Compare first home buyer loans

• Government schemes can cut what you need up front.
• Stamp duty exemptions or discounts in every state, under price limits.
• Stop paying rent and start building equity.

• –Buying costs add up: stamp duty, legal fees, inspections.
• –Schemes have price caps and rules on living in the home.
• –A big loan with little equity at first.

• The interest rate. It's quoted as a yearly rate, but interest is worked out daily on your balance and charged monthly. A variable rate can rise or fall, usually but not always with the Reserve Bank's cash rate. A fixed rate stays the same for a set period, then usually becomes variable. You can also split the loan between the two.
• The comparison rate, shown beside the interest rate. It adds the lender's standard fees for an example loan, which makes loans with different fees easier to compare.
• Fees, such as an application or establishment fee, ongoing package fees, a fee for switching loans, a break fee for leaving a fixed rate early, and a discharge fee when you pay the loan off or move it.
• The term, usually 25 or 30 years. A longer term lowers each repayment; a shorter one cuts the interest you pay overall.
• An offset account. Money in a linked transaction account, such as your pay and savings, is taken off the loan balance when interest is worked out.
• Extra repayments and redraw. Paying extra clears the loan sooner, and redraw lets you take the extra back out if you need it.

Most lenders prefer a 20% deposit, but there are ways in with less. With a smaller deposit you'll usually pay lenders mortgage insurance; for example, LMI on a $500,000 loan with a $50,000 deposit can run to around $10,000, though it varies by lender and can often be added to the loan. A family guarantor or a government scheme can let you avoid it.

With less than a 20% deposit, most lenders charge lenders mortgage insurance (LMI). It protects the lender, not you, if you can't repay, and can cost thousands of dollars, either upfront or added to the loan. The cost depends on the property's value, the loan amount, the size of your deposit, and the lender's insurer.

LMI doesn't get you off the hook: if the home is sold for less than you owe, the insurer can still pursue you for the shortfall. You may avoid it with a guarantor, through a government scheme, or with a lender's waiver for some professions, such as doctors, lawyers and accountants. A mortgage broker can tell you which lenders take small deposits and how their LMI costs compare.

A parent or other family member can guarantee part of your loan, usually with the equity in their own home. Many lenders will then lend more than 80% of the price, sometimes all of it, without LMI.

The guarantor is responsible for the guaranteed amount if you can't repay, so it's a serious commitment. Most lenders insist they get independent legal advice first, and the guarantee can usually be released once you've paid the loan down or the property has grown in value.

Check what you're eligible for before you apply. Each scheme has its own rules and price limits.

• The 5% Deposit Scheme, run by Housing Australia, lets eligible first home buyers buy with a 5% deposit without paying LMI.
• The Family Home Guarantee lets eligible single parents and legal guardians buy with a 2% deposit.
• The First Home Owner Grant is a one-off payment from your state or territory, mostly for newly built homes.
• Stamp duty discounts or exemptions for first home buyers, set by each state and territory.
• The First Home Super Saver Scheme lets you save part of your deposit through voluntary super contributions.

Lenders look at your income, your debts and credit limits, your spending and your credit history. Paying down cards and cutting card limits can raise how much you can borrow.

Pre-approval tells you what a lender may lend, so you can house hunt with a budget. Each application can show on your credit report, so compare first and apply to one lender at a time.

• Renting and investing, if buying where you want to live isn't affordable yet.
• Buying with a guarantor.
• Rentvesting: buying where you can afford and renting where you want to live.