Buying your first home is one of the biggest financial decisions you’ll ever make. Whether you’re purchasing a unit in the inner suburbs, a townhouse in the west, or a family home in the outer growth corridors, securing the right first home buyer loan in Melbourne can make all the difference.
With rising property prices, evolving government incentives, and a wide range of lenders and products, navigating the Melbourne first home loan market can feel overwhelming. In this guide, we break down the essential information first home buyers need in 2025, including loan options, grants, and tips for getting approved.
What Is a First Home Buyer Loan?
A first home buyer loan is a mortgage designed specifically for people buying their first residential property. In Melbourne, there’s no single “first home loan” product—most lenders offer standard home loans with features and discounts targeted at first-time buyers.
These may include:
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Lower deposit options
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Lender discounts or fee waivers
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Access to government support schemes
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Flexible repayment terms
The goal is to make it easier for eligible Melburnians to break into the property market and buy their first home in Melbourne.
Current Market Conditions in Melbourne (2025)
As of 2025, Melbourne’s property market remains strong, particularly in outer suburbs like Craigieburn, Tarneit, and Cranbourne, where first home buyers are most active. Median house prices in some areas are still under $600,000, making them ideal for those applying under government schemes like the First Home Guarantee.
Interest rates remain a key consideration. While rates have stabilised slightly after 2024’s increases, it’s more important than ever to compare first home loan interest rates in Melbourne to find the most affordable deal.
Government Schemes for First Home Buyers in Melbourne
Several first home buyer incentives and grants are available in Melbourne to help reduce the upfront cost of buying a property:
1. First Home Owner Grant (FHOG) Victoria
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$10,000 grant for new homes in Melbourne valued up to $750,000
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Applies to brand-new builds or substantially renovated homes
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Available to eligible first home buyers in Melbourne and regional Victoria
2. First Home Guarantee (formerly FHLDS)
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Buy a home with as little as 5% deposit
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The government guarantees the remaining 15% (so no Lenders Mortgage Insurance)
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Property price caps apply (currently $800,000 for Melbourne as of 2025)
3. Stamp Duty Concessions
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No stamp duty on properties up to $600,000
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Discounted stamp duty for properties between $600,001 and $750,000
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Applies to both new and existing homes in Melbourne
4. Shared Equity Scheme (Victorian Homebuyer Fund)
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The government contributes up to 25% of the property price
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You buy with a smaller deposit and repay the government’s share later
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Helps Melbourne first home buyers enter the market sooner
Types of Home Loans for First-Time Buyers in Melbourne
There are several types of home loans suitable for first home buyers in Melbourne:
1. Variable Rate Home Loans
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Interest rate can rise or fall with market conditions
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Often more flexible with features like offset accounts and redraw facilities
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Good for buyers who want to make extra repayments
2. Fixed Rate Home Loans
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Lock in your interest rate for 1–5 years
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Predictable repayments make budgeting easier
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Ideal if you want certainty in your first few years of ownership
3. Split Loans
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Combine the benefits of fixed and variable rates
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Protect part of your loan from interest rate rises while keeping some flexibility
4. Low Deposit Loans
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Some lenders offer loans with deposits as low as 5% or even 2%
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Usually require LMI (Lenders Mortgage Insurance) unless under a government scheme
How Much Can a First Home Buyer Borrow in Melbourne?
Your borrowing capacity depends on several factors, including:
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Your income and employment status
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Your existing debts (credit cards, car loans, HECS)
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The size of your deposit
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Whether you’re applying solo or with a partner
As a rough guide, a couple earning $120,000 per year with no major debts and a 10% deposit could borrow between $550,000 to $700,000, depending on the lender.
How Much Deposit Do You Need to Buy Your First Home?
Traditionally, lenders recommend a 20% deposit, but this isn’t always required.
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With the First Home Guarantee, you can buy with 5% deposit
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Some lenders accept as little as 2%, especially for new builds
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Keep in mind that if your deposit is under 20% and you’re not on a government scheme, you’ll likely need to pay Lenders Mortgage Insurance (LMI)
Saving a bigger deposit gives you more flexibility, lowers your loan-to-value ratio (LVR), and may help you access better home loan interest rates in Melbourne.
Tips to Get Approved for a First Home Buyer Loan in Melbourne
Getting your first home loan approved can feel daunting, but following these steps will help improve your chances:
1. Clean Up Your Finances
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Pay down existing debts
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Close unused credit cards
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Maintain consistent income and spending habits
2. Build a Genuine Savings History
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Lenders like to see regular savings over time (usually 3–6 months)
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Demonstrates financial discipline and lowers risk
3. Get Pre-Approved Before You Buy
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Loan pre-approval gives you confidence when house hunting
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Shows agents and sellers you’re a serious buyer
4. Use a Mortgage Broker
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A broker can compare home loans for first home buyers in Melbourne across 30+ lenders
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Helps match you with a lender that suits your income, deposit, and needs
First Home Buyer Hotspots in Melbourne (2025)
Some of the most popular suburbs for first home buyers in Melbourne include:
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Werribee – Affordable family homes with good infrastructure
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Cranbourne – Plenty of new developments and grants for new builds
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Tarneit – High growth corridor with schools and transport links
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Pakenham – Larger blocks and newer homes under $700,000
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Craigieburn – Good mix of established homes and land packages
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Melton South – Budget-friendly options for entry-level buyers
These areas are often eligible for the First Home Owner Grant and fall within the price caps for government schemes, making them ideal for first home buyers in Melbourne.
How to Apply for a First Home Buyer Loan
Applying for your first home loan in Melbourne involves several key steps:
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Assess your finances and work out how much you can borrow
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Check your eligibility for grants, stamp duty concessions, and government schemes
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Compare home loan products from multiple lenders or speak to a mortgage broker
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Get pre-approved before you make an offer on a home
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Once your offer is accepted, your lender will organise the formal loan approval
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Complete the legal paperwork and settle your home!
Many lenders now offer online applications and digital document verification, making the process faster and more convenient for tech-savvy buyers.
Can You Get a First Home Buyer Loan With Bad Credit?
It’s possible to get a first home loan in Melbourne with bad credit, but it will be more difficult. Lenders may charge a higher interest rate, ask for a larger deposit, or decline your application altogether.
To improve your chances:
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Pay off outstanding debts
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Avoid payday loans or credit defaults
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Work with a specialist mortgage broker for bad credit loans
Some non-bank lenders specialise in helping buyers with less-than-perfect credit histories.
Final Thoughts
Getting your first home loan in Melbourne is an exciting milestone, but it requires careful planning. With the right mix of deposit, budgeting, and government support, many first-time buyers in Melbourne are achieving their property dreams in 2025.
Don’t rush the process—take time to compare lenders, explore your eligibility for grants, and speak with experts who can guide you through the home loan maze.
If you’re ready to buy your first home, speak to a local Melbourne mortgage broker or lender who understands the needs of first home buyers in Victoria. With the right support, your first home is closer than you think.
