Buying your first home in Melbourne is a huge milestone, and it’s completely normal if it also feels a bit overwhelming. Between deposits, grants, stamp duty, interest rates and all the jargon, it can be hard to know where to start.
This guide is written specifically for first home buyers in Melbourne and across Victoria, and updated for the 2025–2026 scheme changes. We’ll walk you through the process step-by-step, from working out how much you can borrow, to getting home loan pre approval, to understanding the First Home Guarantee (formerly the First Home Loan Deposit Scheme) and Victorian grants.
As a home loan broker in Melbourne, MKS Lending is here to do the heavy lifting for you. We explain the complex stuff in plain English, use our panel of lenders to find suitable options, and give you access to handy tools like our:
-
Borrowing Power Calculator
-
Home Loan Calculator
-
Deposit / Savings tools
Let’s break it all down.
Step 1: Understand What You Can Borrow
Before you fall in love with a property on realestate.com.au, you need a realistic budget. That’s where your borrowing power comes in.
Use a borrowing power calculator
A Borrowing Power Calculator helps you estimate how much a lender might be willing to lend you based on:
-
Your income (salary, bonuses, overtime, rental income, etc.)
-
Your living expenses (groceries, utilities, childcare, subscriptions, etc.)
-
Existing debts (HECS/HELP, personal loans, car loans, credit cards)
-
Your deposit size and any gifted funds
This is a great starting point to answer: “What price range should I even be looking at?”
Tip: Use the Borrowing Power Calculator on the MKS Lending website to run different scenarios, such as paying off a credit card first or adjusting your spending, to see how it changes your borrowing estimates.
What lenders look at
When a bank or lender assesses a first home buyer loan, they’ll look at more than just your income:
-
Income stability – How long you’ve been in your job or industry.
-
Employment type – Full-time, part-time, casual, self-employed or contractor.
-
Credit report & score – Your repayment history, defaults, missed payments and overall credit usage.
-
Living expenses – They’ll cross-check your declared expenses against bank statements.
-
Existing debts – Even a credit card with a high limit (even if you don’t use it) can reduce your borrowing power.
Affordability vs. maximum borrowing
Just because a lender will lend you a certain amount, doesn’t mean you should borrow that much.
Interest rates can change, your life circumstances can change, and you still want money left over for things like holidays, kids, uni and day-to-day living. A broker can help you set a comfortable repayment level, not just a maximum limit.
Use your Home Loan Calculator to model repayments at different rates and loan amounts so you can stress-test your budget.
Step 2: Saving Your Deposit
Next big question: “How much deposit do I need for a home loan?”
Typical deposit ranges
For many Melbourne first home buyers:
-
20% deposit – Ideal. You avoid Lenders Mortgage Insurance (LMI) and get access to more products and sharper interest rates.
-
10% deposit – Common. Many lenders are comfortable with 10% plus LMI.
-
5% deposit – Possible under certain lender policies and with schemes like the First Home Guarantee, often with no LMI.
In some cases (e.g. shared equity or specific schemes), even 2% deposit may be possible, but that usually involves the government taking an equity stake in your property.
Genuine savings
Most lenders want to see genuine savings, especially for low-deposit loans. That usually means:
-
Money you’ve saved yourself over at least 3 months (e.g. regular deposits into a savings account), and/or
-
Extra repayments in a redraw/offset account, or
-
In some cases, rent payments that show a strong history of managing money.
Gifts from parents and one-off lump sums can still help, but they might not count as “genuine savings” on their own, depending on the lender.
Lenders Mortgage Insurance (LMI)
If your deposit is under 20%, lenders usually charge Lenders Mortgage Insurance (LMI). LMI protects the lender, not you, in case you can’t repay the loan — but you pay the premium.
You can:
-
Pay LMI upfront, or
-
Capitalise it (add it to your loan amount, within limits).
Under the expanded First Home Guarantee, eligible buyers can buy with as little as 5% deposit without paying LMI, because the government guarantees the difference up to 20%.
Step 3: Explore First Home Buyer Support Options (2025–2026)
The good news? There is more support than ever for first home buyers in Melbourne. The trick is understanding what you’re eligible for and how it all fits together.
1. First Home Guarantee (formerly First Home Loan Deposit Scheme)
The First Home Guarantee (FHBG), part of the federal Home Guarantee Scheme (HGS), lets eligible buyers purchase a home with as little as 5% deposit, without paying LMI. The government acts as a guarantor on the remaining amount up to 20%.
From 1 October 2025, the scheme has been significantly expanded:
-
Unlimited places – No more strict caps on spots.
-
Higher property price caps – Melbourne’s cap has been lifted (recent updates suggest it’s now in the high-$800k to mid-$900k range – e.g. around $900k–$950k). Exact caps can change, so always check current figures.
-
Relaxed income rules & broader eligibility – Expanded to more types of buyers, including some who haven’t owned property in the last 10 years, and in many cases, no income caps.
This scheme is often still referred to online as the “first home loan deposit scheme”, so you’ll see both names. A home loan broker in Melbourne like MKS Lending can help you work out if your property and deposit fit within the latest rules.
2. Help to Buy (shared equity scheme)
The federal Help to Buy scheme (a shared equity program) is rolling out from late 2025. It can allow eligible buyers to purchase a home with as little as a 2% deposit, with the government contributing up to 30% of the purchase price for existing homes and 40% for new homes as an equity stake.
You don’t pay rent on the government’s share, but you co-own the property and share capital gains or losses. Over time, you can buy out the government’s portion.
This can be attractive if:
-
You have a solid income but limited savings, and
-
You’re comfortable with the idea of shared equity and future trade-offs.
3. Victorian First Home Owner Grant (FHOG)
In Victoria, eligible first home buyers can receive a $10,000 First Home Owner Grant for new homes (including newly built houses, townhouses and apartments) valued up to $750,000.
Key points:
-
The property must be new (never lived in or sold as a place of residence).
-
You must live in the property as your principal place of residence for a continuous period (usually at least 12 months) within 12 months of settlement or construction completion.
There have also been times where regional Victoria has offered higher grants (e.g. $20,000), so always check current rules if you’re looking outside metropolitan Melbourne.
4. Stamp duty concessions for first home buyers in Victoria
Stamp duty (land transfer duty) is one of the biggest upfront costs when buying your first home. In Victoria:
-
No stamp duty if the dutiable value is up to $600,000, and
-
Discounted (concessional) stamp duty for values between $600,001 and $750,000.
This applies to new or established homes, and even vacant land if you plan to build your first home there.
Separate off-the-plan concessions and temporary extra discounts for some apartments and townhouses in Victoria have also been extended to help boost housing supply through to late 2026, which can further reduce stamp duty in certain cases.
5. Other support to explore
You may also want to look into:
-
First Home Super Saver Scheme (FHSSS) – Lets you withdraw voluntary super contributions to use towards your deposit.
-
Single parent home loan options – Including schemes that allow single parents and single guardians to buy with as little as 2% deposit under targeted federal guarantees.
Because these schemes change regularly, it’s smart to double-check eligibility just before you buy. At MKS Lending, we can help you layer together grants, guarantees and concessions to minimise your upfront costs.
Step 4: Choosing the Right Home Loan Product
Once you know your budget and support options, it’s time to choose the right type of loan, not just the lowest rate.
Fixed vs variable (or a mix)
-
Fixed rate home loans
-
Your rate and repayments stay the same for a set period (e.g. 1–5 years).
-
Easier to budget, especially as a first home buyer.
-
Less flexibility if rates fall or you want to make large extra repayments or refinance early.
-
-
Variable rate home loans
-
Your rate can move up or down with the market.
-
Usually more flexible with extra repayments, offsets and refinancing.
-
Repayments can increase if interest rates rise.
-
Some first home buyers choose a split loan – part fixed, part variable – to balance stability and flexibility.
Offset account vs redraw
-
Offset account
-
A transaction account linked to your home loan.
-
Every dollar sitting in offset reduces the interest calculated on your loan balance.
-
Great for people who keep a decent buffer in savings and like flexibility.
-
-
Redraw facility
-
Lets you withdraw extra repayments you’ve made on your loan.
-
Often more restrictive than an offset for everyday access, but can be cheaper in some loan structures.
-
Loan terms: 25 vs 30 years
-
Longer term (e.g. 30 years) – Lower monthly repayments, but you pay more interest over the life of the loan.
-
Shorter term (e.g. 25 years) – Higher monthly repayments, but less total interest.
For many first home buyers, a 30-year term provides breathing space, with the plan to increase repayments later as income grows.
Special considerations: Single parents & low-deposit buyers
If you’re a single parent, single carer or on a single income, you’re not shut out from the market:
-
There are dedicated single parent home loan guarantees allowing low deposits (e.g. 2%) with no LMI under certain federal schemes.
-
Some lenders have policies specifically designed for single-income households.
MKS Lending can help you compare options that take into account childcare costs, flexible work arrangements and support payments so that the loan is sustainable.
Step 5: Getting Home Loan Pre-Approval
Home loan pre approval is like a “conditional yes” from a lender. It gives you a clear price range and makes your offers more credible to agents and vendors.
What pre-approval really means
With pre-approval, a lender has:
-
Reviewed your income, expenses and debts
-
Run a credit check
-
Given you a borrowing limit, usually valid for 90 days (this can vary by lender)
It’s still subject to conditions, like a satisfactory property valuation and your circumstances not changing.
What you’ll usually need to provide
When we help you apply for pre-approval, we’ll typically ask for:
-
ID documents – Driver’s licence, passport, Medicare card
-
Income evidence – Recent payslips, employment letter, tax returns (if self-employed)
-
Bank statements – Showing salary credits and spending
-
Details of debts – Credit cards, personal loans, HECS/HELP
-
Savings statements – Showing your deposit and any genuine savings history
We package this up in a lender-friendly way to help get a clearer, faster outcome.
Common mistakes at pre-approval stage
Try to avoid:
-
Changing jobs or industries mid-process
-
Taking out new debts (credit cards, buy-now-pay-later, car loans)
-
Making big purchases that deplete your savings
-
Ignoring the expiry date of your pre-approval
Your MKS broker will help you keep things on track between pre-approval and settlement.
Step 6: Comparing Loans & Working with a Broker
This is where many first home buyers get stuck: there are dozens of lenders and hundreds of products. That’s why working with a home loan broker in Melbourne can save a lot of time and stress.
Why use a broker instead of going directly to a bank?
-
More choice – We look beyond a single bank to a panel of lenders across home loan comparison in Australia.
-
Tailored recommendations – We help match you with a first home buyer loan that suits your deposit size, income type and long-term plans.
-
Support with grants & schemes – We help you navigate FHOG, stamp duty savings, the First Home Guarantee / first home loan deposit scheme and other programs.
-
No (or low) cost to you – In most cases, our service is paid for by the lender, not by you.
How MKS Lending helps first home buyers
When you work with MKS Lending, we:
-
Assess your situation – income, deposit, credit history, goals.
-
Use our Borrowing Power and Home Loan Calculators to model options.
-
Shortlist lenders and products based on rate, fees, features and policy.
-
Explain the pros and cons in simple language.
-
Manage your application, pre-approval and final approval from start to finish.
-
Stay in touch after settlement to help with future reviews or refinances.
Think of us as your home loan translator and project manager in one.
FAQs for First Home Buyers in Melbourne
1. How much deposit do I need to buy in Melbourne?
Most lenders like to see at least 5–20% of the purchase price:
-
20% deposit – No LMI, more options.
-
10% deposit – Very common, with LMI.
-
5% deposit – Possible, especially with the First Home Guarantee, often with no LMI if you qualify.
Your ideal deposit depends on your income, timeframe and eligibility for schemes. We can help you find a realistic target.
2. Can I buy with a 5% deposit?
Yes, it’s often possible:
-
Under standard bank policies (with LMI), or
-
Under the First Home Guarantee, which can allow 5% deposit without LMI if you and the property meet the criteria.
You’ll still need to show strong income and responsible spending, and you’ll need to cover other costs (stamp duty, legal fees, inspections, etc.), although some of these may be reduced by concessions.
3. What is the First Home Guarantee (first home loan deposit scheme)?
The First Home Guarantee (formerly called the First Home Loan Deposit Scheme) is a federal program that helps eligible buyers purchase a home with as little as 5% deposit while avoiding LMI. The government guarantees the difference up to 20% of the property’s value.
From 1 October 2025, it includes:
-
Expanded eligibility and no income caps in many cases
-
Increased price caps (with higher limits for Melbourne)
-
Unlimited spots rather than strict quotas
A broker can check if your preferred property fits the latest caps and rules.
4. What if I am self-employed or a single parent?
Self-employed buyers
-
You can absolutely get a home loan; lenders will just assess your income differently (e.g. using tax returns, financial statements or BAS).
-
Some lenders are more flexible with newer businesses or variable income — this is where a broker is very helpful.
Single parents / single guardians
-
There are dedicated single parent home loan guarantees that allow very low deposits (e.g. around 2%) with no LMI for eligible borrowers.
-
We’ll help you find lenders and structures that recognise your specific situation (childcare costs, support payments, etc.).
5. Do I need pre-approval before house hunting?
Technically, no – but in practice, yes, it’s strongly recommended:
-
You know your price range, so you don’t waste time on properties you can’t afford.
-
You can make faster, stronger offers, which matters in competitive Melbourne auctions and private sales.
-
You reduce the risk of finance falling over after you’ve signed a contract.
At MKS Lending, we usually recommend organising home loan pre approval before you start seriously searching.
Why MKS Lending Is the Right Choice for First Home Buyers
Buying your first home in Melbourne isn’t just a financial decision, it’s a lifestyle decision. You deserve clear guidance and a team in your corner.
Here’s how MKS Lending supports first home buyers:
-
Local expertise – We understand Melbourne’s market, typical price points and how local lenders think.
-
First home buyer focus – We regularly help first timers navigate grants, guarantees, stamp duty concessions and schemes.
-
Simple explanations – No jargon. We explain rates, fees and features in plain English so you feel confident, not confused.
-
Online tools & calculators – Use our Home Loan Calculator, Borrowing Power Calculator and deposit tools to explore options 24/7.
-
Ongoing support – We’re here for the long term to help you review, refinance or upgrade your home as life changes.
Ready to take the first step?
Whether you’re just starting to save or you’re ready to organise pre-approval, MKS Lending is here to help you move from “someday” to settlement day.
-
Use our Borrowing Power Calculator to get an initial estimate.
-
Try our Home Loan Calculator to see what repayments might look like.
-
Then reach out to our Melbourne home loan broker team for a friendly, obligation-free chat.
General information only: This guide provides general information and does not take your personal objectives, financial situation or needs into account. Always seek personalised advice before making decisions.