Simple Steps to Finance Your Next Property in Australia
General Advice Warning: This article is general information only and does not take into account your objectives, financial situation or needs. It is not financial, credit, legal or taxation advice. Friendly Finance is a loan-matching and comparison service, not a lender, mortgage broker or credit provider, and does not arrange home loans. Consider seeking advice from a licensed mortgage broker or financial adviser, and check the Australian Government's MoneySmart website, before making any property or borrowing decision.
Key Takeaways:
A 20% deposit is no longer the only way in: eligible first home buyers can now purchase with as little as a 2–5% deposit and avoid Lenders Mortgage Insurance, thanks to current government schemes.
Budget well beyond the purchase price: stamp duty, LMI, conveyancing, inspections and other upfront costs can add several per cent to what you actually pay.
Know your borrowing capacity first: lenders assess your repayments with a serviceability buffer, so understanding this early gives you a realistic picture of what you can afford.
Have you been eyeing a property listing and are on the verge of buying it? As exciting as it is to have a new property under your name, it's essential to critically evaluate the financial feasibility of acquiring it.
A property purchase involves a large amount of money and a fair bit of paperwork, and the costs go well beyond the sticker price. Even a 20% deposit on an average Australian home runs well into six figures and many people spend years saving for it. The good news is that a 20% deposit is no longer the only path: Lenders Mortgage Insurance and several government schemes can help eligible buyers get in sooner.
Whether it's your first property or your tenth, here are the key steps to finance your next property purchase in Australia.
1. Assess Your Financial Situation Honestly
Before anything else, look closely at your income, expenses and existing debts over the past few months. Are you consistently saving enough to take on a mortgage without stretching your budget too thin? If you're already juggling multiple debts, it may be worth improving your position before adding a home loan.
It also helps to understand your borrowing capacity. Australian lenders don't just assess whether you can afford repayments at today's rate — under APRA guidance they test whether you could still manage if rates rose, typically adding a serviceability buffer of around 3 percentage points above the loan rate. Knowing this early gives you a realistic picture of what you can borrow.
2. Build Your Credit Score
Your credit score is one of the factors lenders consider, and a stronger score can help you access more favourable loan terms. Building it isn't a one-off task it reflects how consistently you manage credit over time.
Paying bills and existing debts on time, keeping credit card balances low, and avoiding a flurry of new credit applications all help. In Australia, your credit report is held by credit bureaus and reflects your repayment history under Comprehensive Credit Reporting. You can check your credit score for free and learn how to improve it through Tippla. Start early and be patient. Improvements take time to show.
3. Save Your Deposit (And Check If You Qualify For A Government Scheme)
A deposit is a crucial piece of the puzzle. Traditionally, a 20% deposit lets you avoid Lenders Mortgage Insurance (LMI) — a one-off cost that protects the lender (not you) when you borrow more than 80% of a property's value, and which can run to thousands or tens of thousands of dollars.
You can build your deposit faster by automating savings into a separate account and trimming non-essential spending. First home buyers can also use the First Home Super Saver Scheme to save toward a deposit through voluntary superannuation contributions.
Importantly, a 20% deposit is no longer the only way in. Two Australian Government schemes, administered by Housing Australia, have changed the picture:
The Home Guarantee Scheme (First Home Guarantee): From 1 October 2025, eligible first home buyers can purchase with as little as a 5% deposit and no LMI, with the government guaranteeing part of the loan. The scheme was expanded to remove income caps and place limits and to lift property price caps.
Help to Buy: Launched on 5 December 2025, this shared-equity scheme lets eligible buyers purchase with as little as a 2% deposit, with the government contributing up to 40% of the price of a new home (30% for an existing home) in exchange for an equity share, repaid when you sell or buy back the share. Income and property price caps apply, and places are limited.
Eligibility rules and price caps vary, so check the current criteria on the Housing Australia website or with a participating lender before relying on either scheme.
4. Investigate Your Loan Options
Getting the financing right means choosing the right loan for your circumstances. For buying a home, the main product is a home loan (mortgage), and even within that there are choices: variable versus fixed rates, split loans, and features like offset accounts and redraw facilities. Bank and non-bank lenders differ on rates, fees and how they assess your application, so it pays to compare.
A personal loan is a different product with a shorter term and higher interest rate, and it is generally not used to buy a property itself. It may be relevant for smaller property-related costs, but be aware that lenders usually look unfavourably on a deposit funded by borrowed money, as it affects your serviceability. For the home loan itself, a licensed mortgage broker can help you compare options across lenders.
5. If You're Renovating, Budget For The Work
If your plans include renovation or construction, factor those costs into your budget from the start. Balancing quality and value on materials — for example, timber or laminate flooring from providers like Choices Flooring — can help you manage the spend, and recycled or reclaimed materials are a sustainable, cost-effective option. If you need to fund renovations, compare your finance options carefully before committing.
6. Factor In Th Upfront And Ongoing Costs
The purchase price is only part of what you'll pay. In Australia, the single largest upfront cost is usually stamp duty (transfer duty), which varies by state or territory and by property value — though first home buyers may qualify for concessions or exemptions. Other upfront costs typically include conveyancing or legal fees, a building and pest inspection, a property valuation, loan application or establishment fees, and LMI if your deposit is under 20% (and you're not using a scheme).
Ongoing costs include council rates, home and contents insurance, and — for apartments or townhouses — strata or body corporate fees. Because stamp duty alone can add several per cent to your total, it's wise to budget generously and confirm the exact figures for your state using an official stamp duty calculator before you commit.
Frequently Asked Questions
How much deposit do I need to buy a house in Australia? Traditionally 20% to avoid Lenders Mortgage Insurance. However, eligible first home buyers can now buy with as little as 5% under the Home Guarantee Scheme (no LMI) or 2% under the Help to Buy shared-equity scheme, subject to eligibility and price caps.
What is Lenders Mortgage Insurance (LMI)? LMI is a one-off cost that protects the lender if you borrow more than 80% of a property's value. It doesn't protect you, and it can cost thousands. Government schemes and a 20%+ deposit are the main ways to avoid it.
What government schemes help first home buyers in Australia? The main federal schemes are the Home Guarantee Scheme (5% deposit, no LMI), Help to Buy (2% deposit, shared equity), and the First Home Super Saver Scheme (saving a deposit through super). States and territories also offer first home owner grants and stamp duty concessions.
What costs should I budget for besides the deposit? Stamp duty (usually the largest), conveyancing or legal fees, building and pest inspection, valuation, loan fees, and LMI if applicable — plus ongoing council rates, insurance and any strata fees.
