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What is a first home buyer home loan?
There are many different types of home loans based on the borrower type (first home buyer, construction loan, owner occupier, property investment, refinancing, or interest only) and the interest rate type (variable rate, fixed rate, split rate). Find out which loan type is most suitable for first home buyers.
A home loan is secured against your property, so if you are unable to continue paying the loan, the lender may ultimately require you to sell the property to settle the debt.
What should first home buyers look for in a home loan?
First home buyers should be looking for a combination of competitive pricing (low interest rates and fees) and the features that will make their loan suit their budget.
CANSTAR currently compares and rates hundreds of approximately more than 400 home loans available for first home buyers in Australia, to provide you with certainty and confidence when you compare mortgages and interest rates.
Comparing interest rates
Home loan interest rates can vary significantly between home loan providers. Because home loans are a long-term debt, even small differences in interest rates can make a big difference to the total amount you will pay on your loan over its lifetime.
Use our Mortgage Calculator to help you work out what your interest rate will cost you, both in monthly repayments and over the life of the loan.
You can use our website to compare the features of the home loans available for your situation, such as:
- Lending terms including interest rates
- Loan fees
- Ability to make additional repayments
- Redraw facility
- Offset account
- Split loan facility (part of loan charged at fixed interest rate, part at variable rate)
- Top up facility
- Portability (ability to switch your loan to a new property when you move house)
- Construction loan features
- Fixed rate lending terms and conditions
- Customer service
For our First Home Buyers Award, CANSTAR cherry-picks the features of utmost importance to first home buyers and evaluates how lenders match up in their offerings. Follow our Choosing A Home Loan Checklist to make sure you’ve considered all factors when comparing home loans.
We summarise the features that CANSTAR researches and rates in an outstanding value home loan in the Methodology attached to our First Home Buyers Home Loans Award report.
You can compare first home buyers using the comparison selector tool at the top of this page.
Written by: TJ Ryan
Buying a property – especially first time around – is a big decision. Thankfully, CANSTAR has developed some handy checklists to help you through the process of buying your first home:
- Choosing a Home Loan Checklist
- Applying For A Home Loan Checklist
- Buying A House Checklist
- Buying A Unit Checklist
We also have a whole bunch of other priceless tips for first home buyers in articles on this section of our website, including the following:
- How much deposit you need
- What you can use for a deposit
- First Home Owners Grants on offer in each state and territory
- Working out what stamp duty you’ll pay
- All about Lender’s Mortgage Insurance (LMI)
- Why you definitely need a lawyer
- How to bid at auctions
- Pros and cons of buying vs building
- Pros and cons of buying a fixer-upper
- What to ignore when buying a house and what warning signs to look out for
- How long it can take to find a home to buy
- You need Home & Contents Insurance – we compare it for you
Please note that these are a general explanation of the meaning of terms used in relation to home loans or mortgages.
The wording of loan terms and conditions may use different phrases or terms, and you should read the terms and conditions of the relevant loan to understand the features and cost of that loan. You cannot rely on these terms to the part of any loan you may purchase.
Refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG).
Annual percentage rate (APR): This is the total charge for the loan including fees and interest expressed as a percentage, which allows you to compare across the market.
Comparison rate: An interest rate figure that represents the total annual cost of the loan, including the annual interest rate, monthly repayments, and most ongoing and upfront fees and charges. On the Canstar website, all comparison rates for home loans are based on a $150,000 loan over 25 years (read the comparison rate warning). Learn about comparison rates.
Credit rating (credit score): An assessment of the credit-worthiness of individual borrowers, based on their borrowing and repayment history (credit report). Lenders consider your credit rating when deciding whether or not to give you a loan, how much to loan you, and what interest rate you will pay. Check your credit rating.
First Home Owner Grant (FHOG): A government grant given to first home buyers. Learn what first home owner grants are available in your state or territory.
Fixed rate: A fixed rate home loan allows a borrower to lock in an interest rate for a particular period of time, typically from 1 year up to 5 years. The interest rate that the borrow pays will remain the same for that amount of time, regardless of changes in the RBA cash rate. Learn about fixed rate home loans.
Guarantor: If someone “goes guarantor” on your loan, it means that they are promising (“guaranteeing”) that they will be liable for the loan if repayments are not made. The guarantor also means they must be able to demonstrate their own capacity to repay your loan. Learn about guarantors on home loans.
Introductory rate or honeymoon rate: An introductory rate offered to entice borrowers with a low advertised rate for the first few months of the loan. After the honeymoon period, the loan reverts to the Standard Variable Rate offered by the lender. Learn about honeymoon rates.
Lenders Mortgage Insurance (LMI): Insurance that the loaning institution takes out in case of default from the borrower, which the borrower must pay for. Usually applies to home loans with a higher LVR (more than 80%). Learn about LMI and how to avoid it.
LVR (Loan to Value Ratio): This is the maximum proportion of the value of your home that can be loaned out to you. For example, a bank may approve your loan for 80% of the property value, in which you must pay the remaining 20% as your deposit. Find out how LVR affects your interest rate and LMI.
Stamp duty: The state or territory government’s tax calculated on the borrower’s loan amount. Calculate your stamp duty with our calculator.
Negative gearing: When the income from an investment property is not enough to pay the interest on the home loan for that property, negative gearing is currently available as a tax deduction against that income. Learn about negative gearing.
Offset account: A savings account linked to your loan to offset the interest charged on your loan. The money (or credit) in your account is offset daily against your loan balance, which reduces the daily mortgage interest charges. Learn about offset accounts.
Pre-approval: An initial approval process where the bank provides a borrower with an estimate of how much they could borrow, based on information they have provided to the bank. Find out how to get home loan pre-approval.
Redraw: A home loan feature that enables the borrower to withdraw funds they have already paid, usually this is a condition based on if they are far enough ahead on loan payments. This is not available on all loans. Learn the pros and cons of redraw facilities.
Settlement date: The date on which transfer of ownership officially takes place – the buyer pays the rest of the purchase price, and the final legal documents are exchanged. It is also usually the date on which the buyer receives the keys and assumes possession. Learn about what happens on settlement day.
Split loan: A home loan in which a predetermined portion of the loan is locked in at a fixed interest rate and the rest comes with a variable rate of interest. Learn about split loans.
Variable rate: A home loan interest rate that fluctuates according to the official cash rate set by the Reserve Bank of Australia. The rate can go up or down over time, varying your repayments. These loans allow for more flexibility and options. Learn about variable rate home loans.
At the time of writing, CANSTAR researches and rates the following lenders offering home loans for first home buyers:
- AMP Bank
- Arab Bank Australia
- Australian Military Bank
- Bank of Melbourne
- Bank of Sydney
- Bank of Us
- Beyond Bank
- BOQ (Bank of Queensland)
- Catalyst Money
- Coastline Credit Union
- Commonwealth Bank (CommBank)
- Community First Credit Union
- Community Mutual Group
- Defence Bank
- Delphi Bank
- ECU Australia
- FCCS Credit Union
- First Option Credit Union
- Gateway Credit Union
- G&C Mutual Bank
- Heritage Bank
- Holiday Coast Credit Union
- Horizon Credit Union
- Hume Bank
- Illawarra Credit Union NSW
- Macquarie Credit Union
- ME Bank
- Newcastle Permanent
- Northern Beaches Credit Union
- People’s Choice Creidt Union
- P&N Bank
- Police Bank
- QLD Police Credit Union
- QT Mutual Bank
- Queenslanders Credit Union
- Select Credit Union
- George Bank
- Summerland Credit Union
- Suncorp Bank
- Teachers Mutual Bank
- The Capricornian
- The Mac
- The Rock
- Transport Mutual Credit Union
- Victoria Teachers Mutual Bank
- Woolworths Employees Credit Union
Compare first home buyer home loans using the comparison selector tool at the top of this page.