Buying a house in Australia

A step-by-step guide from saving a house deposit to moving in

1. Set an affordable house budget

Avoid mortgage stress

As of 2023, roughly 1.5 million Australians (and growing) are in mortgage stress, which is negatively impacting their lifestyle, health and wellbeing.

A good start is not buying more house than you can afford. While this sounds simple, you need to be thinking about what you could afford in a range of scenarios, not just your current circumstances. For example, how much could you afford if:

  • You lost your job?
  • You got burnt out at work, so decided to move to a less stressful role with a lower salary, or cut back on overtime?
  • You decided to change careers, which required a couple years of retraining and/or apprenticing?
  • You decided to have kids, took some time-off work, then went back part-time and had to cover childcare fees?
  • Interest rates went up another 3%?

Mortgage stress is often defined as housing-related costs being more than 30% of your total gross/pre-tax income where housing-related costs include mortgage repayments plus other housing costs. These other costs include council rates, home maintenance, home insurance, water & sewerage, etc., which can quickly add up to $10,000 per year.

Confirm your borrowing power

You can get a rough sense of how much you can borrow using the online calculators on lenders' website, such as:

While these calculators ask about your current income and expenses, I strongly recommend checking the loan you can afford in the not-so-great scenarios outlined above (i.e., less income, higher expenses, higher interest rates). You may be setting yourself up for stressful times if you take the maximum loan available based on the "best case" scenario (i.e., two full-time incomes, low expenses and low interest rates).

2. Identify government assistance available

Government assistance is provided at both the national and state/territory level, so unfortunately there's no single Government website that lets you know everything that's available to you. As such, your best bet is the real estate websites that keep abreast of the regular changes in government assistance available, such as:

3. Allow for transaction costs

The transaction costs involved in buying a house can catch people by surprise and can easily add up to over $15,000!

When working out how much you money you need to save, you need to consider both the cost of the property, plus these transaction costs. For a first home worth $600-800k, without any concession, you'll need to consider:

  • Stamp/transfer duty ($15-25k)
  • Title transfer fee ($2-3k)
  • Conveyancer/solicitor ($1-2k)
  • Building and pest inspections ($1-2k)

Websites like Mortgage Monster can help you identify the relevant transaction costs and concessions based on your circumstances.

4. Save a house deposit (and decide whether to pay LMI)

Once you know your borrowing power, government assistance available, your house price range, and transaction costs, then you can figure out how much deposit you'll need to save up. Most lenders expect you to have a 20% deposit to provide them some protection in case house prices go down. If you're saving $1,000 per month towards your house deposit, then it'd take you 10 years to save up a 20% house deposit for a $600k property!

This is when people start to look for ways to get into the market sooner to avoid 10 years of rising house prices while they save up their deposit. If you're looking at a $600k house and the price grows at 3% for the next 10 years, then the price will be more like $800k by the time you've saved up your deposit - that's an extra $200k! Ultimately, it comes down to what you think's going to happen to house prices over the next couple of years. If you think prices are rising fast, then you might want to find a way to buy sooner (e.g., paying LMI). However, if you think prices will be stable, or even fall, then you can take your time.

If you want to get into the market sooner, there are multiple options available:

  1. Get LMI waived with a 15% deposit
  2. Use the First Home Guarantee to buy with a 5% deposit
  3. Hire a financial coach to help you save a house deposit faster
  4. Be in the “right” job and get LMI waived
  5. Get a guarantor to help you buy with little-to-no deposit

Each option has pros and cons, so check out our article on how to avoid LMI, so you can decide the right path for you.

5. Obtain home loan pre-approval from your lender

As your house deposit grows and you're starting to look at property listings, it's a good idea to get a home loan pre-approval from your lender. It gives you a bit more confidence in your borrowing power and reduces the likelihood of surprises down the line.

Your lender will ask you about your finances, including your income, employment status/history, government assistance, and household expenses by category.

6. Build your ideal home checklist

You can waste a lot of weekends driving around open homes if you're not clear upfront on your home buying criteria.

Getting clear on what is a "must have" (e.g., 3 bedrooms), "nice to have" (e.g., master ensuite), or "no go" (e.g., only one bathroom), makes it very easy to rule in/out a property when a new listing pops up in your real estate app. With clear criteria, you'll probably be able to immediately rule out over 90% of properties.

If you're buying with a partner, it's important that you develop and agree on this checklist together. You'll probably keep tweaking it as you inspect properties and learn more about what's important to you.

Location criteria

  • Are there certain school catchments you want to be in?
  • What level of crime are you comfortable with?
  • Would you rule out a property under a flight path because you're sensitive to noise?
  • What level of environmental risk are you comfortable with (e.g., floods, bushfires, etc.)?

Walkability and commute criteria

  • Is being close to public transport important to you? How far are you willing to walk to the nearest stop/station?
  • What's your ideal commute to work and what's simply too far away (e.g., more than 40 minutes)?
  • Do you want to be near dedicated cycle paths?
  • How close do you want to be family and friends? Would a 30-minute drive put you off visiting as much as you'd like?
  • Do you want to be walking distance to a supermarket, or are you happy to drive to pick-up milk, bread, etc.?
  • Do you want to live on a tree-lined street?

House criteria

  • What's your minimum and ideal number of bedrooms? What happens when you have people visiting from interstate/overseas?
  • What's your minimum and ideal number of bathrooms? Is a master ensuite a "must have", or a "nice to have"?
  • Do you want a pool, or would you rule out a property with a pool because of the cost and effort required to maintain it?
  • Do you want a large backyard, or are you happy with just a balcony or small courtyard?
  • Is there a style of property you prefer, or don't like? Is this a "must have", or just a "nice to have"?
  • Is having a view critical for you? What kind of view: city, greenery, mountains, water, etc.? Remember, killer views come with a significant price tag
  • 7. Inspect properties

    If a property ticks the boxes on your checklist, then you'll want to inspect the property in-person to make sure the listing photos aren't hiding anything.

    If you have time, go for a wander/drive around the neighbourhood too. Is it easy and pleasant to walk around? Do you feel safe?

    8. Do your due diligence

    Is there a risk of the property flooding?

    While you may think "it's OK, if it floods, insurance will cover it", insurers have been jacking up insurance premiums for properties at high risk of flooding to the point some properties are effectively uninsurable.

    You can check the property's flood risk using your State/Territory Government or Council's flood awareness map:

    There are also Australia-wide maps, such as Climate Valuation, that highlight the key climate-related risks for each suburb, including flooding, coastal inundation, bushfire and extreme winds.

    Is there much crime around the property?

    The police in each State/Territory generally provide a heatmap of crime, or at least suburb-level crime rates, so you can check an area before you buy:

    Some States/Territories provide more detailed information than others (e.g., QLD shows specific locations whereas NSW just summarises at the suburb-level).

    Is the property under the flight path?

    You can get a reasonable idea of potential aircraft noise using Airservices Australia's tools:

    However, these tools tend to focus on what they consider loud noise above 70dB (like a vacuum cleaner) and ignore the lower level noise that can still be annoying at 60dB (like a dishwasher). As such, it's worth looking at the actual flight activity on the WebTrak website and assume you'd hear aircraft noise if there are aircraft passing over the property at an altitude of below 5,000 feet.

    Is the property in a "good" school catchment?

    Check the school catchment for a property by using the relevant State/Territory website:

    Once you've determined the property's school catchment, you can then check the school's historical NAPLAN performance using the My School website. Under the NAPLAN Results section, you can see how students at that school performed relative to students at other schools with a similar background (or all Australian students). The green/red colouring indicates whether the students performed well above, above, close to, below, or well below, the average.

    NOTE: You'll find plenty of arguments about what defines a "good" school, and whether standardised test results like NAPLAN are a good measure. It's simply the only widely, readily available information for property buyers.

    Do body corporate / strata documents highlight any major issues?

    If you're looking at a townhouse or apartment, you'll want to check out the strata or body corporate documents. Ideally, the real estate agent will have already compiled the documents and have them ready to share, but you may have to request them.

    When reviewing Annual General Meeting (AGM) minutes and other documents provided, you'll be looking for signs of:

    • major building issues
    • inadequate funds being put aside for future maintenance - look out for mentions of "special levies"
    • high body corporate / strata fees (e.g., lots of expensive shared facilities, such as pool, lift, etc.)
    • poorly functioning committee (e.g., issues not being addressed and getting worse)

    Once you've reviewed all the information, it's really a judgement call on whether you feel comfortable with any risks you've identified and whether the property price is low enough to compensate for the risks.

    9. Estimate the property value

    Understand the seller's asking price

    There's two sides to every property transaction: what the buyer is willing to pay and what the seller is willing to accept. If there's no overlap between the two ranges, then there's not going to be a deal.

    Let's start with trying to understand what the seller might be willing to accept. Ideally, the asking price will be clearly indicated on the listing, but unfortunately this is becoming less common (esp. in hot markets). If you get sick of the sea of listings without price guides (e.g., “For Sale”, “Price By Negotiation”, “Auction”, “Expressions of Interest”), then there are a couple sneaky ways to reveal the seller’s price guide:

    • Restrict the search filters on Domain / RealEstate.com.au until only your target property appears in the search results (e.g., suburb, bedrooms, bathrooms, car space filters), then incrementally adjust the price filter until the property disappears from the search results
    • Install a Chrome extension like KoalaData, which appends the hidden price data to Domain search results to save you time - it also has a cool feature that shows changes in the listing price during this campaign

    Sure, the seller could understate their price range, but a rough price guide is better than nothing and saves you from wasting time on properties outside your budget. Also, historical analysis of asking and sold prices suggests it's common for sellers to accept a 5-10% discount on their initial asking price.

    Get a valuation report

    A quick and easy starting point for a property valuation is the free automated property valuations provided by banks and real estate search engines, such as:

    I hestitated in adding the last point to the list as there are strings attached - you will be subject to marketing emails/calls, but you can tell them to stop.

    You’ll notice that every website will have a slightly different value, but it’s useful for triangulating the value of a property. Just remember these valuations can be slightly out-of-date in fast rising/falling markets as there’s a time lag in them receiving and processing new sales data.

    Prepare your own valuation based on comparable properties

    If you’re interested in making an offer on a property, it’s worth doing the extra research to prepare your own valuation based on comparable sales.

    You can estimate a property's value by:

    1. Identifying 3-5 comparable properties using the “Sold” properties search on Domain or RealEstate.com.au – ideally, they’ll be in a similar location, same bedrooms count, similar quality of finish, similar level of landscaping with similar views. You won’t get perfect matches, but the closer the better.
    2. For each comparable property, adjusting the actual sales price to account for key differences to your target property. For example:
      • Movements in Suburb median house price since the comparable property sold (see Market section of Domain Suburb Profiles)
      • Differences in land values (check out your State/Territory's land valuations website)
      • Differences in floor area +$2-3k/m2
      • Additional bathroom +$25k
      • Renovated bathroom +$15-25k
      • Additional bedroom +$70k
      • Renovated bedrooms +$10k
      • Renovated kitchen +$20-40k
      • Renovated living room +$10k
      • Recently painted interior +$5-10k
      • Recently painted exterior +$10-20k
      • Recently replaced roof +$20k
      • Double glazed windows +$25k
      • Additional deck +$10-25k
      • Additional carport space +$10k
      • Additional garage space +$15k
      • Significant landscaping +$20-50k
    3. Estimate target property value based on the average of the comparable property valuations

    I would NOT recommend relying on the real estate agent’s list of comparable properties that they'll likely offer to you. Remember, they're working for the seller, not you! Their sales commission gives them a strong incentive to inflate the price and make it seem like a great deal, so they’ll use the term “comparable” very loosely. The high-end, newly built 3-bedroom house down the road with stunning views will be considered "comparable" to the low-end, run-down 3-bedroom house in a gully that they’re trying to sell you… they’re both 3-bedroom houses on the same street, right?!

    10. Engage a conveyancer to review the contract of sale

    Review the contract of sale

    The seller's real estate agent will typically provide a Contract of Sale that can be used to submit a formal offer on the property. In most cases, this will be a standard contract with standard clauses, but with a space for you insert your particulars (e.g., sale price, settlement date, agreed deposit, name, signature, etc.) and any special conditions (e.g., subject to finance).

    You should engage a conveyancer, or solicitor, to review the Contract of Sale for you. They will highlight anything that looks odd, or unfavourable to you, in the contract. They can also explain the implications of any special conditions added by the seller.

    Include special terms in your contract of sale

    In addition to reviewing the draft contract provided by the seller (via the agent), your conveyancer can also help you incorporate your own special conditions into the contract to protect you. Examples of special conditions include:

    • Subject to finance (in case you can't get the full loan as planned)
    • Subject to satisfactory building and pest inspection (in case there's' issues that weren't apparent during the 30-minute open house)
    • Subject to satisfactory searches
    • Subject to sale of buyer's previous property, or simultaneous settlement
    • Subject to satisfactory soil testing (e.g., when constructing a pool)
    • Subject to body corporate approval (e.g., keeping pets in apartment)
    • Inclusion of specific items with the property (for avoidance of doubt)
    • Property at seller's risk until completion date
    • Early possession prior to settlement with/without rent
    • Early access prior to settlement (e.g., obtaining renovation quotes, storage of goods, etc.)
    • Repairs prior to settlement
    • Vacant possession (i.e., seller to end existing lease early)
    • Settlement period

    If including these special conditions in your offer, you need to remember that they will likely make your offer LESS attractive to the seller. You need to assess the situation (e.g., Does the seller have other competitive offers? How hard is it for you to find a similar deal?) and risks (e.g., Is the property run-down with a decent chance of major structural issues?).

    Vice versa, if you're very confident that you will be able to get a loan (e.g., solid financial situation, genuine savings, good broker, etc.), then you could submit an offer that's only subject to finance for 7 days (or not subject to finance at all) to make it more attractive to the seller.

    It's also worth asking the agent whether the seller would prefer a shorter (or longer) settlement period as this can be a useful negotiating tactic if you're competing with other offers. However, you need to ensure you allow yourself sufficient time to get all your settlement paperwork sorted, especially if your lender is known to be slow, or you're relying on other parties for your settlement funds (e.g., your superannuation fund releasing money as part of the First Home Super Saver Scheme)

    Without these special conditions to protect yourself, you may have to forfeit your deposit and/or pay penalties to the seller if you want to terminate your contract after discovering a major issue with the property.

    11. Submit your offer, negotiate and execute the contract if satisfied

    Submit your offer

    The laws and practices around submitting an offer vary by State/Territory. For example, in Queensland, formal offers are generally submitted using the standard Contract of Sale template, so all parties are clear on the terms and conditions of the offer. If the seller accepts your offer, they would then counter-sign the Contract of Sale you signed when submitting your offer.

    Negotiate

    At this point, there's often a bit of back and forth with the agent. The agent will be trying to drum up competing offers and pushing you to submit a better offer. You need to be confident in your estimate of "fair value" and willing to walk away, so you don't feel pressured into offering a higher price due to FOMO. I'd recommend familiarising yourself with your State/Territory's rules around multiple offer situations and pay particular attention to the words used by the agent when they mention other offers, so you can call-out any inappropriate behaviour by the agent and understand the real situation. Remember, the agent's job is to obtain the best deal for the seller by increasing competition amongst buyers. The agent will likely mention that "there's a lot of interest", or "we already have interest at the asking price", but how serious is this interest? Is it simply people asking for the draft contract of sale, or is it a formally signed offer?

    Execute the contract, or walk away

    Remember, your offer has not been accepted until the Contract of Sale has been executed by both parties. If the seller has only verbally accepted your offer, they're still free to obtain more offers and accept a better offer that comes along. Likewise, if the seller hasn't formally accepted your offer, you're welcome to withdraw your offer and walk away.

    12. Pay the agreed deposit on contract

    Things get a bit confusing here as "deposit" is used to refer to two different things:

    1. Deposit on contract: payable to the seller on executing the contract (typically 5-10% of purchase price), or within a couple days. This deposit is held in a trust until settlement, or termination (e.g., you terminate the conditional contract as you weren't comfortable withissues identified during the bulding & pest inspection).
    2. Home loan deposit: payable on settlement - this is your contribution towards the property purchase as agreed with your bank (typically 5-20% of purchase price). This deposit isn't payable until settlement.

    The deposit on contract is the amount that's at-risk if you breach the contract. For example, if you signed an unconditional Contract of Sale (i.e., no building & pest inspection), then tried to back ouf of the contract because you noticed a major structural issue with the property.

    13. Submit your home loan application

    You'll want to submit your home loan application as soon as contracts are exchanged, so you can get it approved within the period allowed in the "subject to finance" clause, or at least in time for settlement.

    Most of the time these timeframes won't be an issue as most lenders approve applications in a matter of days. However, it could become an issue, if circumstances have changed and your lender is no longer willing to lend you as much (or at all). For example, they might have tightened their lending criteria, or your personal circumstances may have changed. In this scenario, you'd have to quickly find another lender and jump through their hoops to get your home loan approved at short notice.

    14. Obtain a building and pest inspection

    Get a good inspector

    If you've decided to include a "subject to satisfactory building and pest inspection" clause in your contract, then you should identify a good inspector in your area, so you know who to call when you finally execute a contract. Be sure to read the review comments as you'll want an inspector that does a thorough job - I'd be happy to pay a bit more for someone that could save me from wasting thousands on issues that wouldn't otherwise have been detected.

    Organise the inspection

    Once you've executed a contract, you'll want to contact your chosen inspector, then put them in touch with the real estate agent, so they can coordinate a suitable time for the inspection. It's worth asking the inspector if you can attend the inspection with them, so you can hear/see the issues in-person, as it can sometimes be difficult to fully grasp the issue from the photos alone. Just make sure you're not distracting the inspector while they're doing their work as you don't want them to miss something important! Once they complete the inspection, they'll send you through a formal report, so you can understand the issues they've identified and decide how you'll proceed. Don't expect a perfect report - practically every house will have issues. The main thing is whether there are any major issues that you hadn't considered when making the offer and how much it'd cost you to resolve the issue.

    Decide what to do

    If the sale is subject to satisfactory building and pest inspection, you have an opportunity here to re-negotiate with the seller. You may ask the seller to rectify the issue, or lower the sale price to reflect the cost to you of resolving the issue later. Given every house will have some issues, it's probably only worth focusing on the major, expensive-to-resolve issues that aren't obvious during a short open house. Remember, the seller does not have to negotiate with you and they may simply suggest that you terminate the contract if you're not satisfied with the property's condition at the agreed price.

    15. Decide whether to go unconditional

    When you reach the end of the period for your "subject to finance" and "subject to satisfactory building and pest inspection", you need to decide whether you're going to proceed to settlement, or walk away based on these clauses.

    If your home loan has been approved and you're satisfied with the property's condition after the inspection (and any negotiations), then you simply communicate to your conveyancer/solicitor that you would like to go unconditional. Your conveyancer/solicitor will then contact the seller's real estate agent to get the ball rolling on settlement.

    16. Purchase home insurance

    The risk of property damage transfers from the seller to the buyer at different points depending on your State/Territory. In several States (e.g., QLD), the risk is transferred prior to settlement, which may seem odd as you don't even have keys to the place yet. As soon as the risk transfers, you'll want to have home insurance to protect yourself.

    17. Complete pre-settlement inspection

    Your solicitor/conveyancer should remind you to book a pre-settlement inspection with the agent as you can't simply show up unannounced to inspect the property. You'll want to do the inspection close to settlement (e.g., the morning of settlement, or the day prior). Your right to a pre-settlement inspection varies by State/Territory, so be sure to check your rights when drafting the Contract of Sale.

    The purpose of this inspection is different to your earlier inspections - it's purely to confirm that you're getting what was agreed when the contract was signed. Remember, it can be months between exchange of contracts and settlement, so a lot can change in that time.

    During the pre-settlement inspection, you'll want to check:

    • property is in the same condition as when contract executed (i.e., no new damage)
    • junk removed from house - don't assume they're coming back to clean up!
    • property is vacant (i.e., tenants have moved out) if vacant possession agreed
    • any inclusions noted in the Contract of Sale are still on-site and haven't been removed by the seller (e.g., garden shed, solar panels, nbn black box, etc.)
    • keys and/or access codes are available for all access points (e.g., house, garage, shed, windows, networking equipment, etc.)

    If there's a major issue, raise it with your conveyancer/solicitor immediately before they proceed with settlement. Most issues can be resolved by the seller addressing the issue (with no/minor delay to settlement), or the sale price being reduced to reflect the issue, without having to resort to terminating the contract.

    18. Confirm amounts payable at settlement

    In the lead-up to settlement, your conveyancer/solicitor should provide you with a statement that indicates the estimated amount payable by you at settlement. This amount will factor in items such as the purchase price, home loan deposit, council rates, strata levies, water charges, stamp duty, legal fees, registration fees, bank cheque fees, etc.

    This is only an estimate as the exact amount is confirmed during settlement when all the parties get together. To avoid settlement issues/delays, your conveyancer may suggest transferring a slightly higher amount just in case they underestimated the amount payable.

    You'll typically need to transfer your settlement funds into:

    • a bank account agreed with your lender, so they can simply withdraw all the funds required for settlement; or
    • a trust account (typically managed by your conveyancer/solicitor), so they can provide the funds required for settlement.

    19. Complete settlement and pick up the keys

    Once settlement is completed, you'll usually collect the keys from the seller's real estate agent. I'd recommend arranging to meet the agent at the property and taking your time to confirm you've received working keys for all the access points.

    20. Move in

    Here's a quick checklist to help make your move easier:

    • Connect your internet
    • Connect your utilities
    • Work out what you'll do with pets and kids during the move
    • Update your address with everyone and set up a temporary mail redirect with Australia Post
    • Do a thorough clean before your new home is filled with furniture
    • Get spare keys cut
    • Start furniture shopping ASAP - some items can take months!
    • Organise tradies for any urgent works
    • Say g'day to your new neighbours

    21. Start budgeting for home ownership costs

    How much do I need to budget for home ownership costs?

    Don't underestimate the cost of owning a home - it's much more than just the mortgage repayments. You'll likely be up for:

    Expense Monthly cost
    Home Maintenance $200-300
    Home Improvements $100-500
    Homewares & Appliances $200-250
    Council Rates $100-150
    Home & Contents Insurance $100-150
    Utilities: Electricity & Gas $150-200
    Utilities: Water & Sewerage $50-100

    While you won't be paying these expenses every month, you need to be putting this much away every month to be prepared for when the irregular expense hits (e.g. air con dies, roof starts leaking, etc.), or the quarterly/annual bill arrives.

    How the f*ck does it cost over $3,000 per year to maintain a house?

    Very easily!

    Your house would probably cost at least $400k to construct, so you can expect significant maintenance to keep it humming. If you follow the very basic 1% rule, it suggests budgeting $4k per year for home maintenance.

    This feels about right when you consider all the items requiring maintenance:

    Item Cost to replace Frequency Cost per year
    Flooring $10,000 10 years $1,000
    Bathroom $20,000 40 years $500
    Fence $10,000 $20 years $500
    Roof $15,000 30 years $500
    Gardening, Pest Control $500 Every year $500
    Kitchen $15,000 30 years $500
    Air Conditioner $5,000 20 years $250
    Windows, Blinds $5,000 20 years $250
    Painting | External $5,000 20 years $250
    Painting | Internal $4,000 15 years $250
    Hot Water System $1,500 15 years $100
    TOTAL $4,600

    22. Save over $250k by paying off your home loan sooner

    If you take out a $550k home loan to buy your first home for $750k, interest rates hover around 7% (long-term historical average), and you just complete the minimum repayments over 30 years - like the bank wants - then you’ll end up paying $767k in interest! This means your $750k house has cost you over $1.5 million in total.

    Just because you’ve signed up to a 30-year home loan, that’s simply the longest possible period for repayment, you don’t have to take that long. If you can find a way to put an additional $500 per month towards your home loan, then you can pay off your mortgage 9 years sooner and save yourself over $250,000 in interest!

    If you’re thinking where the hell am I supposed to get an extra $500 per month, schedule a free call with us to see what’s possible with support from a financial coach.

    23. Avoid paying a "loyalty tax" to your bank

    Banks often charge existing home loan customers a "loyalty tax" in the form of higher interest rates than they offer new customers. The banks are relying on customers being ignorant, or too lazy to do something about it, or a bit of both.

    Research by the ACCC indicated that the "loyalty tax" tends to grow over time (as the banks test how much they can gouge you) starting at 0.3% and then growing to 1.0% if you still haven't pulled your finger out 10 years later. The banks must love it as the Australian Financial Review reported banks are earning $4.5 BILLION EACH YEAR from this lack of action! At the individual level, you could wind up paying an over $50k in extra interest over the life of your loan for no reason.

    You can avoid paying the "loyalty tax" by shopping around each year, negotiating with your lender and not assuming your bank will automatically do the right thing by you.