What Should Be on Your First Home Buyer Checklist
A complete first home buyer checklist covers four areas: confirming your deposit source and amount, establishing eligibility for government schemes, gathering application documents, and selecting loan features that match how you plan to manage repayments. Each affects what you can borrow and how much you pay over time.
Buyers in Mulgrave often start with a budget based on what they think they can afford rather than what a lender will approve. The two figures are not always the same. Lenders assess income, existing debts, living expenses, and the deposit you have saved. A buyer earning $90,000 with a car loan and credit card limit will have a lower borrowing capacity than someone on the same income with no existing commitments. Working through borrowing capacity before you search for property gives you a realistic price range and avoids disappointment after you have already found something you want to buy.
Mulgrave sits within the Melbourne metro cap for the Australian Government 5% Deposit Scheme, which is currently $950,000. That means eligible buyers can purchase with a 5% deposit without paying lenders mortgage insurance, provided the property value does not exceed the cap. The scheme has no income limits and no annual place caps. Applications are made through a participating lender, not directly through Housing Australia.
Deposit Requirements and How Lenders Assess Them
You need at least 5% of the purchase price saved in genuine savings, which is money you have accumulated over at least three months in your own account. A 5% deposit allows you to access the Australian Government 5% Deposit Scheme if you meet the eligibility criteria. A 10% deposit opens up more lender options but still attracts lenders mortgage insurance unless you qualify for a scheme that waives it.
Lenders distinguish between genuine savings and gifted deposits. Genuine savings must be held in your account for a minimum period, typically 90 days. A gift from a parent or relative can form part of your deposit, but most lenders will still require at least 5% in genuine savings unless the gift covers the full deposit amount. If you are relying on a gift, expect the lender to request a statutory declaration from the person giving the money confirming it is not a loan.
The First Home Super Saver Scheme allows you to withdraw voluntary contributions made to your superannuation fund, up to a total of $50,000, to use toward a deposit. Contributions must be made over at least two financial years. Withdrawals are taxed at your marginal rate less a 30% offset. The scheme can supplement your savings but is not a replacement for disciplined deposit accumulation.
Victorian Stamp Duty Concessions for Mulgrave Buyers
Victoria offers a full stamp duty exemption on properties up to $600,000 and a sliding scale concession on properties valued between $600,001 and $750,000. The concession applies to both new and established homes, provided the property will be your principal place of residence. Above $750,000, standard stamp duty rates apply.
Consider a buyer purchasing an established home in Mulgrave at the current median. If that property falls within the concession range, the buyer saves several thousand dollars in upfront costs, which can be redirected toward settlement expenses or retained as a buffer after purchase. Properties above $750,000 attract full duty, which adds a significant amount to the upfront cost and reduces the deposit available for other purposes.
The Victorian First Home Owner Grant of $10,000 applies only to new homes valued up to $750,000. Established home buyers in Mulgrave do not qualify for the grant but can still access the stamp duty concession if the property value falls within the eligible range. If you are considering a new build or a house and land package, the grant can be used alongside the stamp duty concession and the Australian Government 5% Deposit Scheme.
Choosing Between Fixed and Variable Interest Rates
A variable interest rate moves with the market. If the Reserve Bank changes the cash rate or your lender adjusts its pricing, your repayment amount changes. A fixed interest rate locks in your rate for a set period, typically one to five years. Your repayment amount stays the same during that period, regardless of what happens in the broader market.
Fixed rates provide certainty, which is useful if you are managing a tight budget and cannot absorb an increase in repayments. Variable rates typically offer more flexibility, including access to features like offset accounts and unlimited additional repayments. Many lenders restrict these features on fixed loans or allow only limited additional repayments before charging a fee.
Some buyers split their loan, fixing a portion and leaving the rest variable. This approach provides some certainty while retaining access to flexible repayment features on the variable portion. If you fix 50% of your loan and rates fall, the variable portion benefits from the reduction. If rates rise, the fixed portion provides protection. The right mix depends on your income stability, your tolerance for repayment changes, and how much flexibility you need to make extra repayments.
Offset Accounts and Redraw Facilities
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. If you have a loan of $500,000 and $20,000 in your offset account, you pay interest on $480,000. The money in the offset account remains accessible at any time.
A redraw facility allows you to access extra repayments you have made above the minimum required amount. If your minimum monthly repayment is $2,500 and you pay $3,000, the extra $500 goes into redraw. You can withdraw it later if needed, subject to any conditions the lender imposes. Some lenders charge a fee for redraw transactions or require a minimum withdrawal amount.
Offset accounts generally offer more flexibility than redraw because the money is held in a separate account and is not subject to lender approval for withdrawal. Redraw balances are part of the loan account, and the lender retains some control over access. Variable loans typically include offset or redraw as standard features. Fixed loans often do not, or they limit the amount you can deposit into redraw during the fixed period.
Preparing Your Application and Understanding Pre-Approval
Pre-approval gives you conditional loan approval before you make an offer on a property. The lender assesses your income, expenses, debts, and deposit, then confirms how much they are willing to lend. Pre-approval is valid for a set period, typically three to six months, and is subject to a satisfactory property valuation and no significant changes in your financial circumstances.
Lenders require proof of income, recent payslips or tax returns, bank statements covering at least three months, and identification documents. If you are self-employed, expect to provide two years of tax returns and financial statements. If you have existing debts, provide statements showing current balances and repayment schedules. The more complete your application, the less time the lender needs to process it.
Pre-approval does not guarantee final approval. If the property you choose has issues that affect its value or saleability, the lender may reduce the approved amount or decline the loan. If your financial circumstances change between pre-approval and settlement, such as a reduction in income or a new debt, the lender may reassess your application. Treat pre-approval as a strong indication of what you can borrow, not a binding commitment.
How Lenders Mortgage Insurance Affects Your Loan
Lenders mortgage insurance is a one-off cost that protects the lender if you default on the loan and the property is sold for less than the outstanding balance. It is charged when your deposit is less than 20% of the property value. The premium is calculated as a percentage of the loan amount and varies depending on the size of your deposit and the lender you choose.
If you use the Australian Government 5% Deposit Scheme, lenders mortgage insurance is waived because Housing Australia guarantees the difference between your deposit and 20% of the property value. If you apply for a standard loan with a 5% or 10% deposit outside the scheme, lenders mortgage insurance will apply. The premium can be paid upfront at settlement or added to the loan balance and repaid over the life of the loan.
Adding the premium to your loan increases the total amount you borrow and the interest you pay over time. Paying it upfront reduces your loan balance but requires additional cash at settlement. Most first home buyers choose to capitalise the premium because it preserves their savings for other settlement costs and ongoing expenses.
Call one of our team or book an appointment at a time that works for you to review your deposit position, confirm your eligibility for government schemes, and structure a loan that aligns with your repayment approach.
Frequently Asked Questions
What deposit do I need to buy my first home in Mulgrave?
You need at least 5% of the purchase price in genuine savings to access the Australian Government 5% Deposit Scheme, which waives lenders mortgage insurance for eligible buyers. A 10% deposit provides more lender options but still attracts lenders mortgage insurance unless you qualify for a scheme that removes it.
Does Victoria offer stamp duty concessions for first home buyers?
Victoria provides a full stamp duty exemption on properties up to $600,000 and a sliding scale concession on properties between $600,001 and $750,000. The concession applies to both new and established homes used as your principal place of residence.
Should I choose a fixed or variable interest rate for my first home loan?
A fixed rate provides repayment certainty for a set period, which is useful if you are managing a tight budget. A variable rate offers more flexibility, including offset accounts and unlimited additional repayments, and moves with market conditions.
What is the difference between an offset account and a redraw facility?
An offset account is a separate transaction account that reduces the loan balance on which interest is calculated, and the money remains fully accessible. A redraw facility allows you to access extra repayments made above the minimum, but the lender retains some control over withdrawal terms.
What is pre-approval and how long does it last?
Pre-approval is conditional loan approval based on your income, expenses, and deposit before you make an offer on a property. It is valid for three to six months and is subject to a satisfactory property valuation and no significant changes in your financial circumstances.
