Everything You Need to Know: First Home Buyer Checklist

Establishing Eligibility and Determining Applicable Concessions

Eligibility for first home buyer assistance is governed by federal and Australian Capital Territory legislation. The Australian Government 5% Deposit Scheme permits eligible first home buyers to purchase with a 5% deposit, with Housing Australia guaranteeing the shortfall to 20% of the property value. No income caps apply and no annual place limits apply under the current operative framework from 1 October 2025. No LMI is payable where the scheme is accessed through a participating lender.

In the Australian Capital Territory, from 1 July 2026, eligible buyers are fully exempt from conveyance duty regardless of the value of the property purchased and regardless of household income. The removal of the property value cap and income threshold previously in force represents a material expansion of the Home Buyer Concession. The HBC is available to first home buyers and to individuals who have not owned property in the last five years. Buyers must ensure that all applicants and their domestic partners satisfy the five-year non-ownership requirement, and at least one buyer must own and live in the home as their principal place of residence for at least 12 months commencing within one year of settlement.

Consider a buyer who intends to purchase an established apartment in Braddon. The buyer has never owned property and holds permanent residency. The buyer's partner has not owned property in Australia in the last five years. The purchase price falls within the Australian Capital Territory price cap of $1,000,000 applicable under the 5% Deposit Scheme. The buyer applies through a participating lender, secures approval with a 5% deposit, and pays no Lenders Mortgage Insurance. At settlement, the buyer accesses the full conveyance duty exemption under the HBC. The buyer occupies the property as their principal place of residence within six months and remains in continuous occupation for the required 12-month period. The combination of the federal deposit scheme and the territory duty exemption delivers a measurable reduction in upfront capital requirements and total acquisition cost.

Quantifying the Deposit and Associated Settlement Costs

Deposit size determines the financing structure and the necessity for mortgage insurance. Under the Australian Government 5% Deposit Scheme, a buyer contributing 5% of the purchase price eliminates the requirement for LMI because the government guarantee replaces the insurance product ordinarily required by the lender. Outside the scheme, a buyer contributing less than 20% of the purchase price typically incurs LMI, the cost of which is calculated by reference to the loan-to-value ratio and the absolute loan amount.

Settlement costs in the Australian Capital Territory comprise legal fees, disbursements, property inspection costs, and mortgage registration fees. Legal fees vary by firm and transaction complexity but typically range from $1,200 to $2,500 for a standard residential purchase. Disbursement costs cover searches, title registration, and administrative processing. Building and pest inspection costs vary by property type and location but generally fall between $400 and $800. Mortgage registration fees are set by regulation and are published by the ACT Revenue Office.

When preparing a deposit, buyers must distinguish between genuine savings and non-genuine savings. Most lenders require at least a portion of the deposit to have been held in the applicant's account for a minimum period, typically three months, to satisfy genuine savings criteria. Funds received as a gift from an immediate family member may be accepted by some lenders, provided a signed declaration is obtained confirming that the funds are a gift and not a loan. Lenders assess the buyer's savings history, account conduct, and the source of all deposit funds during the application assessment process.

Compiling Documentation for the First Home Loan Application

The home loan application requires identity verification, income verification, expenditure verification, and asset and liability disclosure. Lenders assess serviceability by reference to the applicant's capacity to meet loan repayments at the lender's assessment rate, which exceeds the actual interest rate applied to the loan.

For employed applicants, income verification ordinarily requires payslips covering the most recent 30 to 90 days, depending on the lender's policy, and either a notice of assessment from the Australian Taxation Office or an employment letter confirming salary, commencement date, and employment status. Self-employed applicants must provide tax returns, notices of assessment, and financial statements covering at least the most recent two financial years. Some lenders require accountant declarations or business activity statements where the applicant's business structure or income profile necessitates additional verification.

Expenditure verification includes current rental payment history, credit card limits, personal loan commitments, and other recurring financial obligations. Lenders obtain a credit report from one or more credit reporting agencies and assess the applicant's repayment history, credit enquiries, and outstanding credit exposure. A pattern of missed payments, defaults, or court judgments may result in application decline or the imposition of risk-based pricing adjustments.

Asset verification requires transaction account statements covering a period sufficient to demonstrate genuine savings and confirm the deposit source. Superannuation balances may be disclosed but are not ordinarily included in serviceability calculations unless the applicant intends to access those funds under the First Home Super Saver Scheme. Liability disclosure must include all outstanding debts, guarantor obligations, and contingent liabilities such as tax debts or pending litigation.

Understanding Pre-Approval and Its Limitations

Pre-approval is a conditional assessment issued by a lender confirming that, subject to property valuation and final verification, the applicant is eligible to borrow up to a specified amount. Pre-approval does not constitute a binding commitment by the lender to advance funds. The approval remains subject to property assessment, title verification, and confirmation that the applicant's financial circumstances have not materially changed between the date of pre-approval and the date of settlement.

Pre-approval validity periods vary by lender but typically range from three to six months. During that period, the applicant may search for a property and enter into a contract of sale with confidence that finance is likely to be available, provided the property satisfies the lender's valuation and security requirements. If the valuation returned by the lender's panel valuer is less than the contract price, the lender may reduce the approved loan amount or decline to proceed. Buyers should ensure that any contract of sale is conditional upon finance approval and valuation confirmation to the buyer's satisfaction.

In our experience, buyers in Canberra's established apartment market regularly encounter valuation shortfalls where the contract price exceeds the conservative valuation applied by the lender's panel. A shortfall of 5% to 10% requires the buyer to increase the deposit or renegotiate the contract price with the vendor. Pre-approval does not insulate the buyer from this risk, and buyers should maintain sufficient liquidity to address a potential shortfall or be prepared to invoke the finance condition if the shortfall cannot be resolved.

Selecting Loan Structure and Interest Rate Type

Loan structure and interest rate type determine repayment obligations, flexibility, and total interest cost over the life of the loan. A variable interest rate adjusts in response to changes in the lender's cost of funds and competitive positioning. A fixed interest rate remains unchanged for the agreed term, typically one to five years, after which the loan reverts to the lender's standard variable rate unless a new fixed term is negotiated.

A variable rate loan typically permits unlimited additional repayments and full or partial loan discharge without penalty. Most variable rate products offer an offset account, which is a transaction account linked to the loan where the credit balance reduces the daily interest calculation on the outstanding loan balance. Offset accounts deliver a tax-effective return equivalent to the loan interest rate and provide liquidity because funds remain accessible at all times. A redraw facility permits the borrower to withdraw previously made additional repayments, subject to lender policy and any minimum balance requirements.

A fixed rate loan provides certainty of repayment amount during the fixed term but imposes restrictions on additional repayments and early discharge. Most lenders cap additional repayments during the fixed term at between $10,000 and $30,000 per annum. If the borrower discharges the loan or makes additional repayments exceeding the cap during the fixed term, the lender calculates a break cost based on the present value of the interest margin foregone due to the early exit. Break costs can be substantial, particularly where the borrower exits a fixed loan during a period of declining market interest rates.

A split loan structure divides the total borrowing between a variable portion and one or more fixed portions. The split allows the borrower to retain flexibility on the variable portion while securing rate certainty on the fixed portion. The proportion allocated to each component should reflect the borrower's tolerance for interest rate risk, anticipated changes in financial circumstances, and the likelihood of making additional repayments or refinancing within the fixed term.

Accessing the First Home Super Saver Scheme

The FHSS Scheme allows first home buyers to make voluntary concessional and non-concessional contributions into their superannuation fund and apply to release eligible amounts toward a home deposit. Up to $15,000 of personal contributions from any one financial year can be released, with a total cap of $50,000. Concessional contributions are taxed at 15% rather than at marginal income tax rates. The tax differential between the 15% contributions tax rate and the applicant's marginal rate generates a material accumulation benefit for buyers on higher marginal rates.

Buyers intending to access the scheme must ensure that contributions are made as voluntary contributions and are not employer-mandated superannuation guarantee contributions. Buyers generally need to obtain a determination from the ATO before signing a purchase contract, because the determination confirms the amount eligible for release and the timing of the release. Once the determination is issued and the contract is signed, the applicant requests release of the funds. The ATO coordinates with the superannuation fund to transfer the released amount, less applicable withholding tax, to the applicant's nominated bank account. The released amount may then be applied toward the deposit or settlement costs.

The scheme does not require the buyer to be a first home buyer at the time contributions are made. The requirement applies only at the time the release is requested. Buyers should confirm their eligibility status with a licensed tax adviser or financial planner before commencing contributions, particularly where the buyer or the buyer's spouse has previously held a property interest that may disqualify them from first home buyer status under the ATO's interpretation of the relevant legislation.

Applying for the Australian Government 5% Deposit Scheme

Applications are made through a participating lender panel. Applications cannot be made directly to Housing Australia. The buyer must first approach a participating lender and submit a home loan application through that lender's standard process. The lender assesses the application, confirms the buyer's eligibility for the scheme, and submits the application to Housing Australia for guarantee approval. Housing Australia does not conduct an independent credit assessment; the lender retains full underwriting responsibility.

Fixed rate, variable rate and split loan structures may be available depending on the participating lender. Not all lenders offer the full range of loan features or product types under the scheme. Buyers seeking an offset account, redraw facility, or split loan structure should confirm availability with the participating lender before proceeding. Some lenders restrict the scheme to standard principal and interest variable rate loans without offset or other features.

The property purchase price and the lender's assessed valuation must both be at or below the applicable price cap. For the Australian Capital Territory, the applicable cap is $1,000,000 for all areas. If the valuation returned by the lender's panel valuer exceeds the contract price but both figures remain below the cap, the scheme remains available. If the valuation is below the contract price and the contract price exceeds the cap, the scheme is not available. Buyers should ensure the contract is conditional upon eligibility for the scheme where scheme access is essential to the transaction proceeding.

Reviewing Loan Offer and Finalising the Transaction

Once the lender issues formal loan approval, the buyer receives a loan offer document setting out the approved loan amount, interest rate, loan term, repayment amount, fees, and applicable conditions. The offer document is a disclosure statement required under the National Consumer Credit Protection Act and includes key facts, cost warnings, and the buyer's cancellation rights. The buyer must review the document in full, confirm that the approved loan structure matches the application, and ensure that all fees disclosed align with the lender's published fee schedule.

The lender's solicitor prepares the mortgage documentation and arranges execution by the borrower. The mortgage is registered on the title at the time of settlement, creating a registered security interest in favour of the lender. The buyer's solicitor coordinates with the vendor's solicitor to settle the transaction on the agreed date. At settlement, the lender advances the loan funds to the buyer's solicitor, who applies those funds together with the buyer's deposit to satisfy the purchase price and discharge any existing mortgage over the property. The buyer's solicitor pays stamp duty, registration fees, and adjustment amounts for rates and other outgoings, and provides the buyer with a settlement statement reconciling all receipts and payments.

Following settlement, the buyer takes possession of the property and commences occupation in accordance with the residency requirements applicable to the HBC and any other scheme accessed during the transaction. The buyer should retain all settlement documentation, including the executed contract of sale, mortgage, transfer, and settlement statement, for future reference and for the purpose of substantiating compliance with residency and eligibility conditions in the event of a Revenue Office audit.

OAUM Securities maintains a panel of participating lenders and can assist buyers in identifying a lender offering the required loan features under the Australian Government 5% Deposit Scheme. Our team provides detailed comparisons of first home buyer product structures, prepares application documentation, and coordinates the submission process to ensure compliance with all eligibility criteria. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions