Do you know what first home buyers need to purchase?

Buying your first house means preparing a deposit, securing pre-approval, and understanding which government schemes reduce the upfront cost.

Most first home buyers in Melbourne start by working backwards from the property price cap that applies to their chosen scheme. Victoria's Australian Government 5% Deposit Scheme allows a purchase price up to $950,000 with a 5% deposit, which means you need $47,500 in genuine savings. Settlement costs including conveyancing, building inspections, and loan establishment fees typically add another $8,000 to $12,000. If you qualify for Victoria's stamp duty exemption on properties up to $600,000, you pay no transfer duty. Between $600,001 and $750,000, a sliding concession applies.

Consider a buyer who has saved $50,000 and earns $85,000 annually. They apply through a participating lender under the 5% Deposit Scheme and identify a house in Reservoir priced at $680,000. The deposit is $34,000. Settlement costs come to $10,000. They retain $6,000 as a buffer. Because the property falls within the concession band, they pay reduced stamp duty rather than the full amount, which would otherwise exceed $35,000. Pre-approval confirms borrowing capacity before they make an offer, and the application is submitted once the contract is signed.

How the 5% Deposit Scheme works for house purchases

The Australian Government 5% Deposit Scheme removes the need for lenders mortgage insurance when you purchase with a 5% deposit. Housing Australia guarantees the difference between your deposit and 20% of the property value, which satisfies the lender's risk requirement without charging you a separate premium.

Applications are made through one of 31 participating lenders. You cannot apply directly to Housing Australia. The lender assesses your income, expenses, and credit history in the same way they would for any home loan application. If you meet their lending criteria and the property price falls within the $950,000 cap for Melbourne, the lender requests the guarantee from Housing Australia. No income cap applies under this scheme, which makes it accessible to buyers with higher salaries who have prioritised savings over deposit size.

The scheme covers houses, townhouses, and apartments, provided they meet standard lending criteria. Off-the-plan purchases are eligible if the contract is unconditional and settlement occurs within the lender's acceptable timeframe. You must move into the property as your principal place of residence within 12 months of settlement and live there for at least 12 continuous months.

Stamp duty concessions and how they change the budget

Victoria offers a full stamp duty exemption on properties up to $600,000 and a sliding concession on properties between $600,001 and $750,000. Above $750,000, standard duty rates apply regardless of whether you are a first home buyer.

A house purchased at $600,000 attracts no duty. The same house at $750,000 would normally incur duty of approximately $40,000, but the concession reduces that figure significantly. At $800,000, the concession no longer applies, and you pay full duty of around $43,070. The concession applies to both new and established homes, provided the property will be your principal place of residence.

In our experience, buyers who focus on properties within the concession range stretch their deposit further. A $680,000 purchase with a 5% deposit and reduced duty costs less upfront than a $750,000 purchase at the top of the concession band, even though the deposit difference is only $3,500. Duty savings in that range can exceed $30,000, which is often more than the deposit gap between two comparable properties.

First Home Owner Grant and when it applies

Victoria's First Home Owner Grant pays $10,000 for new homes valued up to $750,000. The grant does not apply to established houses. A new home is defined as a property that has not been previously occupied or sold as a place of residence, or a home that has been substantially renovated to the point where it is considered new for grant purposes.

The grant is paid after settlement and is typically applied directly to your home loan balance by the lender. You can also choose to receive it as a direct payment, though most buyers reduce their loan amount instead. If you are building, the grant is usually paid at the point when the contract becomes unconditional, which may be earlier than final completion.

Because the grant applies only to new homes, buyers purchasing an established house in suburbs such as Doncaster, Northcote, or Templestowe do not qualify. The trade-off is that established homes in these areas often fall within the stamp duty concession band, which delivers a larger saving than the grant itself when the property is priced between $600,000 and $750,000.

What pre-approval confirms and why it matters

Pre-approval confirms how much a lender is willing to lend you based on your income, expenses, existing debts, and credit history. It is not a guarantee that the loan will settle, but it does confirm that your financial position meets the lender's criteria before you make an offer.

A pre-approval is typically valid for three to six months depending on the lender. During that time, you can make offers on properties within the approved loan amount without needing to resubmit your financial documents for each offer. If your circumstances change during the pre-approval period, such as a change in employment or an increase in debt, the lender reassesses before proceeding to formal approval.

Lenders will still conduct a full valuation of the property once a contract is signed. If the property is valued below the purchase price, the lender may reduce the loan amount or require a larger deposit to maintain the agreed loan-to-value ratio. This is one reason why buyers who secure pre-approval often include a finance clause in their contract, which allows them to withdraw if the lender does not approve the loan on the agreed terms.

Offset accounts, redraw, and managing repayments

An offset account is a transaction account linked to your home loan. The balance in the offset account reduces the loan balance on which interest is calculated, which lowers the interest you pay without requiring you to make extra repayments into the loan itself.

A buyer with a $640,000 loan and $15,000 in an offset account pays interest on $625,000. The $15,000 remains accessible for everyday spending or emergencies, which makes offset accounts useful for buyers who want flexibility without locking funds into the loan permanently.

Redraw allows you to withdraw extra repayments you have made above the minimum required amount. Some lenders limit redraw availability or charge fees for each withdrawal, so the terms vary. Offset accounts generally offer simpler access to your funds, though not all loan products include an offset option, particularly at lower interest rates.

Fixed and variable rate structures

A fixed interest rate locks in your repayment amount for a set period, typically one to five years. A variable interest rate moves with the lender's standard rate, which means your repayments can increase or decrease over time.

Fixed rates provide certainty, particularly for buyers who want to know exactly what their repayments will be during the initial years of ownership. Variable rates offer flexibility, including the ability to make extra repayments without penalty and access to features such as offset accounts, which are rarely available on fixed rate products.

Some buyers split their loan between fixed and variable portions, which balances certainty with flexibility. A 50/50 split on a $640,000 loan means $320,000 is fixed and $320,000 is variable. You can make unlimited extra repayments on the variable portion and direct everyday savings into an offset account linked to that portion, while the fixed portion holds your repayments steady regardless of rate movements.

Settlement costs beyond the deposit

Settlement costs include conveyancing, building and pest inspections, loan establishment fees, and title registration. Conveyancing fees typically range from $1,500 to $2,500 depending on the complexity of the transaction. Building and pest inspections cost between $500 and $800 for a standard house. Loan establishment fees vary by lender but are often between $300 and $600.

If you are purchasing in an area such as Bulleen or Templestowe, where properties are more likely to be on larger blocks with older structures, a thorough building inspection is particularly important. Identifying issues such as stumps, rewiring, or plumbing before settlement allows you to negotiate repairs or adjust your offer rather than discovering them after you have taken ownership.

Title insurance is optional but covers you if a defect in the property title is discovered after settlement. It is more common in New South Wales than Victoria, but some buyers in Melbourne choose to include it, particularly for older properties or those with complex ownership histories.

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