Simple hacks to save on your first home loan

Getting your first home loan sorted without overpaying

Your first home loan doesn't need to be complicated, but it does need to be set up properly from the start. The difference between a loan that works for you and one that costs you more than it should comes down to a handful of decisions you make before you sign anything.

Most first-time buyers focus entirely on the interest rate and miss the features that actually matter once you're in the property. An offset account can save you thousands over the life of the loan without you changing a single habit. The ability to make extra repayments without penalty means you can pay the loan down faster when you've got spare cash. And choosing between fixed, variable, or a split can change how much flexibility you have when your circumstances shift.

We work with first-time buyers every week, and the ones who get it right early are the ones who think past settlement and consider how they'll actually use the loan over the next five to ten years.

Why offset accounts matter more than most first-time buyers realise

An offset account is a transaction account linked to your home loan that reduces the interest you pay based on the balance sitting in it. If you've got a loan amount of $500,000 and $10,000 in your offset, you only pay interest on $490,000. The money in the offset stays accessible, so you're not locking it away like you would with extra repayments straight onto the loan.

Consider a buyer who settles on a two-bedroom unit and keeps their emergency fund, tax savings, and everyday banking in the offset. Over a year, even with an average balance of $8,000, they're saving interest on that amount every single day. At current variable rates, that adds up quickly without them needing to change how they manage money. They still have access to the cash if something comes up, but it's working to reduce their interest in the meantime.

Not every loan product comes with an offset, and some lenders charge extra for it. If you're comparing home loan options, check whether the offset is included and whether it's a full offset or a partial one. Partial offsets only reduce your interest by a percentage of the balance, which makes them far less useful.

Fixed vs variable vs split: how to pick the structure that suits you

A variable rate moves with the market, so your repayments can go up or down depending on what the Reserve Bank and your lender do. A fixed rate locks in your interest rate for a set period, usually between one and five years, so your repayments stay the same no matter what happens with rates. A split loan gives you both, with part of your loan on a fixed interest rate and part on a variable interest rate.

There's no universal answer, but there is a structure that usually makes sense for first-time buyers. If you want certainty for the first few years and you're budgeting carefully, fixing part of your loan can help you plan without worrying about rate rises. But if you fix the whole amount, you lose access to features like offset accounts and the ability to make extra repayments without hitting break costs.

A split loan lets you lock in some certainty while keeping part of the loan flexible. You might fix 50% or 60% of the loan amount for three years and leave the rest variable with an offset attached. That way, you've got stable repayments on the fixed portion and the ability to throw extra cash at the variable portion when you can. It's a middle ground that works well if you're not sure where rates are headed but you still want some protection.

In our experience, buyers who go for a full fix often regret it a year or two later when they want to make extra repayments or refinance and realise they're stuck with penalties.

What the loan application process actually involves

Applying for a home loan means proving you can afford the repayments and that you've saved the deposit without borrowing it from someone else. Lenders want to see your income, your expenses, your savings history, and any other debts you're carrying. They'll also look at the property you're buying to make sure it's worth what you're paying and that it meets their lending criteria.

You'll need payslips, bank statements, tax returns if you're self-employed, and proof of your deposit. If you've received a gift from family, most lenders will accept it as long as it's declared and documented properly. The application itself can take anywhere from a few days to a few weeks depending on how quickly you provide documents and whether the lender needs anything else.

Getting a home loan pre-approval before you start looking gives you a clear idea of your borrowing capacity and shows agents and sellers you're ready to move. Pre-approval doesn't lock you into that lender, but it does give you a head start once you've found a place.

How Lenders Mortgage Insurance affects your deposit and loan setup

If your deposit is less than 20% of the property value, your loan to value ratio sits above 80%, and most lenders will require you to pay Lenders Mortgage Insurance. LMI protects the lender if you default, but you're the one who pays for it. The cost depends on your deposit size and the loan amount, and it can range from a few thousand dollars to tens of thousands on higher-value properties.

You can usually add the LMI premium to your loan amount rather than paying it upfront, but that means you're paying interest on it for the life of the loan. Some lenders offer discounts on LMI for certain professions or if you're buying in specific locations. If you're a first-time buyer using a government scheme or family guarantee, you may be able to avoid LMI altogether even with a smaller deposit.

LMI isn't necessarily a reason to delay buying. If property values are rising and waiting another year to save a 20% deposit means you're priced out of the area you want, paying LMI might still make sense. The key is understanding what it costs and factoring that into your overall budget.

Choosing between principal and interest or interest-only repayments

Principal and interest repayments mean you're paying down the loan amount as well as covering the interest each month. Interest-only repayments mean you're only covering the interest, so the loan amount doesn't reduce. For an owner-occupied home loan, principal and interest is almost always the right call because you're building equity from day one.

Interest-only loans are mostly used by investors who want lower repayments and plan to sell the property or refinance later. As a first-time buyer, you want to build equity and own more of the property over time. Paying principal and interest from the start also means you'll pay less interest overall because the loan balance is shrinking with every repayment.

Some buyers ask about interest-only because the repayments are lower, but the trade-off is that you're not getting anywhere with the loan itself. If you're stretching to afford the property, it's worth reconsidering whether it's the right purchase rather than switching to interest-only just to make the numbers work.

How portable loans help if you move before the loan term ends

A portable loan is one you can take with you if you sell your property and buy another one before the loan term is finished. If you've got a fixed interest rate home loan and you sell, you'd normally be hit with break costs for ending the fixed period early. A portable loan lets you transfer the fixed rate and remaining balance to your next property without penalty.

Not every lender offers portability, and the ones that do often have conditions around timing and loan amounts. If you're buying your first home but you know there's a chance you'll upgrade or relocate in the next few years, it's worth checking whether the loan product includes portability. It won't cost you anything to have it as an option, but it can save you a lot if you need it.

If you're looking at refinancing down the track, portability might not matter as much because you'd be switching lenders anyway. But if you want to stick with your current lender and rate, portability gives you that flexibility.

What to ask your broker before you settle on a loan structure

Before you commit to a loan, ask whether the product includes an offset account, whether you can make extra repayments without penalty, and what the comparison rate actually covers. The advertised interest rate is only part of the picture. The comparison rate includes fees and gives you a truer sense of what the loan will cost, but even that doesn't account for features like offset or redraw.

Ask about ongoing fees, how long any rate discount lasts, and whether the lender has a reputation for passing on rate cuts when the Reserve Bank moves. Some lenders are quick to raise rates but slow to drop them, and that can cost you over time. If you're considering a construction loan or planning to use the property as an investment later, make sure the loan structure allows for that without needing to refinance.

We'd rather spend an extra hour going through your options properly than have you call us six months later wishing you'd set things up differently. The loan structure you choose now will affect your repayments, your flexibility, and how much interest you pay for years to come.

Call one of our team or book an appointment at a time that works for you.

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