Home LoanWhat Loan Do Most First Time Home Buyers Use?

May 17, 2024

Buying you’re first home in Sydney is both an exciting yet daunting experience! Understanding the available loan options is very crucial for making a informed decision. This complete guide explores the most commonly used loans by first-time homebuyer in Sydney. Helping you to navigate the complexities of the Australian mortgage market!

  1. Mortgages with Variable Rates

    The interest rate on a home loan that is not fixed is a variable rate mortgage, in which the amount of interest paid will be changed to exceed a particular benchmark or reference rate. Over the course of a mortgage loan, lenders may provide variable rate interest to borrowers. Loans with variable rates are usually preferred by borrowers who think that interest rates will eventually decrease. Since their interest rates drop in accordance with the market rate, borrowers may profit from decreasing rates without refinancing during times where rates are falling.

    Types of Variable-Rate Home Loans

    Standard Variable Rate (SVR): The lender’s standard rate, which can fluctuate.
    Tracker Loans: Interest rates follow an external benchmark, such as the Reserve Bank of Australia (RBA) cash rate.
    Discount Variable Loans: Offer a discount off the lender’s SVR for a set period.

    Advantages of Variable-Rate Home Loans

    Lower Initial Payments: Potential for reduced payments if market rates remain low.
    Flexibility: Often comes with fewer restrictions on extra repayments.

  2. Fixed Rate Mortgages

    Home loans with fixed rates lock in an interest rate for a set period of time usually one to five years. Borrowers benefit from predictable repayments throughout the fixed period which protects them from changes in interest rates.

    Advantages of Fixed-Rate Home Loans

    Predictable Repayments: Fixed monthly repayments help with financial planning.
    Protection Against Rate Hikes: Shielded from interest rate increases during the fixed term.
    Long-Term Security: Suitable for buyers planning to stay in their homes for a considerable period.

  3. Split Rate Mortgages

    With split rate home loans borrowers can designate a portion of their loan to each rate type and benefit from a combination of fixed and variable interest rates.

    Advantages of Split Rate Mortgages

    Stability: Fixed portion provides predictable repayments.
    Flexibility: Variable portions can benefit from lower rates if market conditions are favourable.
    Risk Management: Diversifies the risk of interest rate fluctuations.


    Complexity: Managing two different rates can be more complicated.
    Rate Changes: Variable portion still subject to market rate changes.

  4. Interest only Mortgages

    Borrowers are only required to make interest-only payments for a certain amount of time, usually one to five years. Interest-only loans have lower beginning repayment rates while they are interest-free but because they require a rule for repayment at some point and the final total amount may be even more.

    Advantages of Interest Only Mortgages

    Lower Initial Payments: Easier to manage finances in the early years of homeownership.
    Investment Potential: More cash flow available for other investments or expenses.


    Principal Repayment: After the interest-only period, repayments increase significantly to cover both interest and principal.
    Equity Growth: No equity is built during the interest-only period.

  5. Low Down Payment Home Loans

    First-time homebuyers with humble funds can take advantage of low deposit house loans which let them borrow up to 95% or even 100% of the purchase price of the property. Lenders’ mortgage insurance may be necessary for these loans in order to minimise the risk associated with higher loan-to-value ratios which would lead to more costs for the borrowers.

    Features of Low Down Payment Home Loans

    Reduced Deposit Requirement: Allows entry into the property market with less upfront cash.
    Higher LMI Costs: Likely to incur LMI due to the smaller deposit.


    Higher Interest Rates: These loans may come with higher interest rates.
    LMI Costs: Factor in the potential cost of LMI.

Government Assistance for First-Time Buyers

First Time Home Buyers Schemes

The NSW government also has several first time home buyers schemes and each of them is offering different forms of financial assistance such as grants, exemptions and low deposit loans. Eligibility for these assistance schemes has specific criteria like Australian citizenship or permanent residency, property value thresholds and circumstances about co-ownership or previous property ownership. Thus, necessitating thorough understanding before filing an application. First-home buyers in Sydney are recommended to research and study the different assistance schemes to compare their pros and cons, ask for professional financial advice for educated decision-making and make sure all paperwork is submitted within the application period to stretch the opportunities the government provides.

First Home Owner Grant

The First Home Owner Grant is a one-time discount for payments of $10,000 which intends to help first homeowners carry the expenses of purchasing their dream house. This assistance scheme is relevant for first time buyers looking to buy or build their new home which includes:

  1. newly built houses
  2. townhouses
  3. apartments
  4. units
  5. and similar properties bought off the plan or renovated.

To be eligible for this first home buyer assistance scheme, the buyer must buy or build their first new house and the property value must meet specific amounts. This grant is an advantage for first time homeowners which simplifies the financial hardship and allows them to enter the property market with confidence.

First Home Buyers Assistance Scheme

This was developed to open the way for first time homeownership. The scheme offers a full exemption from transfer duty for new or existing homes valued up to $800,000. And an exemption for vacant land valued up to $350,000. To be qualified for this scheme, buyers must settle in the property within 12 months of agreement or completion date. The total amount of the first home should not exceed $600,000. This first time home buyer scheme notably supports first time home buyers which reduces upfront charges and makes homeownership more achievable.

First Home Guarantee

It is government assistance to support eligible first time home buyers. This scheme allows buyers to get or build a new home with a low deposit as little as five percent. The scheme could be as low as two percent for eligible single parents which makes the property purchase more convenient. This scheme allows eligible first home buyers to safeguard their home with a mere five percent deposit only. This scheme is braced by national housing finance which bypasses the Lenders’ Mortgage Insurance requirement and leads to a lot of savings on initial charges. By reducing the deposit requirement, this scheme brings homeownership closer to reality for many aspiring home buyers in NSW.

Guidance and Support for First-Time Buyers

Buying your first dream home is a fulfilling milestone and the walk to homeownership can be complicated and demanding. But it becomes much more attainable with the proper assistance and support. NSW’s different assistance schemes and initiatives are created to give financial help and make homeownership more achievable for first time home buyers. Another tip is to ask professional advice from experts such as mortgage brokers or financial advisors. These professionals can help you through the process and offer advice and recommendations on requirements, grants, loans, deposits, costs, taxes and more. They can also aid the application process and make sure that you maximise the schemes’ advantages.

Want to Start your Home Loan Now?

Are you in the search for the easiest way to secure your first home loan in Sydney? Look no further! Australian Financial & Mortgage Solutions is your trusted partner in making the home loan application process stress-free. We are a prime financial services provider devoted to assisting first time home buyers in getting into the complicated world of property and homeownership through different home loans and government schemes like the First Home Buyers Scheme in Australia. AFMS gives personalised financial solutions, mortgage counsel and expert advice to help buyers reach their dream of home ownership. AFMS helps clients go through the application process for government first time home buyers schemes like the First Home Buyers Scheme which ensures observance with requirements and enhances availability of incentives and exemptions.

Our online form and accessible team make applying for home loans a breeze. Just fill out the form or give us a call to kickstart the process. Stay informed about your application’s progress through convenient electronic updates once we’ve received your submission. If you have any questions along the way, our expert Sydney-based home loan team is always ready to assist.