Authored by the expert who managed and guided the team behind the Australia Property Pack
Everything you need to know before buying real estate is included in our Australia Property Pack
First home buyers in Australia often underestimate the total costs involved, making critical mistakes that can lead to financial stress or missed opportunities.
Common errors include underestimating upfront costs beyond the deposit, failing to compare multiple lenders, and rushing into purchases without proper due diligence. As of September 2025, the expanded First Home Buyers Guarantee allows deposits as low as 5%, but many buyers still struggle with hidden costs and poor financial planning decisions.
If you want to go deeper, you can check our pack of documents related to the real estate market in Australia, based on reliable facts and data, not opinions or rumors.
First home buyers in Australia commonly make costly mistakes including insufficient budgeting for upfront costs, inadequate lender comparison, and emotional decision-making over analytical property assessment.
The expanded government guarantee schemes now allow 5% deposits, but buyers must still navigate complex state-based concessions, ongoing property costs, and market research to avoid overpaying or financial stress.
| Common Mistake | Financial Impact | Prevention Strategy |
|---|---|---|
| Insufficient deposit planning | $10,000-$40,000 LMI costs | Use 5% government guarantee scheme |
| Ignoring stamp duty calculations | 3-5% of property value | Research state-specific concessions |
| Single lender pre-approval | 0.1-0.5% higher interest rates | Compare at least 3-4 lenders |
| Skipping building inspections | $5,000-$50,000 in repairs | Always conduct professional inspections |
| Emotional property selection | 10-20% overpayment | Research recent sales data thoroughly |
| Underestimating ongoing costs | $4,000-$10,000 annually | Budget for rates, insurance, maintenance |
| Overextending budget | Mortgage stress risk | Keep repayments under 30% of income |
How much deposit do I realistically need to buy my first home in Australia?
As of September 2025, first home buyers in Australia can purchase with as little as a 5% deposit through the expanded First Home Buyers Guarantee scheme.
The government guarantee covers the gap between your deposit and 20%, eliminating the need for Lenders Mortgage Insurance (LMI). This insurance typically costs between $10,000-$40,000 for a standard property purchase.
For Australia's median house price of approximately $844,000 in 2025, a 5% deposit equals $42,200. However, having a larger deposit of 10-20% provides more negotiating power and better loan terms from banks.
Most financial advisors recommend saving at least 10% of the property value as a deposit, plus an additional $15,000-$25,000 for upfront costs and moving expenses.
It's something we develop in our Australia property pack.
What extra upfront costs besides the deposit should I budget for?
Beyond your deposit, expect to pay 3-7% of the property purchase price in additional upfront costs across Australia.
| Cost Type | Typical Range | Notes |
|---|---|---|
| Stamp Duty | 3-5% of property value | Varies by state; concessions available for first home buyers |
| Conveyancing/Legal Fees | $1,500-$3,000 | Essential for property transfer and contract review |
| Building & Pest Inspections | $400-$1,000 | Critical for identifying structural issues |
| Loan Application Fees | $300-$800 | Charged by most lenders for processing |
| Council/Title Searches | $200-$500 | Required for legal due diligence |
| Bank Valuation Fee | $300-$600 | Lender assessment of property value |
| Settlement Adjustments | $500-$2,000 | Rates, water, strata fees prorated |
How can I check my borrowing capacity with Australian banks before making an offer?
Australian banks provide online borrowing power calculators that assess your capacity based on income, expenses, existing debts, and interest rate buffers.
Major lenders like Commonwealth Bank, Westpac, ANZ, and NAB offer these tools on their websites. Input your gross annual income, monthly expenses, credit card limits, and existing loan repayments for an instant estimate.
Banks typically use a serviceability buffer of 2-3% above current interest rates when calculating your capacity. They also apply debt-to-income ratios, usually capping total debt at 6-8 times your annual income.
For more accurate assessments, book appointments with bank lending specialists or mortgage brokers who can provide detailed pre-approval certificates valid for 3-6 months.
What are the risks of only getting pre-approval from one lender instead of comparing several?
Limiting yourself to one lender's pre-approval can cost thousands in higher interest rates and restrictive loan conditions.
Interest rate differences of just 0.25% can mean $15,000-$25,000 extra over a 30-year loan on a typical Australian property. Each bank has different risk appetites, meaning one might approve you for $600,000 while another offers $700,000.
Different lenders also have varying fees structures, offset account options, and flexibility for future changes like switching to interest-only payments or extending loan terms.
Mortgage brokers can compare 20+ lenders simultaneously, often securing better rates than direct bank applications. This comparison process typically takes 2-3 weeks but can save significant money over the loan term.
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How do first home buyer grants and stamp duty concessions actually work in my state, and how much could I save?
Each Australian state offers different first home buyer incentives that can save you $10,000-$50,000 depending on the property value and location.
| State | Stamp Duty Concession | Grant Amount |
|---|---|---|
| NSW | Full exemption under $650,000; partial up to $800,000 | $10,000 for new builds |
| Victoria | Full exemption under $600,000; partial up to $750,000 | $10,000 for new builds |
| Queensland | Full exemption under $500,000; partial up to $750,000 | $30,000 for new builds |
| Western Australia | 75% reduction under $430,000; partial up to $530,000 | $10,000 for established homes |
| South Australia | Full exemption under $500,000; partial up to $650,000 | $15,000 for new/established |
| Tasmania | 50% reduction under $400,000 | $30,000 for new builds |
| ACT | Duty reduction available | $30,000 for eligible buyers |
What ongoing costs like council rates, strata fees, insurance, and maintenance should I expect in Australia each year?
Australian property ownership involves annual costs of $4,000-$15,000 depending on property type, location, and condition.
Council rates typically range from $1,200-$3,500 annually, calculated on property value and local council services. Major cities like Sydney and Melbourne generally have higher rates than regional areas.
For apartments and townhouses, strata fees average $1,500-$5,000 yearly, covering building maintenance, insurance, and shared facilities. Luxury buildings with pools, gyms, and concierge services command higher fees.
Home and contents insurance costs $1,200-$2,500 annually, with flood-prone areas and bushfire zones requiring additional coverage. Maintenance and repairs typically cost 1-2% of property value yearly, though older homes may require $5,000-$10,000 for major repairs.
It's something we develop in our Australia property pack.
How do I avoid overpaying by understanding recent sales data and auction results in the suburb I want to buy?
Research comparable sales from the past 3-6 months using Domain, realestate.com.au, and CoreLogic to establish realistic price expectations.
Focus on properties with similar bedrooms, bathrooms, land size, and condition within 500-800 meters of your target property. Note seasonal variations, as Australian property markets often show stronger activity in spring (September-November).
Attend weekend open inspections and auctions in your chosen suburb to understand buyer competition and price trends. Track auction clearance rates, as rates above 70% indicate strong demand and potential price growth.
Consider engaging a buyer's agent for $3,000-$15,000 who can access off-market properties and provide professional bidding strategies. They often secure properties 5-10% below market value through their network connections.
What mistakes do buyers make when skipping a proper building and pest inspection?
Skipping professional building and pest inspections can result in repair costs of $5,000-$100,000 that weren't factored into your purchase budget.
Common issues discovered include structural cracks, roof leaks, electrical problems, plumbing defects, and termite damage. In Australia's climate, termite inspections are particularly critical as damage can compromise structural integrity.
Professional inspections cost $400-$1,000 but can identify problems that sellers must either fix or discount from the sale price. Many buyers have successfully negotiated $10,000-$30,000 off purchase prices after inspection reports revealed significant issues.
Schedule inspections during your cooling-off period (usually 5 business days) to maintain the right to withdraw from contracts if major problems are discovered.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How can I avoid getting locked into a mortgage with high interest rates or hidden fees?
Compare comparison rates rather than headline rates, as comparison rates include most fees and provide a more accurate cost assessment.
Avoid loans with high establishment fees ($500-$2,000), ongoing monthly fees ($10-$30), and excessive break costs that penalize early exit. Read all loan documentation carefully for clauses about rate increases beyond Reserve Bank movements.
Consider split loans combining fixed and variable rates to balance payment certainty with potential savings. Fixed rates offer stability but may include higher break costs if you need to refinance early.
Negotiate package deals that waive annual fees in exchange for maintaining transaction accounts with the same bank. Many lenders offer fee waivers worth $300-$800 annually for professional packages.
What mistakes do people make by choosing the wrong property type?
First home buyers often choose off-the-plan apartments attracted by lower deposits and marketing promises, without understanding completion risks and potential value drops.
Off-the-plan purchases risk construction delays, developer bankruptcy, and final properties differing from initial plans. Market values may decline between contract signing and settlement, leaving buyers with properties worth less than purchase price.
Established homes offer immediate occupancy and transparent condition assessment but may require renovation costs. Units in oversupplied areas like inner Melbourne and Brisbane have shown minimal capital growth over recent years.
Houses typically provide stronger long-term capital growth than apartments due to land value appreciation, but require higher deposits and ongoing maintenance responsibilities.
How do I make sure I'm not stretching my budget too far and risking mortgage stress?
Financial experts recommend keeping total housing costs below 30% of gross household income to avoid mortgage stress in Australia's economic environment.
Factor in potential interest rate increases of 2-3% above current rates when calculating affordability. The Reserve Bank of Australia has indicated rates may rise through 2025-2026 depending on inflation trends.
Maintain emergency savings equivalent to 3-6 months of mortgage repayments to handle job loss, illness, or unexpected major repairs. Many mortgage-stressed households struggle because they used all savings for the deposit.
Consider income protection insurance costing $50-$150 monthly to cover mortgage repayments if you become unable to work due to illness or injury.
It's something we develop in our Australia property pack.
What are the risks of rushing the process and buying based on emotion rather than long-term growth potential?
Emotional property purchases often result in overpaying by 10-20% and selecting areas with poor long-term growth prospects.
Rushed decisions skip important research into suburb demographics, infrastructure development, employment hubs, and school catchments that drive property values. Buyers focusing on cosmetic appeal may overlook structural issues or poor locations.
Successful property selection requires analyzing median price growth over 10+ years, rental yields, population growth forecasts, and planned infrastructure projects. Areas near new transport links or employment centers typically show stronger appreciation.
Allow at least 3-6 months for thorough market research, including attending multiple open inspections, studying price trends, and understanding local market cycles before making offers.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
First home buying in Australia requires careful planning and professional guidance to avoid costly mistakes that can impact your financial future for decades.
Success comes from thorough research, comparing multiple lenders, understanding all costs involved, and making analytical rather than emotional decisions throughout the purchase process.
Sources
- Ensure Legal - First Home Buyers Guarantee Expanded
- Prime Minister's Office - 5% Deposits for First Home Buyers
- Parliamentary Budget Office - First Home Buyer Scheme Analysis
- Commonwealth Bank - First Home Buyer Scheme Guide
- Police Bank - Upfront Costs Guide for First Home Buyers
- Bargoti Real Estate - Costs of Buying a House in 2025
- CM Law - Hidden Costs in Property Investment
- Westpac - Mortgage Calculator
- Bendigo Bank - Borrowing Power Calculator
- Housing Australia - First Home Guarantee