (LVR < 80%) | |||||||||||||
| Fixed | More details | ||||||||||||
Westpac – Premier Package Fixed Options Home Loan (Principal and Interest) 1 Year (LVR < 70%) | |||||||||||||
| Fixed | More details | ||||||||||||
Commonwealth Bank – Fixed Rate Home Loan (Principal and Interest) 3 Years | |||||||||||||
| Variable | More details | ||||||||||||
NAB – Base Variable Home Loan (Principal and Interest) (New Customer) | |||||||||||||
| Fixed | More details | ||||||||||||
ANZ – Fixed Rate Home Loan (Principal and Interest) 5 Years (LVR < 80%) | |||||||||||||
| Fixed | More details | ||||||||||||
| FEATURED | Up – Up Home Fixed 4 Years (Principal & Interest) (LVR ≤ 90)
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Up – Up Home Fixed 4 Years (Principal & Interest) (LVR ≤ 90)
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| Variable | More details | ||||||||||||
Heritage Bank – Discount Variable Home Loan ($150k+) (LVR < 70%) | |||||||||||||
| Variable | More details | ||||||||||||
P&N Bank – & Basic Home Loan (LVR < 60%) | |||||||||||||
| Fixed | More details | ||||||||||||
Newcastle Permanent – Premium Plus Package Fixed Rate Home Loan Special (Principal and Interest) 2 Years | |||||||||||||
| Variable | More details | ||||||||||||
MOVE Bank – Straightforward Plus Home Loan (LVR < 80%) (New Customer) | |||||||||||||
| Fixed | More details | ||||||||||||
HSBC – Package Fixed Rate Home Loan (Principal and Interest) 4 Years (LVR < 80%) | |||||||||||||
| Fixed | More details | ||||||||||||
IMB Bank – Fixed Rate Home Loan (Principal and Interest) 3 Years (LVR ≤ 80%) | |||||||||||||
- Immediate cashback upon settlement
- $2000 for loans up to $700,000
- $4000 for loans over $700,000
Important Information and Comparison Rate Warning
First home buyer loan features
Interest rates
By far the biggest cost factor of a home loan is the interest rate. You only have to spend a few minutes on one of our calculators to see that having a home loan with an interest rate that’s a single percentage point higher than another home loan’s (e.g. 5% instead of 4%) can cost you tens of thousands of dollars extra in interest over the life of the loan.
Of course, not everyone can qualify for the lowest interest rate on the market. Your interest rate is often determined by a range of factors, including your LVR (loan-to-value ratio), credit rating, income, expenses, suburb etc.
So to give yourself the best chance of qualifying for a low interest rate, you should aim to have at least a 20% deposit (putting your LVR at 80%), have a good track record of paying bills on time and managing your spending, and avoid buying in suburbs that are at risk of price falls (e.g. buying an apartment in an area where lots of other apartment buildings are under construction).
Fees
While its the biggest expense, the interest rate isn’t the only thing that’ll cost you. Most home loans include upfront and ongoing fees, as well as incidental fees, such as the extra costs of lender’s mortgage insurance (LMI) or refinancing. A helpful guide to the relative cost of a home loan is its comparison rate, which takes the upfront and ongoing fees into account on top of the interest rate. So if a home loan’s comparison rate is significantly higher than its advertised interest rate, you might expect high fees.
Features
Flexible features such as an offset account or redraw facility can help first home buyers save thousands in interest over the life of the loan and pay it off loan years earlier. Such features may come with added fees or a higher interest rate on the loan, but given the savings they can help you generate, they can be worth the extra cost.
Guarantor
If you’re really struggling to cough up the dough for a deposit, then you can always speak to someone (usually your parents) about whether they’d consider going guarantor for your home loan.
A guarantor acts as a guardian angel for both you and your lender. They sign an agreement stating that they will make any repayments that you yourself fail to meet, protecting both parties from a default. Having this safety net can help you secure a home loan with a small deposit, exempt you from having to pay LMI or even qualify you for a low interest rate.
Obviously going guarantor isn’t something to be taken likely as it’s a huge responsibility, but if you have someone that’s willing, you should seek out a home loan that will accept them as a guarantor. While most lenders allow guarantors, they often have restrictions around who can act as one. For instance, most do not allow non-family members to go guarantor, but some do.
Savings.com.au’s two cents
Don’t feel too helpless if you’re struggling to buy your dream first home. A first home buyer grant is one of several sources of assistance. Other options include the First Home Super Saver Scheme, using a guarantor, and the First Home Guarantee scheme.
But keep in mind that government grants and concessions are subject to the ever-changing nature of state budgets and legislation, so don’t hang your hat on them. You should aim to save enough to be able to buy a property without a grant, so that it merely serves as an added bonus.
While the information in this article is accurate at the time of writing, it is subject to change. Check your state government’s website to see what the grant requirements are and what changes are in the works.
Frequently Asked Questions
Eligibility for the First Home Owner Grant (FHOG) depends on the state/territory you live in. But to give you a general idea, eligibility criteria typically includes:
- Being an Australian citizen
- Being at least 18 years old
- You must intend on living in the property (owner occupier)
- You can apply as a couple but you must be de facto or married
- You must be a first home buyer
If you’re thinking about applying for the FHOG, visit your state/territory’s page for more details/eligibility requirements.
There are a number of grants and incentives geared towards helping first home buyers purchase their first homes. To give you a quick overview of the government assistance that may be available to you, grants and incentives could include:
- First Home Guarantee Scheme: Allows you to buy your first home (doesn't have to be brand new) with a deposit as little as 5% without paying LMI.
- First Home Super Saver Scheme: Allows first home buyers to use their super fund to help them accelerate their deposit savings by around 30% through lower taxes and a deemed rate of return.
- First Home Owner Grant: One-off payment to help eligible first home buyers purchase their first home.
- Regional First Home Buyer Guarantee: From October 2022 to June 2025, 10,000 guarantees each year will help first home buyers purchase a regional home with as little as a 5% deposit without having to pay LMI.
While not specifically for first home buyers, you could potentially look into the Family Home Guarantee Scheme, which allows single-parent families to purchase a home with as little as a 2% deposit.
As a first home buyer, you may be able to purchase a home with a deposit as low as 5%. Some lenders will offer home loans with a 95% loan-to-value ratio (LVR), meaning you only need to have a 5% deposit. Typically, these loans are less common and can come with a higher interest rate. Some lenders also offer 85 to 90% LVR home loans, meaning you need a 15 to 10% deposit to purchase respectively.
However, purchasing with a deposit of less than 20% typically means you need to pay lenders mortgage insurance (LMI). But as a first home buyer, there are government grants and incentives that can allow you to purchase a home with as little as a 5% deposit without needing to pay LMI.
Regional First Home Buyer Guarantee: A Guide
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First Home Guarantee: A Guide
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Queensland first home buyer grants explained
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NSW First Home Owner Grants: A guide
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