A first home loan in NSW is easier when you make the big decisions before you start inspecting. There are five that shape everything else: how much you can comfortably borrow, how much deposit you need, which government schemes apply to you, what loan structure suits you, and which lender’s policy fits your income and deposit.
This guide is the overview. It explains how each decision works and what to weigh up, so you can set a realistic price range and avoid restarting the process halfway through. When you are ready to gather paperwork, the first home buyer loan checklist for NSW covers the documents and steps in detail.
Rates have moved recently. The RBA lifted the cash rate target to 4.60% on 30 September 2026 (RBA), so any borrowing estimate from earlier in the year is worth re-checking.
How does a first home loan work?
You borrow from a lender to buy a home, put in your own deposit, and repay the loan (usually over 30 years) with interest. The property is the lender’s security. If you borrow more than 80% of the property’s value, lenders usually charge Lenders Mortgage Insurance (LMI) unless a scheme or guarantor applies.
Most first home loans are principal and interest, meaning each repayment covers interest and reduces the balance. Moneysmart’s buying a house guide is a useful plain-language primer on the overall process (checked October 2026).
What are the five decisions in a first home loan?
| Decision | Main options | What to weigh up |
|---|---|---|
| Borrowing amount | Lender maximum vs your comfortable range | Repayments at today’s rate plus a buffer, and your life plans |
| Deposit | 2%, 5%, 10% or 20% plus costs | LMI, schemes, genuine savings and gifted funds |
| Schemes | 5% Deposit Scheme, Help to Buy, duty relief, grant, FHSS | Price caps, occupancy rules and which ones combine |
| Loan structure | Variable, fixed or split; offset or redraw | Certainty vs flexibility, fees and break costs |
| Lender | Bank, non-bank, participating scheme lender | Income policy, deposit policy and turnaround |
How much can you borrow as a first home buyer?
Lenders look at your income, living expenses, existing debts (including credit card limits and buy now pay later) and dependants. They then test whether you could still afford the loan if rates rose. APRA expects lenders to assess new loans at least 3 percentage points above the loan rate (APRA APG 223, checked October 2026).
APRA also activated a debt-to-income limit from 1 February 2026. Lenders can write no more than 20% of new owner-occupier lending at a debt-to-income ratio of six times or more (APRA, checked October 2026). This does not ban high-DTI loans, but it can make them harder to get.
Use the borrowing power calculator for a rough range, and read how much can I borrow for a home loan for what moves that number. Then set your budget below the maximum, so a rate rise or life change does not leave you stretched.
How much deposit do you need for a first home?
The traditional target is 20%, which usually avoids LMI. Many first home buyers buy with less. The 5% Deposit Scheme lets eligible buyers purchase with 5% and no LMI, and single parents and legal guardians with 2%. Since 1 October 2025 the scheme has no income caps and no limit on places (firsthomebuyers.gov.au, checked October 2026).
On top of the deposit you need money for purchase costs: conveyancing, inspections, lender fees, moving and a cash buffer. The Sydney house deposit guide shows 5%, 10% and 20% in dollar terms at common Sydney prices.
Which first home buyer schemes should you check?
In NSW, eligible buyers pay no transfer duty on homes up to $800,000 and a concessional rate up to $1,000,000, with occupancy requirements including moving in within 12 months (Revenue NSW, checked October 2026). There is also a $10,000 grant for eligible new homes, the Help to Buy shared equity scheme and the First Home Super Saver Scheme.
These do different jobs and some can be combined. The NSW first home buyer schemes guide compares them side by side.
Should you choose a fixed, variable or split loan?
A variable rate moves with the lender’s pricing and usually allows unlimited extra repayments, redraw and an offset account. A fixed rate locks your repayment for a set period, but extra repayments may be capped and breaking the loan early can cost money. A split loan puts part of the balance on each.
Moneysmart sets out the trade-offs in its fixed vs variable guide (checked October 2026). There is no universally right answer; it depends on how much certainty you need and how likely your plans are to change.
Is an offset account worth it for a first home buyer?
An offset account is a transaction account linked to your loan. The balance reduces the amount you pay interest on (Moneysmart, checked October 2026). It can be worthwhile if you will keep meaningful savings in it, but some offset loans come with higher rates or package fees, so compare the cost against the interest you would realistically save.
What upfront costs come with a first home loan?
Budget for these on top of your deposit:
- Transfer duty, unless you qualify for the full exemption.
- LMI if your deposit is under 20% and no scheme applies.
- Conveyancing or solicitor fees.
- Building and pest inspections or strata report.
- Lender application, valuation or settlement fees, depending on the lender.
- Home insurance from exchange or settlement, depending on the contract.
- Moving costs and a buffer for the first few months.
Is a broker or a bank better for a first home loan?
A bank can only offer its own products. A broker compares loans across a panel of lenders and must act in your best interests under the law. Moneysmart’s page on using a mortgage broker explains how brokers are paid and what to ask (checked October 2026).
A broker is most useful when your situation is not straightforward: casual or contract income, a gifted deposit, a scheme application, or a tight timeframe.
What mistakes do first home buyers make with their loan?
- Shopping for properties before testing repayment comfort.
- Treating pre-approval as final approval.
- Forgetting duty and purchase costs in the funds-to-complete figure.
- Taking on new credit (car loan, credit card) between pre-approval and settlement.
- Choosing a loan on rate alone without checking fees and features.
- Assuming every lender treats gifted funds, casual income or genuine savings the same way.
What is the next step?
Once you have answers to the five decisions, move to pre-approval. NewGen’s first home buyer support covers lender comparison, scheme applications and the path to settlement. All loans are subject to lender approval, and lending criteria, fees and charges apply.