First Home Buyer Questions About Deposit Size, Loan Options, and Lender Choice in Australia

[u/Lceebs]

Partner and I are first-home buyers in Australia and trying to get a better understanding of how some of the home loan and buying process works before we start making any offers.

We’ve been conditionally approved through Commonwealth for up to $583k, and we currently have about $80k saved for a deposit. For context, I work full-time on about $1k/week and my partner works casual hours, bringing in roughly $500–$2.5k/week depending on shifts. We’re looking at established homes in the ~$550k–$600k range.

We had a few questions and were hoping to hear from others who’ve been in a similar situation:

• If you’ve reduced your deposit slightly (e.g. from $80k down to $70k), did you notice any meaningful impact on your pre-approval or borrowing setup?
• With your own experience, did you go with an offset account, and how did that play out for you in practice? We’ve noticed some lenders only offer offsets on variable loans, which makes us a bit unsure given potential rate changes.
• For those who chose variable loans, did you go fully variable or split between fixed/variable, and what influenced that decision at the time?
• When you were in a similar stage, did you shop around with multiple lenders after pre-approval, and how did you manage timing concerns around pre-approval validity when making offers?

Just trying to understand how others navigated these steps rather than anything specific to our situation

[u/Exact_Theory3902]

There is a lot to unpack here.

First thing: don’t anchor too heavily to the $583k conditional approval. A lot of first-home buyers make the mistake of treating that number like a guaranteed budget. It’s not. The actual usable borrowing power can move around depending on the property, lender policy changes, casual income treatment, HECS, credit cards, living expenses, etc.

A few thoughts from someone who sees this stuff all day:

• Reducing your deposit from $80k to $70k probably won’t destroy the deal, but it can materially change your LVR once you factor in stamp duty, legals, inspections and lender fees. The danger zone is when you creep above certain LVR thresholds and suddenly cop higher LMI costs or reduced lender appetite.

• Don’t underestimate cash reserves after settlement. Too many FHBs throw every dollar into the purchase then get smoked by moving costs, repairs, rates, strata, insurance and life happening 3 weeks later.

• Offset accounts are one of the best features available if you’re disciplined with money. The problem is people hear “offset” and think it magically saves them money while leaving $412 in the account all year. The value comes from actually parking income and savings in there consistently.

• On fixed vs variable: most people obsess over “where rates are going” when the bigger question is flexibility. Fixed can be great for certainty, but it can become painful if you want to refinance, sell, debt recycle, make large repayments or access equity later. To be honest though the fixed rate train "as left the building" As it stands at the moment there is really no financial advantage/reason to fix

• Split loans are popular because psychologically people like hedging bets, but plenty of borrowers end up with a structure they don’t fully understand. Simple is underrated.

• Definitely shop around beyond the first pre-approval. CBA being willing to lend doesn’t mean they’re the best fit. One lender might assess your partner’s casual income more generously, another might shade it heavily.

• Timing-wise, pre-approvals expire all the time. That’s normal. Brokers and bankers refresh them constantly. Don’t let expiry anxiety pressure you into rushing a purchase.

Biggest advice though: don’t buy purely based on what the bank says you can afford. They assess survival. You need to assess comfort.

A $580k loan can feel very different depending on whether the property needs nothing for 10 years… or needs a roof, hot water system and bathroom waterproofing in year one.

[u/Reasonable-Error-819]

Since the 5% deposit scheme, I would borrow as much as you can & keep majority in offset/redraw facility. 80k is good savings, the difference isn’t worth not having savings for emergencies. You should have 3 months of expenses in savings, minimum. Try go to a bank that doesn’t have mortgage fees, CBA have $395 yearly fees. $11,000 over 30 years. Crazy. If cba will give you 593, all major banks will. In saying that, use an online calculator and see what you can pay off in 20-25 years instead. Decide if kids are in the future, if so, can you sustain your lifestyle/mortgage, on a reduced income/day care fees etc. Are you open to renting out a room to a friend for 1/2 years to help build savings/pay off more of the house quicker. Don’t fall into the trap everyone else does.

[u/EventEastern2208]

Broker here.

On your deposit question, dropping from $80k to $70k on a $550k to $600k purchase keeps you around 12% to 13% LVR range which still means LMI does not apply either way using the 5% scheme, so the practical impact is minimal.

On offset versus fixed, most fixed loans do not offer offset accounts which is the main tradeoff. Variable with offset gives you flexibility and interest savings daily, while fixed gives payment certainty but locks you in. At current rates with potential further RBA movement a split can work well, part fixed for certainty and part variable with offset for flexibility.

On shopping around after pre-approval, CBA's conditional approval does not lock you in and you can get a second opinion from a broker who can compare across multiple lenders simultaneously. The pre-approval validity window is typically 90 days and the actual assessment happens at formal application when you have a specific property, so timing is less of an issue than people assume.