Buying your first home is one of the biggest financial decisions you’ll make. Before you start property hunting or worrying about finding the perfect place, there’s some essential groundwork: understanding deposits, working out what you can afford, and knowing what other costs come along with homeownership.
The good news is this process is far less mysterious than it feels initially. With the right information and some simple calculations, you can get clear on whether now is realistic for you or whether another 12 months of saving makes more sense.
Let’s work through it step by step.
Step 1: Know Your Price Range Before Anything Else
Searching for homes without knowing your budget is like shopping without knowing your budget—you’ll fall in love with things you can’t afford and waste energy on properties outside your reach.
Calculate Your Borrowing Power
The first calculator you need is one that shows your borrowing capacity. This depends on:
- Your gross annual income
- Your existing debts (car loans, credit cards, HECS-HELP, personal loans)
- Your savings history and deposit amount
- Interest rate stress tests (lenders typically assume rates could rise to 6–7%, even if current rates are lower)
Most lenders will approve you to borrow 4–5 times your gross annual income, adjusted for debts. A teacher earning $95,000 with moderate debts might borrow $350,000–$420,000 depending on their specific situation.
Use an affordability calculator to model this. Don’t guess. Knowing your actual borrowing capacity removes uncertainty and helps you focus your property search.
Add Your Deposit to Find Your Price Range
Once you know your borrowing capacity, add your deposit:
Borrowing capacity + Deposit = Maximum purchase price
If you can borrow $380,000 and have $30,000 saved for a deposit, your realistic purchase price is around $410,000. Properties at $450,000 or $500,000 are outside your reach right now—there’s no point viewing them.
This clarity prevents disappointment and keeps your search focused.
Step 2: Work Out Your Deposit
The conventional wisdom says 20%. That’s still a sensible target, but it’s increasingly not essential. Here’s what you need to know.
The 20% Deposit: What It Means
If you put down 20% of the property value, you borrow 80%. This crosses the Loan-to-Value (LVR) threshold where lenders stop requiring Lenders Mortgage Insurance (LMI).
LVR is the ratio of your loan to the bank’s valuation of your property:
Loan amount ÷ Property value = LVR (as a percentage)
For example: A $400,000 loan on a $500,000 property = 80% LVR.
At 80% LVR or below, you don’t pay LMI. Above 80%, you do. This is crucial because LMI can add $15,000–$40,000 to your loan depending on how much you’re borrowing.
Smaller Deposits: The LMI Trade-Off
Most first-home buyers now purchase with deposits smaller than 20%. You can go to 5% with various government guarantees, and sometimes lower with a family guarantor.
The trade-off is paying Lenders Mortgage Insurance. Here’s how to think about it:
A smaller deposit means you can buy sooner, but you’ll pay LMI upfront (added to your loan). A larger deposit means waiting longer but avoiding LMI costs.
Which makes sense for you? If property prices in your area are rising 5–10% annually and you’re currently saving for a 20% deposit that’ll take three years, you might actually come out ahead buying now with 5% down and paying LMI. But if property prices are stable and you can save aggressively, waiting for 20% might be better.
There’s no universal right answer—it depends on your local market, your savings rate, and your personal circumstances.
For some buyers, particularly those with family support or strong income stability, a no-deposit pathway may also be an option. Understanding no-deposit home loan options can help you see how guarantor arrangements or specialist lending programs might reduce upfront savings requirements without compromising long-term affordability.
Deposit Examples Across Price Points
Here’s what deposits look like at different purchase prices:
| Property Price | 20% Deposit (no LMI) | 10% Deposit (with LMI) | 5% Deposit (with LMI) |
|---|---|---|---|
| $600,000 | $120,000 | $60,000 | $30,000 |
| $800,000 | $160,000 | $80,000 | $40,000 |
| $1,000,000 | $200,000 | $100,000 | $50,000 |
| $1,200,000 | $240,000 | $120,000 | $60,000 |
Notice the gap between a 20% deposit and a 5% deposit. For an $800,000 property, that’s a $120,000 difference. If you’re currently saving $2,000 monthly, that’s a five-year difference in timeline.
Step 3: Understand the Other Costs (They’re Significant)
The deposit isn’t the only money needed upfront. Several other costs arrive during the purchase process, and they add up.
Stamp Duty
This is a state tax on property transfers. It varies significantly by state, property price, and whether you’re a first-home buyer. Stamp duty can range from 3–5.75% of the property value depending on your location.
Example stamp duty across states (varies by purchase price and buyer status):
- Victoria: First-home buyers on properties up to $600,000 pay no stamp duty. This saves tens of thousands for eligible buyers.
- Queensland: First-home buyers on properties under $800,000 receive a substantial concession or full exemption.
- New South Wales: Progressive stamp duty with concessions for first-home buyers.
- South Australia: Concessions available for first-home buyers.
Check your state’s revenue office website for exact calculations. Stamp duty is typically one of the largest costs after the deposit itself.
Legal and Conveyancing Costs
When you buy property, a solicitor or conveyancer handles the legal transfer. Their fees typically range from $800–$2,500 depending on the property value and complexity.
This includes:
- Property and title searches
- Contract review and negotiation
- Title transfer preparation
- Settlement coordination
Don’t skip this. Whilst it’s legal to do your own conveyancing if you’re very experienced, it’s genuinely not advisable unless you have property or legal expertise.
Building and Pest Inspections
Before buying, you should arrange:
- Building inspection: $400–$800. Essential to identify structural issues, maintenance problems, or hidden defects.
- Pest inspection: $150–$400. Particularly important if you’re in a termite-prone area or the property is older.
- Asbestos assessment: $300–$600 (if the property was built before 1990 and you want specific asbestos location mapping).
These aren’t optional if you want to buy wisely. Skipping an inspection to save $500 risks discovering a $50,000 roof problem after settlement.
Loan Establishment and Registration Fees
Your lender charges fees for processing your loan and registering it with the state land titles office. These vary but typically range from $200–$600.
Some educator-friendly lenders waive these fees—another reason to explore specialist lenders.
Lenders Mortgage Insurance (if Your Deposit Is Below 20%)
If you’re borrowing more than 80% of the property value, you’ll pay LMI. This isn’t a monthly fee—it’s added to your loan upfront.
For a $400,000 loan with a 5% deposit (80% LVR), LMI might be $12,000–$18,000 depending on the lender and property type.
Realistic Total Upfront Costs (Example)
Let’s say you’re buying an $800,000 property with a 5% deposit in Victoria:
| Cost Item | Amount |
|---|---|
| Deposit (5%) | $40,000 |
| Stamp duty (Victoria – no FHB concession, $800k property) | $43,070 (based on SRO VIC calculator) |
| Conveyancing and legal | $1,500 |
| Building inspection | $650 |
| Pest inspection | $300 |
| LMI (5% deposit) | $16,000 |
| Lender fees | $500 |
| Total upfront | $102,020 |
You’d need roughly $102,000 saved in total to cover both your deposit and your upfront costs before settlement.
Your $40,000 deposit goes toward the purchase price, while about $62,000 covers stamp duty, insurance, and other buying costs.
Always confirm with your conveyancer, lender, or use the official SRO Victoria stamp duty calculator before making any financial decisions.
Step 4: Know What Affects Your Loan Amount and Interest Rate
Several factors determine not just how much you can borrow, but what interest rate you’ll pay.
Your Credit Report and Credit Score
Lenders assess your credit report to understand how you’ve managed credit historically. A strong credit score (typically 700+) shows lenders you’re reliable. A weaker score suggests higher risk.
This affects both approval odds and interest rate. You might be offered 6.2% with a strong score but 6.8% with a weaker one. Over 30 years on a $400,000 loan, that 0.6% difference means paying tens of thousands more.
Improve your credit score before applying:
- Make regular, on-time repayments on any credit products
- Pay down credit card balances (or at least keep usage under 30% of available credit)
- Don’t apply for multiple loans or new credit simultaneously
- Check your credit report for errors and dispute inaccuracies
Your Savings History
Lenders like seeing consistent saving behaviour over months. If you deposit $15,000 into your savings account the week before applying for a teacher home loan, that raises questions. If you’ve been depositing $1,000–$2,000 monthly for 12 months, lenders view that as genuine discipline.
Your Employment Type and Income Stability
Full-time permanent employees face fewer questions. Part-time, casual, or contract workers need more documentation to prove income stability. Teachers typically fall into this category and benefit from working with reliable brokers who understand education employment structures.
Property Type and Location
Lenders are more cautious about some property types. A new apartment in a major city might attract different lending terms than a 40-year-old house on acreage two hours from the city.
Step 5: Explore Government Support for First-Home Buyers
Australia’s government and state governments offer several schemes to help first-home buyers. These can meaningfully reduce upfront costs.
Federal Schemes
First Home Super Saver Scheme (FHSS)
A smarter way to save for your first home. By making voluntary contributions to your super fund, you can grow your savings faster and take advantage of lower tax rates. Eligible buyers can withdraw up to $50,000 plus earnings to put toward a home deposit.
Australian Government 5% Deposit Scheme
This national scheme helps first-home buyers purchase with as little as a 5% deposit and no Lenders Mortgage Insurance (LMI). It replaces the former Regional First Home Buyer Guarantee, meaning both metro and regional buyers are covered under one program.
Help to Buy Scheme (coming soon)
A new shared equity initiative from the Australian Government that will allow eligible buyers to purchase with as little as a 2% deposit, with the government contributing up to 40% of the property price in equity.
Expected to launch soon — keep an eye on First Home Buyers for updates.
State-Based Grants
Most states offer grants for first-home buyers purchasing new homes or substantially renovated properties:
- Victoria: $10,000 grant for eligible new homes
- Queensland: Up to $30,000 for new homes under price thresholds
- New South Wales: Various schemes depending on location
- South Australia: $15,000 grant for all new builds
- Western Australia: First-home buyer concessions and grants (varies)
- Tasmania: Various schemes (check Tasmania’s housing website)
These grants don’t require you to have a certain deposit—they’re paid directly toward your purchase, effectively reducing the amount you need to borrow.
If you already own a property and are considering an upgrade or investment purchase, you could learn more about how educators can access property equity to help fund your next move or strengthen your financial position.
Stamp Duty Concessions
Several states offer reduced or waived stamp duty for first-home buyers:
- Victoria: No stamp duty on properties up to $600,000; reduced duty to $750,000
- Queensland: Concessions or exemptions under $800,000
- New South Wales: Progressive concessions for first-home buyers
Stamp duty concessions aren’t deposits, but they’re money saved that can go toward other costs or reducing your loan amount.
Step 6: Create Your Savings Plan
Once you’ve calculated your price range, deposit target, and total upfront costs, create a realistic savings plan.
Work Out Your Timeline
If you need $50,000 total and can save $1,500 monthly, you’ll reach your goal in approximately 33 months (just over 2.5 years). If you can save $2,500 monthly, you’ll reach it in 20 months.
Be honest about what you can actually save after living expenses, existing debts, and lifestyle spending. Aggressive saving isn’t sustainable if it means eliminating all discretionary spending.
Choose Your Savings Vehicle
- Dedicated savings account: Automatic transfers on payday work. Separate your deposit savings from your everyday spending account.
- Term deposit or high-interest savings account: Slightly better returns than standard savings accounts, and the interest compounds over time.
- First Home Super Saver Scheme: If you have 3–5 years to save, this offers tax benefits worth thousands.
Track Your Progress Visually
Knowing you’ve saved $12,000 toward a $50,000 goal (24% there) feels better than just having money in a savings account. Track your progress and celebrate milestones.
Step 7: Get Pre-Approval Before You Start Serious House Hunting
Once you understand your budget, deposit target, and timeline, get pre-approval from a lender.
Pre-approval confirms how much you can borrow and for what term. It shows real estate agents and sellers that you’re a genuine buyer, not just browsing. It also locks in your interest rate for a set period (usually 30 days), giving you certainty.
Getting pre-approval doesn’t commit you to anything. It simply clarifies your position before you invest time in property hunting.
The Bottom Line: Plan Before You Search
The path to homeownership feels less overwhelming when you’ve done the groundwork. Know your borrowing capacity. Understand the real costs involved—not just the deposit. Explore government support that actually applies to your situation. Create a realistic savings timeline.
At Education Home Loans, we help teachers and education professionals prepare for this stage by clarifying what lenders might look for and guiding you through the early steps of the process. If you’re ready to begin, reach out to us today — we can help you move forward with clarity and confidence.
Then, when you’re ready, you’ll search for properties from a position of clarity rather than hope.
Homeownership is achievable. It just requires honest numbers and a plan.