Key takeaways:
You don't always need a 20% deposit. Low-deposit home loan options may be available, subject to eligibility and lender criteria.
A low credit score doesn't automatically mean rejection. Lenders consider your broader financial position and apply different credit policies.
Look beyond the interest rate. Compare rates, fees, features and lending requirements when choosing a home loan.
Government assistance may help eligible first-home buyers. Schemes, grants and concessions have different eligibility requirements.
Pre-approval doesn't guarantee final approval. Further borrower, property and lender checks generally apply.
Buying your first home comes with plenty of questions, and common assumptions about deposits, credit scores and home loan approval can make the process harder to understand.
However, in reality, home loan requirements can vary between lenders and depend on your circumstances. Government assistance may also be available to eligible first-home buyers.
In this article, we unpack 10 common first home loan myths, what you need to know and what to check before applying for a home loan.
Myth #1: You need a 20% deposit to get a home loan
You don't always need a 20% deposit to buy your first home. Some lenders offer home loans with smaller deposits, subject to lending criteria and approval.
A larger deposit can still reduce how much you need to borrow. Depending on the lender and loan, a deposit of at least 20% may also help you avoid lender's mortgage insurance (LMI). With a smaller deposit, LMI may apply and may add to your loan or upfront costs.
Some lenders also offer loans at higher loan-to-value ratios (LVRs), allowing you to borrow a greater portion of the property's value. Maximum LVRs and LMI requirements vary by lender, loan and circumstances.
What about the Australian Government 5% Deposit Scheme?
Eligible first-home buyers may be able to buy with a minimum 5% deposit without paying LMI through the Australian Government 5% Deposit Scheme. Housing Australia provides a guarantee to a participating lender, enabling an eligible buyer to borrow up to 95% of the property's value.
Property price caps and other eligibility requirements apply. Buyers must also meet the participating lender's credit and loan approval criteria.
Learn more about the Australian Government 5% Deposit Scheme.
Outside the Scheme, some lenders may offer other low-deposit home loans. Deposit requirements, LMI and lending criteria vary, so it can be worth checking your options before assuming you need to save 20%.
You might also be interested in: Can you buy a house with no deposit in Australia?
Myth #2: A bad credit score means you'll be rejected
A low credit score doesn't automatically mean lenders will reject your home loan application.
Your credit history is one factor lenders may consider alongside your income, expenses, debts and ability to make repayments. A lower score or adverse credit history may affect which lenders or home loan products are available to you. How much weight it carries can also vary by lender and credit policy.
Credit score, credit report and credit assessment: What’s the difference?
These terms are related, but they aren't the same:
Credit score: A number calculated from information in your credit report that may be used when assessing a credit application.
Credit report: A record of your credit history, which can include credit accounts, repayment history, credit enquiries, defaults and certain insolvency information.
Credit assessment: A lender's broader assessment of your application, including your credit history, income, expenses, debts and capacity to repay the loan.
Missed repayments, defaults and other adverse information may limit your home loan options, but lender policies differ. One lender may assess your circumstances differently from another.
What can you do before applying for a home loan?
If you're concerned about your credit history:
Check your credit report: You can request a free credit report every three months from a credit reporting body and ask for corrections if you find inaccurate information.
Make repayments on time: Your repayment history can form part of your credit report.
Review your debts and credit limits: Know what you owe and the credit facilities you have available before applying.
Limit unnecessary credit applications: Credit applications can result in enquiries appearing on your credit report.
Check your borrowing position: Use a borrowing power calculator to estimate your borrowing capacity. Your actual borrowing capacity depends on your circumstances and the lender's criteria.
For more information, read our guide to credit scores and home loans.
You might also be interested in: What affects your credit score and how to improve it
Myth #3: You should stick with your current bank for a home loan
You don't have to get your first home loan from your current bank.
While staying with a familiar lender may seem simpler, a bank generally offers its own home loan products and assesses applications under its own lending policies. Comparing lenders can matter because their policies, products, rates and fees can differ. This may be particularly relevant if you:
Are self-employed or earn variable income.
Have recently changed jobs or employment arrangements.
Have existing debts or financial commitments.
Whichever lender you choose, you'll need to meet its lending criteria, and approval isn't guaranteed.
Bank or mortgage broker: What’s the difference?
Going directly to a bank means considering the home loans that the lender offers.
On the other hand, a mortgage broker can compare options across the lenders on their panel and explain how different lending policies may apply to your circumstances. Aussie provides access to over 25+ leading lenders, including major banks and other lenders.* An Aussie Broker can compare suitable home loan options from the panel, including relevant rates, fees and lending requirements.
You might also be interested in: Banks vs non-bank lenders: What’s the difference (2026 guide)
Myth #4: You can't buy a home without help from your family
You don't necessarily need financial help from your family to buy your first home.
Gifted deposits and family guarantees are options for some buyers, but other pathways may be available depending on your deposit, circumstances and eligibility.
What are your options without family help?
Depending on your circumstances, you could consider:
A low-deposit home loan: Some lenders may accept deposits below 20%, although LMI, lending criteria and other costs may apply.
Australian Government 5% Deposit Scheme: Eligible first-home buyers may be able to buy with a minimum 5% deposit without paying LMI. Property price caps and other eligibility requirements apply.
State or territory assistance: First Home Owner Grants and stamp duty concessions or exemptions may reduce some upfront costs for eligible buyers. Eligibility and benefits vary by state or territory.
Help to Buy: Eligible buyers may be able to purchase with a minimum 2% deposit through the Australian Government's shared equity scheme. Income, property price and other eligibility requirements apply.
We'll cover government assistance in more detail under Myth #9. You can also read our guide to first-home buyer grants and government assistance.
What if your family wants to help?
Family support doesn't have to mean gifting you a deposit.
With a guarantor home loan, an eligible family member may be able to use equity in their property as additional security for part of your loan, subject to lender requirements.
Acting as a guarantor carries financial risks. Borrowers and guarantors should understand their obligations and consider seeking independent legal and financial advice before proceeding.
Learn more about how guarantor home loans work.
Myth #5: Paying rent is cheaper than paying off a mortgage
Renting isn't always cheaper than buying, and buying isn't always cheaper than renting.
The comparison depends on the property price, your deposit and interest rate, local rents and the upfront and ongoing costs of homeownership.
Comparing rent with mortgage repayments alone doesn't tell the full story. Homeowners face additional costs, while principal repayments can gradually reduce the loan balance and build equity in the property.
Renting versus buying: What costs should you compare?
Renting | Buying |
|---|---|
Regular rent payments | Regular mortgage repayments |
Bond and moving costs | Deposit and purchase costs, potentially including stamp duty and conveyancing |
Limited responsibility for major property repairs | Council rates, home insurance, maintenance and other ownership costs |
Greater flexibility to relocate, subject to the lease | Buying and selling can involve significant transaction costs |
Rent doesn't build property equity | Principal repayments can build equity, although property values can rise or fall |
Costs can vary significantly by location and property type. A lower purchase price doesn't necessarily make buying cheaper overall, just as higher rent doesn't automatically mean buying will cost less.
What could a mortgage repayment look like?
Consider a $550,000 property with a 5% deposit of $27,500, leaving a $522,500 home loan.
At an advertised owner-occupier variable rate of 5.99% p.a. (6.02% p.a. comparison rate) from Aussie's lender panel, principal-and-interest repayments over 30 years would be approximately $3,129 per month. The rate was advertised as at 14 September 2026 and is subject to change.
But mortgage repayments are only part of the cost. A buyer may also need to budget for stamp duty, conveyancing, rates, insurance, maintenance and other costs. With a 5% deposit, LMI may also apply unless an exemption or eligible pathway, such as the Australian Government 5% Deposit Scheme, applies.
Note: Example for illustrative purposes only. Based on a $550,000 property, $27,500 deposit, $522,500 loan, 5.99% p.a. variable interest rate (6.02% p.a. comparison rate), 30-year term and principal-and-interest repayments. Repayments are calculated using the interest rate, not the comparison rate. The example excludes LMI, stamp duty, conveyancing, government charges, rates, insurance, maintenance and other costs. Actual rates, repayments, fees and costs depend on the loan, lender and borrower's circumstances.
You might also be interested in: Where mortgage repayments are cheaper than rent in Australia right now
Myth #6: All home loans are the same
Home loans can differ in their interest rates, repayment structures, fees and features. Understanding these differences helps first-home buyers compare options that suit their circumstances.
Fixed, variable and split home loans
A key difference is how the interest rate is structured:
Loan structure | How it works |
|---|---|
The interest rate is fixed for an agreed period, providing greater repayment certainty during that time. Limits on extra repayments and break costs may apply. | |
The interest rate can rise or fall, so repayments may change. Available features and conditions vary by lender and product. | |
Part of the loan has a fixed rate and part has a variable rate, combining features of both structures. |
No single loan structure suits everyone. Consider how much repayment certainty you want, whether you plan to make extra repayments and which features matter to you.
You might also be interested in: Fixed and variable rates and balloon payments
What home loan features should you compare?
Features vary between products and may come with conditions, limits or additional costs.
Loan feature | What it means |
|---|---|
A linked account where the balance is generally offset against your home loan balance when interest is calculated. | |
May let you access eligible extra repayments you've made, subject to the lender's terms and conditions. | |
Lets you repay more than the required amount. Limits or fees may apply, particularly with fixed-rate loans. | |
Repayment frequency | Depending on the loan, repayments may be available weekly, fortnightly or monthly. |
You might also be interested in: What home loan features can you add to your mortgage?
Principal and interest vs interest-only repayments
With principal-and-interest repayments, each repayment generally covers interest and reduces the amount borrowed. If you make the required repayments, the loan is structured to be repaid over the agreed term.
With interest-only repayments, scheduled repayments generally cover only interest for an agreed period, rather than reducing the principal. Repayments will generally increase when the interest-only period ends and principal-and-interest repayments begin. An interest-only loan may also cost more in interest over its term than an equivalent principal-and-interest loan.
Available repayment options depend on the lender, loan product and your circumstances.
You might also be interested in: Switching from interest-only to principal and interest
Myth #7: Getting pre-approved means you're guaranteed a home loan
Home loan pre-approval doesn't guarantee final approval. Also known as conditional approval, pre-approval indicates how much a lender may be willing to lend based on the information assessed and any applicable conditions.
Pre-approval can help you set a buying budget, but the lender will generally complete further borrower and property checks before granting full approval.
Pre-approval vs full approval: What’s the difference?
Pre-approval | Full approval |
|---|---|
A conditional indication based on information assessed by the lender | Approval after required borrower and property checks are completed |
Can help establish a budget before you buy | Allows the home loan to progress towards settlement |
Conditions and an expiry period generally apply | Loan documents and remaining conditions may still need to be completed before settlement |
What can affect your home loan after pre-approval?
Your application may need to be reassessed if:
Your financial circumstances change: New debts, changes to employment, income, or expenses may affect the lender's assessment.
The property doesn't meet lender requirements: The lender will generally assess the property before providing full approval.
The lender's valuation is lower than the purchase price: This can affect your loan-to-value ratio (LVR) and how much the lender is prepared to lend.
Your pre-approval expires: Pre-approvals generally have a set validity period, after which updated information or reassessment may be required.
Conditions and validity periods vary by lender, so review your pre-approval carefully before making an offer or signing a contract.
Learn more about how home loan pre-approval works.
You might also be interested in: 6 ways to make the most of home loan pre-approval
Myth #8: The lowest interest rate is always the best home loan
The lowest advertised interest rate doesn't necessarily mean the lowest overall cost or the best home loan for you. Fees, features, restrictions and future rate changes can also affect what you pay and how the loan works for you. That's why it's important to look beyond the headline rate when comparing home loans.
Why does the comparison rate matter?
The comparison rate combines the interest rate with certain fees into a single percentage, based on a prescribed loan amount and term. This can help you compare the cost of different home loans.
However, it doesn't include every fee or cost and may not reflect what you'll pay based on your loan amount and term. Consider the interest rate and comparison rate alongside the loan's fees, features and conditions.
What should you compare beyond the interest rate?
Check:
Interest rate: The rate used to calculate interest on your loan.
Comparison rate: An indication of cost that includes the interest rate and certain fees.
Fees: Check for application, annual, package and other upfront or ongoing fees.
Offset and redraw: Understand how these features work and whether fees, limits or conditions apply.
Extra repayments: Some loans restrict additional repayments, particularly during a fixed-rate period.
Fixed-rate break costs: Breaking or changing a fixed-rate loan early may result in additional costs.
Revert rates: Fixed or introductory rates may change when the initial period ends. Check what rate is expected to apply afterwards, noting it may change before then.
Eligibility: Advertised products and rates may only be available to borrowers who meet specific lending criteria.
A lower rate can still be attractive, but the broader question is what the loan could cost overall and whether its features and conditions suit your needs.
See Aussie's current home loan interest rates to compare available options.
Myth #9: Once you have a home loan, you're locked in
Taking out a home loan doesn't mean you have to keep the same loan for the entire term. You can review your loan as interest rates, products and your circumstances change. Refinancing may allow you to switch lenders or change your loan structure or features, subject to lender approval.
When should you review your home loan?
There's no single time that suits every borrower, but it may be worth reviewing your loan when:
Your interest rate or fees change: Compare what you're paying with other available options.
Your fixed-rate period is ending: Check the rate, repayments and features that will apply afterwards.
Your circumstances change: Changes to your income, expenses or financial commitments may affect what you need from your loan.
You want different features: You may want an offset account, redraw facility or different repayment options.
You're considering refinancing: Switching loans or lenders could change your rate, fees, features or loan structure.
You want to access equity: If your property value has increased or your loan balance has fallen, you may have built equity. Borrowing against equity increases your debt and is subject to lender criteria and approval.
What should you consider before refinancing?
A lower advertised rate doesn't automatically make refinancing worthwhile. Depending on your current and new loan, switching costs can include discharge, application and valuation fees, as well as fixed-rate break costs. Compare these costs with the potential benefits before refinancing.
Refinancing is also a new credit application. The lender will assess your income, expenses, debts, property and other relevant circumstances against its lending criteria.
If you're refinancing to consolidate debt, consider the total cost, not just the monthly repayment. Moving shorter-term debt into a home loan and repaying it over a longer period could increase the total interest paid, even at a lower interest rate.
Learn more about how home loan refinancing works or arrange a home loan review.
You might also be interested in: Refinancing a fixed rate mortgage: Understanding break fees
Myth #10: Government first-home buyer schemes are too hard to access
Government assistance can have detailed eligibility rules, but it may still be worth checking whether you qualify. Depending on your circumstances and where you buy, federal, state or territory programs may help reduce some upfront barriers to buying your first home.
The key is understanding how each program works. For example, the Australian Government 5% Deposit Scheme and Help to Buy have different deposit requirements, eligibility criteria and ownership conditions.
At a glance: First-home buyer government assistance
Program | What first-home buyers should know |
|---|---|
A state or territory grant for eligible first-home buyers. Grant amounts, property requirements and eligibility vary depending on where you buy. | |
Eligible first-home buyers may be able to buy with a minimum 5% deposit without paying LMI. There are no income caps and unlimited places, but property price caps, other eligibility requirements and lender approval apply. | |
An Australian Government shared-equity scheme. Eligible buyers can purchase with a minimum 2% deposit, with the Government contributing up to 40% of the purchase price of a new home or 30% of an existing home. Income limits, property price caps and other eligibility requirements apply. | |
States and territories may offer concessions or exemptions to eligible first-home buyers. Thresholds and eligibility depend on where and what you buy. |
What's the difference between the 5% Deposit Scheme and Help to Buy?
Under the Scheme, the government provides a guarantee to a participating lender. Eligible first-home buyers may be able to purchase with a minimum 5% deposit without paying LMI. There are no income caps or limits on places, although property price caps and other eligibility criteria apply.
Help to Buy works differently because the Government takes an equity share in the property. Eligible buyers need a minimum 2% deposit, and the Government can contribute up to 40% of a new home's purchase price or 30% of an existing home's purchase price.
For the 2026–27 financial year, there are 10,000 places nationally. Income limits are $103,000 for individual applicants and $165,000 for joint applicants or single parents. These thresholds are indexed annually.
Property price caps and other requirements also apply. Because Help to Buy is a shared-equity arrangement, the Government generally shares proportionally in increases or decreases in the property's value when it repays its equity share.
It is also important to note the two schemes cannot be used together. Help to Buy involves a Government equity share, while the 5% Deposit Scheme provides a guarantee to a participating lender.
You might also be interested in: 5% deposit vs Help to Buy vs Aussie Boost: Which option could help you buy sooner?
What to know before applying for your first home loan
Once you understand the common first home loan myths, focus on your own financial position. Before applying:
Estimate your borrowing power and repayments: Use a borrowing power calculator and home loan repayment calculator to get an initial estimate. Your actual borrowing capacity depends on your circumstances and the lender's criteria.
Check your deposit and buying costs: Factor in your deposit plus potential costs such as stamp duty, conveyancing and other purchase expenses.
Review your credit report: Check the information recorded and request corrections if you find errors.
Check first-home buyer assistance: See whether the Australian Government 5% Deposit Scheme, Help to Buy, First Home Owner Grant or state or territory concessions may apply. Eligibility requirements vary.
Compare home loans: Look beyond the interest rate to the comparison rate, fees, features and eligibility requirements.
Understand pre-approval: Pre-approval can help set your buying budget, but it's conditional and doesn't guarantee full approval.
Making sense of your first home loan options
Remember, first home loan requirements aren't one-size-fits-all.
How much deposit you need, how a lender assesses your application and which home loan options are available can depend on your circumstances and the lender's criteria.
Understanding your deposit options, government assistance, borrowing position and loan features can help you make a more informed first-home buying decision. Before applying, consider your deposit and purchase costs, check your credit position, compare home loans and understand eligibility requirements that apply.
An Aussie Broker can help you compare suitable home loans from Aussie's lender panel and guide you through the application process, subject to lender criteria and approval.
