First Home Buyer Costs: What to Budget For

The deposit is only the beginning. A first home comes with a cluster of other upfront costs — and missing them is a classic first-buyer mistake.

Plantrino Guides · Updated 2026 · About a 7-minute read

Saving a deposit feels like the finish line for a first home buyer. In reality it is closer to the halfway point. Around the deposit sits a ring of other costs that must be paid in cash, and buyers who plan only for the deposit can find themselves short at the worst possible moment. This guide lays out what to budget for.

The Deposit

The deposit is the portion of the price you pay yourself, with the mortgage covering the rest. A larger deposit has real advantages: it shrinks the loan, reduces the interest you pay over time, and — importantly — can help you avoid the insurance cost described below. Many buyers aim for a deposit of around 20% of the price for this reason, though smaller deposits are common.

Lenders also care about where the deposit came from. Many want to see that at least part of it is genuine savings — money you saved steadily over months, visible in your bank statements — rather than a lump sum that appeared last week. A gift from family can still count towards the deposit, but the lender may apply extra conditions, so ask how your lender treats gifted funds before you rely on them.

Loan-to-Value Ratio: the Number Lenders Watch

Lenders express your deposit as a loan-to-value ratio (LVR) — the loan amount divided by the property value. Buy a $600,000 home with a $120,000 deposit and you borrow $480,000: an LVR of 80%. Put down $60,000 instead and you borrow $540,000: an LVR of 90%.

The LVR drives two things. First, lenders typically reserve their sharpest interest rates for lower-LVR loans. Second, once the LVR climbs above a threshold — commonly 80% — lenders mortgage insurance usually enters the picture. Knowing your LVR before you start inspecting homes tells you which costs you are walking into.

Stamp Duty

Stamp duty is a state-based tax on the property purchase, and for many buyers it is the largest cost after the deposit. It can run into the tens of thousands. The encouraging news for first home buyers is that most states offer concessions or exemptions — sometimes substantial — up to certain price thresholds. The rules vary by state, so this is essential to check early, because it can change your whole budget.

Two details trip buyers up. The thresholds are price caps, so a home just above your state's cutoff can attract dramatically more duty than one just below it. And the concessions often distinguish between new and established homes, or between buying a home and buying vacant land to build on. Check the current rules with your state's revenue office before you settle on a price range, not after.

Lenders Mortgage Insurance

If your deposit is below a certain share of the property value — often around 20% — the lender may require Lenders Mortgage Insurance (LMI). This is a one-off cost that protects the lender, not you, if the loan cannot be repaid. It can add a meaningful sum, and it is one of the strongest reasons to build a larger deposit if you can. Some first home buyer schemes are designed to help buyers avoid LMI.

The premium is calculated from your loan size and LVR — the bigger the loan and the higher the LVR, the more it costs — and lenders can usually quote it before you apply. Many buyers do not pay it in cash: the premium can often be capitalised, meaning it is added to the loan. That eases the upfront squeeze, but you then pay interest on the premium for the life of the loan, so a capitalised premium quietly costs more than its sticker price.

A Worked Example: the Cash You Actually Need

Illustrative numbers make the gap between "deposit saved" and "ready to buy" concrete. Suppose you are buying a $600,000 first home with a 10% deposit, and — purely for illustration — your quotes come back like this:

• Deposit (10%): $60,000
• Stamp duty after a partial first-buyer concession: $10,000
• LMI premium paid upfront: $10,000
• Conveyancing and legal work: $2,000
• Building and pest inspections: $600
• Loan, registration and transfer fees plus moving: $1,500

Total cash at or before settlement: $84,100 — about 40% more than the deposit alone. Every figure except the deposit will differ for your state, lender, and property, which is exactly the point: get real quotes for each line early, because the deposit is the only number you control directly. If the same buyer capitalised the LMI instead of paying it in cash, the upfront total would drop to about $74,100, but the loan would grow from $540,000 to roughly $550,000 and interest would accrue on the extra $10,000 for up to 30 years.

Legal and Conveyancing Fees

Transferring property ownership involves legal work — reviewing contracts, conducting searches, and handling settlement. Whether you use a solicitor or a conveyancer, this is a necessary cost. It is far smaller than stamp duty, but it is not optional.

Building and Pest Inspections

Before committing, it is strongly advisable to have the property professionally inspected for structural issues and pests. This is a modest cost that can save an enormous one — discovering a serious problem before you buy is vastly better than after. Treat it as cheap insurance, not an expense to skip.

Other Costs to Remember

• Loan application or establishment fees charged by the lender.
• Mortgage registration and transfer fees charged by government.
• Moving costs — removalists, connections, and the small expenses of settling in.
• Council and utility adjustments at settlement.
• Insurance — building insurance is typically needed from settlement.

First Home Buyer Schemes

Governments often run schemes specifically to help first buyers — these can include grants, stamp duty concessions, and arrangements that reduce the deposit needed or help avoid LMI. Eligibility, value, and availability change over time and differ by state. They can make a genuine difference, so it is well worth researching what is currently available where you plan to buy.

Treat schemes as a bonus, not a foundation. Places in some programs are capped, price and income eligibility limits shift, and settlement timing can affect whether you qualify. Build a budget that works without the scheme; if you then secure one, the savings strengthen your buffer instead of rescuing your plan.

Common Mistakes First Buyers Make

• Treating the whole savings balance as the deposit. If you have $80,000 saved and commit all of it as deposit, there is nothing left for stamp duty, legal fees, or the move. Work out the side costs first, subtract them, and what remains is your true deposit.
• Assuming the stamp duty concession applies. Concessions have price caps, property-type rules, and residency conditions that differ by state. A buyer who budgets for zero duty and then falls outside the rules can be tens of thousands short.
• Forgetting that LMI sits on top of everything else. Buyers who stretch to a 10% or 5% deposit sometimes discover the LMI quote only late in the approval process. Ask lenders for the premium estimate early — and if you capitalise it, remember the loan (and its interest) grows.
• Draining the emergency fund to hit 20%. Avoiding LMI is worthwhile, but not at the cost of moving in with an empty account. A slightly smaller deposit with a real buffer often beats a bigger deposit and no safety net.
• Skipping inspections to move faster in a hot market. Waiving the building and pest check saves days and a few hundred dollars; a missed structural or termite problem can cost more than every other item in this guide combined.

Frequently Asked Questions

Buying a first home is not just about the deposit — it is the deposit plus stamp duty, possible LMI, legal fees, inspections, and a handful of smaller costs, with a buffer left over. Map every one of them early. The buyers who plan for the full picture move in with confidence rather than a nasty surprise.