First Home Buyer Guide Melbourne 2026: Everything You Need to Know

Victorian Government Grants and Concessions

As of early 2026, Victorian first home buyers have access to several government incentives designed to reduce the upfront cost of purchasing a home. Understanding what you're eligible for can save you tens of thousands of dollars.

• First Home Owner Grant (FHOG): A $10,000 grant available for first home buyers purchasing or building a new home valued at up to $750,000. This applies to new builds, off-the-plan apartments, and substantially renovated homes - but not established properties. The grant is paid at settlement or upon completion of construction.
• Stamp duty exemption: First home buyers purchasing a property valued under $600,000 pay no stamp duty at all. On a $550,000 property, this saves you approximately $21,000 in upfront costs - money that can go towards your deposit or furnishing your new home.
• Stamp duty concession: For properties valued between $600,001 and $750,000, a sliding scale concession applies. The closer your purchase price is to $600,000, the greater the discount. For example, a $650,000 property would attract significantly reduced stamp duty compared to the standard rate.
• First Home Guarantee (federal): This federal scheme allows eligible first home buyers to purchase with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI). Places are limited each financial year and eligibility criteria apply, including income caps and property price thresholds. It's competitive, so applying early is important.
• Help to Buy scheme (federal): Under this scheme, the government co-owns a share of your property - up to 40% of a new home or 30% of an existing home - reducing the amount you need to borrow. You can buy back the government's share over time as your financial position improves. Eligibility criteria and place limits apply.

Important note: Government schemes and thresholds can change. We recommend confirming current eligibility criteria at the time of your purchase. Your mortgage broker can verify which grants and concessions apply to your specific situation.

How Much Deposit Do You Need?

The deposit is usually the biggest hurdle for first home buyers. The good news is that you don't necessarily need the full 20% that many people assume. Here's how the numbers work.

• Standard 20% deposit: This is the benchmark to avoid Lenders Mortgage Insurance (LMI). For a $650,000 property, that's $130,000. If you can reach this level, you'll have access to the most competitive interest rates and avoid the additional cost of LMI.
• With LMI (as low as 5% deposit): Many lenders will approve loans with a 5-10% deposit, but you'll need to pay LMI. This is a one-off insurance premium that protects the lender (not you) against default. LMI costs vary significantly depending on your loan size and deposit percentage - typically $8,000 to $30,000 or more. It can be added to the loan amount in most cases.
• First Home Guarantee (5% deposit, no LMI): If you secure a place under the federal First Home Guarantee, you can buy with just a 5% deposit and pay no LMI at all. Eligibility criteria apply, including income caps for singles and couples.

Example: For a $650,000 property

• 20% deposit = $130,000 (no LMI)
• 10% deposit = $65,000 (plus approximately $12,000 in LMI)
• 5% deposit = $32,500 (plus approximately $20,000 in LMI, or no LMI under First Home Guarantee)

Don't forget additional costs beyond the deposit:

• Stamp duty (if applicable - remember, exemptions apply for properties under $600,000)
• Legal and conveyancing fees: $1,500 - $3,000
• Building and pest inspection: $500 - $800
• Loan establishment fees (varies by lender)
• Moving costs, connection fees, and initial home setup

As a rule of thumb, budget an additional 2-5% of the purchase price on top of your deposit to cover these costs comfortably.

How Much Can You Borrow?

Borrowing capacity varies significantly from person to person — it depends not just on your income, but on how each lender assesses your full financial picture. Different lenders use different criteria, which is why the same person can get very different results across institutions. Your actual borrowing capacity depends on several key factors:

• Income type: PAYG employees with stable income history are generally assessed more favourably than self-employed borrowers, who typically need two years of tax returns and financials.
• Existing debts: Credit cards (even if unused), personal loans, HECS-HELP debt, car loans, and buy-now-pay-later accounts all reduce your borrowing capacity. Closing unused credit cards before applying can make a meaningful difference.
• Living expenses: Lenders assess your declared living expenses against the Household Expenditure Measure (HEM) benchmark and use whichever is higher. Reducing discretionary spending in the months before applying can help.
• Credit history: Late payments, defaults, or multiple recent credit enquiries can affect your assessment. Check your credit report before applying so there are no surprises.
• Deposit size: A larger deposit generally means a lower loan-to-value ratio (LVR), which can unlock better rates and easier approval.

Serviceability buffer: It's important to understand that banks don't assess your ability to repay at the actual interest rate. They add a buffer of approximately 3% on top. So if the current rate is 6%, the bank assesses whether you can afford repayments at around 9%. This is a regulatory requirement designed to ensure borrowers can handle rate increases, but it does reduce how much you can borrow compared to what you might expect.

Step-by-Step First Home Buyer Process

1. Get your finances in order. Review your savings, pay down debts where possible, and check your credit score. Start tracking your expenses - lenders will review your bank statements. Aim to have a clean, consistent savings history for at least three months before applying.
2. Get pre-approved. A pre-approval (also called conditional approval) tells you how much a lender is willing to lend you. This gives you a clear budget before you start house hunting and shows sellers and agents you're a serious buyer. Pre-approvals are typically valid for 3 to 6 months.
3. Find your property. Research suburbs, attend open inspections, and get a feel for the market. When you find a property you're serious about, organise building and pest inspections. Your conveyancer should review the contract of sale before you sign anything.
4. Make an offer or bid at auction. For private sales, your broker or conveyancer can advise on conditions to include in your offer (such as subject to finance and building inspection). At auction, the contract is unconditional - so ensure your finances are in order beforehand.
5. Apply for formal approval. Once you have a signed contract, your broker submits the full loan application. The lender orders a property valuation and completes their assessment. This process typically takes 5 to 10 business days.
6. Approval and conditions. The lender issues formal (unconditional) approval and provides loan documents to sign. You'll need to arrange building insurance from the date of settlement. Your broker will walk you through any remaining conditions.
7. Settlement. Settlement typically occurs 30 to 90 days after signing the contract (the timeframe is specified in the contract). On settlement day, the lender transfers funds, ownership is registered in your name, and you receive the keys. You're officially a homeowner.

Fixed vs Variable in 2026

Choosing between a fixed and variable rate is one of the most common questions first home buyers have. As of early 2026, with the RBA cash rate sitting at 3.85%, here's how the landscape looks.

• Variable rates: Variable rates move with the market. They offer greater flexibility — you can make unlimited extra repayments, use an offset account to reduce interest, and redraw funds if needed. The trade-off is that your repayments can increase if rates rise.
• Fixed rates: Fixed rates lock in your repayment amount for a set period, giving you certainty for budgeting. However, they usually limit extra repayments and don't come with offset accounts. If rates drop during your fixed period, you're locked in at the higher rate. Breaking a fixed loan early can incur significant fees.
• Split option: Many borrowers choose to fix a portion of their loan (say 50-60%) for certainty, while keeping the remainder on a variable rate for flexibility. This gives you the best of both worlds - predictable repayments on the fixed portion and the ability to make extra repayments and use an offset on the variable portion.

Common First Home Buyer Mistakes

After helping many first home buyers through this process, these are the mistakes we see most often:

• Not getting pre-approved before house hunting. Without a pre-approval, you don't know your true budget. You risk falling in love with a property you can't afford, or missing out because you can't move fast enough when the right one comes along.
• Only talking to one bank. Your own bank might not have the best deal. A mortgage broker compares 20+ lenders to find the most competitive rate and features for your situation. The difference between lenders can be tens of thousands of dollars over the life of the loan.
• Forgetting additional costs beyond the deposit. Stamp duty, conveyancing, inspections, and moving costs add up quickly. Many first home buyers are caught off guard by these expenses. Budget for them from the start.
• Stretching to the absolute maximum borrowing capacity. Just because a bank will lend you a certain amount doesn't mean you should borrow that much. Leave yourself a buffer for rate rises, unexpected expenses, and lifestyle. Being house-poor is no fun.
• Not understanding the difference between pre-approval and formal approval. Pre-approval is conditional - it's not a guarantee. Formal approval only comes after the lender completes a full assessment including a property valuation. Don't make unconditional commitments based solely on a pre-approval.

How a Mortgage Broker Helps First Home Buyers

Buying your first home is one of the biggest financial decisions you'll make, and the process can feel overwhelming. A mortgage broker simplifies everything and ensures you're making informed decisions.

• Compare 20+ lenders: Instead of approaching banks one by one, your broker searches across a wide panel of lenders - including major banks, second-tier lenders, and specialist providers - to find the best rate and loan features for your situation.
• Identify grants you're eligible for: First home buyer incentives can be confusing, with federal and state schemes each having different eligibility criteria. Your broker ensures you don't miss out on any grants or concessions you're entitled to.
• Guide you through the entire process: From pre-approval to settlement, your broker manages timelines, coordinates with conveyancers and agents, and keeps everything on track. You always know what's happening and what comes next.
• Service is free: Mortgage brokers are paid by the lender, not by you. There's no cost for the advice, comparison, and application management - which makes it a no-brainer for first home buyers navigating the process for the first time.
• Manage paperwork and deadlines: Loan applications involve significant documentation. Your broker prepares and submits everything correctly the first time, reducing delays and the risk of declined applications.

At FGO Finance Group, we specialise in helping first home buyers across Melbourne navigate this process with confidence. With 35+ five-star Google reviews, our clients consistently highlight the clarity and personalised support they receive throughout their home buying journey.