The easiest way to afford your first home

Getting into your first home feels impossible when you're watching prices climb faster than you can save.

The gap between what you've saved and what you think you need keeps growing. But affordability isn't just about having a 20% deposit. It's about understanding which home loan products work when your savings are limited and how to use them without paying thousands more than necessary.

Low deposit loans that reduce upfront costs

You can apply for a home loan with as little as 5% of the purchase price saved. Most lenders will require you to pay Lenders Mortgage Insurance when your deposit sits below 20%, but that cost can be added to your loan amount rather than paid upfront. This means your savings go further at settlement.

Consider a buyer looking at a unit in Oakleigh with a 7% deposit. Instead of waiting another two years to save 20%, they moved forward with a low deposit loan that required LMI. The premium added roughly $8,000 to their loan amount, but they locked in a purchase price before the market moved further. Their monthly repayments increased by around $50, but they avoided being priced out of the suburb entirely.

Variable rate home loans offer more flexibility for buyers who need to make extra repayments when they can. If you receive a tax refund or a work bonus, those funds can go straight onto the loan without penalty. Fixed rate options lock in your interest rate for a set period, which helps if you need certainty around your repayments while you adjust to homeownership.

Home loan features that improve borrowing capacity

An offset account linked to your owner occupied home loan reduces the interest you pay without changing your repayment amount. Every dollar sitting in the offset reduces the balance that interest is calculated on. For buyers with irregular income or those building up an emergency fund, this feature builds equity faster without locking funds away.

Some lenders offer interest rate discounts when you meet specific conditions, such as making all repayments on time or holding other products with the same bank. These rate discounts might only be 0.10% to 0.25%, but over the life of your loan that compounds.

Split rate home loans divide your loan amount between fixed and variable portions. Half your loan might sit on a fixed interest rate for three years while the other half remains variable. This structure gives you stability on part of your repayments while maintaining access to features like offset accounts and extra repayments on the variable portion.

Government schemes that remove LMI costs

The Home Guarantee Scheme allows eligible first home buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance. The government guarantees the portion of the loan above 80%, which removes a cost that would otherwise add thousands to your loan amount.

Eligibility depends on your income, whether you've owned property before, and the price of the property you're purchasing. There are annual limits on how many guarantees are issued, so timing matters. Buyers in Melbourne's outer suburbs such as Mulgrave or Wheelers Hill often find properties within the scheme's price caps more readily than those looking closer to the CBD.

The Help to Buy scheme is another option where the government takes an equity share in your property, reducing the loan amount you need to borrow. You contribute a smaller deposit, the government contributes up to 40% for a new home or 30% for an existing home, and you borrow the rest. When you sell or choose to buy out the government's share, they receive the same percentage of the sale price.

Comparing rates without overpaying for features

Current home loan rates vary significantly between lenders, and the advertised rate isn't always the one you'll receive. Your loan to value ratio, employment type, and the size of your deposit all influence the interest rate offered.

When you compare rates, focus on the comparison rate rather than the headline interest rate. The comparison rate includes most fees and gives a more accurate picture of what the loan costs annually. A variable home loan rate might look lower, but if the ongoing fees are high, the comparison rate reveals the real cost.

Some home loan packages bundle offset accounts, redraw facilities, and rate discounts together. If you won't use an offset account because you don't have surplus funds sitting in transaction accounts, you're paying for a feature that adds no value. Match the home loan features to how you'll actually manage your money, not to what sounds useful in theory.

Structuring repayments to build equity faster

Principal and interest repayments reduce your loan balance with every payment. In the early years, most of your repayment covers interest, but over time more goes toward reducing what you owe. Interest only repayments are lower each month because you're not paying down the loan balance, but they don't build equity. For first home buyers, principal and interest is almost always the right structure unless you're purchasing an investment property.

If your income increases or your expenses drop, increasing your repayment amount by even $100 per month makes a tangible difference over time. Most variable rate home loans let you adjust your repayment frequency or amount without restriction. Paying fortnightly instead of monthly results in one extra month's repayment each year, which shortens your loan term.

A portable loan allows you to take your existing home loan with you if you sell and purchase another property. This avoids discharge fees and can save time during settlement. Not all lenders offer this feature, but if you expect to upgrade within five to seven years, it's worth considering during your home loan application.

Pre-approval that strengthens your position

Having home loan pre-approval before you start looking at properties gives you a clear budget and shows sellers you're a serious buyer. Pre-approval is conditional, meaning the lender has assessed your income, expenses, and credit history and agreed in principle to lend you a specific loan amount.

Pre-approval typically lasts between three and six months, depending on the lender. If your financial situation changes during that period, such as changing jobs or taking on new debt, you'll need to update the lender. In competitive markets like Brighton or Glen Waverley, having pre-approval already in place can make the difference between securing a property and missing out.

Lenders assess your borrowing capacity based on your income, existing debts, and living expenses. If you're carrying personal loans or car loans, paying those down before applying improves how much you can borrow. The same applies to credit card limits. Even if you don't use the full limit, lenders assume you could, and that affects your borrowing capacity.

Affordability isn't about waiting until you have 20% saved. It's about using the right home loan products at the right time and structuring them to match how you earn and spend. That's what turns a small deposit into a property you can actually hold onto.

Call one of our team or book an appointment at a time that works for you.

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