The easiest way to prepare for your first property purchase

Getting your finances ready before you start viewing homes gives you a clear picture of what you can afford and speeds up the buying process once you find the right property.

Frankston offers a mix of opportunities for first home buyers, from apartments near the foreshore and station precinct through to houses in established streets further from the bay. Preparing properly means you can move quickly when something suitable comes up, particularly in a market where stock levels can shift between seasons.

Building Your Deposit and Understanding Government Support

You need a minimum 5% deposit to access the Australian Government 5% Deposit Scheme. The scheme covers the gap between your deposit and the 20% threshold that would otherwise require Lenders Mortgage Insurance, and no income cap applies. For Melbourne properties, the price cap sits at $950,000.

Consider a buyer saving for a two-bedroom unit in Frankston. With a 5% deposit, they would need genuine savings that meet lender serviceability requirements. Most lenders want to see at least three months of consistent saving behaviour, meaning regular deposits into an account that hasn't been drawn down for non-essential spending. A one-off transfer from another account two weeks before applying won't meet that test.

Victoria offers a full stamp duty exemption on properties up to $600,000 and a sliding concession on properties between $600,001 and $750,000. The $10,000 First Home Owner Grant applies only to new builds valued under $750,000. If you're buying an established home, you won't receive the grant, but the stamp duty concession still applies if the property falls within the price threshold.

Gift deposits are accepted by most lenders, but they come with conditions. The person giving the gift usually needs to sign a statutory declaration confirming the funds are a genuine gift with no expectation of repayment. Some lenders will accept a portion of your deposit as a gift while requiring the remainder to be genuine savings. If a family member is contributing, speak with a mortgage broker in Frankston early so the documentation is in place before you apply.

What Lenders Assess Beyond Your Deposit

Your income, employment type, and existing debts determine how much you can borrow. Lenders calculate serviceability using an interest rate buffer, typically adding around 3% to the current variable rate to ensure you can still afford repayments if rates rise.

In our experience, buy now pay later accounts and credit card limits reduce borrowing capacity even if the balances are paid in full each month. A $10,000 credit card limit might reduce your maximum loan amount by $30,000 to $40,000 depending on the lender. Closing unused accounts or reducing limits before applying improves your position.

Employment stability matters. Lenders prefer to see at least six months in your current role if you're a permanent employee, or two years of consistent trading history if you're self-employed. Casual employees usually need 12 months with the same employer and evidence of regular ongoing hours. If you've recently changed jobs but stayed in the same industry or moved to a higher income, most lenders will still assess you favourably as long as your probation period has ended.

Choosing Between Fixed and Variable Interest Rates

A variable rate moves with the market and usually comes with an offset account. A fixed rate locks in your repayment amount for a set period, typically one to five years, but limits your ability to make extra repayments and doesn't offer offset functionality during the fixed term.

Many first home buyers split their loan, fixing a portion for repayment certainty while keeping the remainder on a variable rate with an offset account. The variable portion gives you flexibility to park savings and reduce interest, while the fixed portion protects you if rates rise. There's no universal split that works for everyone. Your decision should reflect how much financial flexibility you want versus how much protection you need from rate movements.

Offset accounts reduce the interest you pay without requiring you to lock funds inside the loan. Every dollar in the offset account reduces the balance on which interest is calculated. If you're likely to accumulate savings or receive irregular income such as bonuses or tax returns, an offset account attached to your variable portion makes sense. Redraw facilities allow you to access extra repayments you've made, but some lenders place conditions on redraw access, and funds aren't always available immediately.

Getting Pre-Approval Before You Start Looking

Pre-approval gives you a conditional commitment from a lender based on your financial position. It's valid for three to six months depending on the lender and confirms how much you can borrow before you make an offer.

Pre-approval isn't a guarantee. The lender will still need to assess the specific property you choose, and if your financial circumstances change between pre-approval and settlement, the lender can withdraw the offer. That said, it gives you confidence when negotiating and shows real estate agents you're a serious buyer.

The application requires payslips, tax returns if you're self-employed, bank statements showing your savings history, and identification documents. Lenders also want to see statements for any other credit accounts, even if the balances are zero. Gathering these documents before you apply speeds up the process. Applying for home loans with a broker means the paperwork is submitted correctly the first time, which reduces delays and back-and-forth requests from the lender.

Budgeting for Costs Beyond the Deposit

Settlement costs include conveyancing fees, building and pest inspections, and lender establishment fees. Conveyancing typically costs between $1,200 and $2,000 depending on the complexity of the transaction. Building and pest inspections usually sit around $500 to $800 combined. Some lenders charge establishment fees between $400 and $600, though many have reduced or waived these in recent years.

You'll also need to budget for ongoing costs after settlement. Council rates, water rates, home and contents insurance, and strata fees if you're buying an apartment all need to be factored into your post-purchase budget. Lenders assess serviceability based on the loan repayment, but your actual cash flow needs to cover these additional expenses. If your monthly budget is tight once the loan repayment is accounted for, you may want to borrow slightly less or look at properties with lower holding costs.

Understanding borrowing capacity early in the process helps you set a realistic property search range and avoid disappointment later. Knowing what you can comfortably afford, rather than just what a lender will approve, is a better foundation for a sustainable purchase.

Structuring Your Application for Long-Term Flexibility

The loan structure you choose now affects your options later. If you plan to keep the property as an investment when you upgrade, setting up the loan correctly from the start avoids costly restructuring down the track.

As an example, a buyer purchasing a two-bedroom house in Frankston with the intention of holding it long-term might choose a loan with full offset and redraw functionality. If they later move to a larger property and convert the Frankston house to an investment, the ability to separate interest deductions becomes relevant. Mixing personal and investment funds in the same loan account creates problems for tax purposes. Structuring the loan with a clear separation from the beginning makes the transition smoother.

If you're planning to build rather than buy an established home, construction loans work differently. Funds are released in stages as the build progresses, and you usually pay interest only on the amount drawn down during construction. This reduces your repayment burden while the property is being completed, but you need to factor in the step-up to principal and interest repayments once construction finishes.

Call one of our team or book an appointment at a time that works for you. We'll walk through your financial position, explain which loan structures suit your circumstances, and help you prepare an application that positions you well with lenders.

Frequently Asked Questions