How to Get a Home Loan in Australia: The Complete Guide

Getting a home loan in Australia is not as complicated as most people think. It feels overwhelming because there are hundreds of products across dozens of lenders, each with different criteria, different rates, and different ways of calculating what you can borrow. But the actual process follows a clear path, and once you understand it, the mystery disappears.

This guide walks through every step — from working out what you can afford, to getting pre-approved, to settlement day. Whether you are buying your first home or your fifth, the fundamentals are the same.

Why Should You Check Your Borrowing Power Before Looking at Properties?

Most people start their home buying journey the wrong way around. They find a property they love, get emotionally attached, and then scramble to figure out if they can afford it.

Flip that. The first thing you should do — before you attend a single open home — is find out what you can actually borrow.

A mortgage broker can give you a detailed assessment of your borrowing power without any impact on your credit score. This is not a formal application. It is an estimate based on your income, expenses, debts, and the lending criteria of the banks and lenders in the Australian market.

What you get back is not a vague range. It is a realistic picture of your maximum loan amount, your likely repayments, and — most importantly — the budget you have to go shopping with. That changes everything. Instead of guessing, you are walking into open homes with a number in your head.

How Do Banks Decide What You Can Borrow?

Every lender in Australia assesses borrowing power differently. This is one of the least understood parts of the process.

Two people with the same income, the same expenses, and the same deposit can get materially different borrowing amounts from different banks. That is not a bug — it is how the system works. Each lender has its own serviceability model, its own way of categorising income, and its own buffer rates.

Here is what they are all looking at, even if they weigh it differently:

Your income. Salary is straightforward, but things get more nuanced if you are self-employed, earn commissions, receive rental income, or have multiple income streams. Some lenders will take 100% of your overtime and bonuses. Others will only count 80%, or none at all.

Your expenses. Lenders compare what you declare against benchmark figures like the Household Expenditure Measure (HEM). If your declared expenses are lower than the benchmark, most lenders will use the higher figure. If your expenses are genuinely low, some lenders are more generous than others in accepting that.

Your existing debts. Credit cards, personal loans, HECS-HELP, car leases, buy now pay later — all of it counts. Even if your credit card balance is zero, the lender will factor in the full credit limit as a potential liability.

The buffer rate. Lenders do not assess you at the actual interest rate you will pay. They add a buffer — typically around 3 percentage points — to make sure you can still afford the loan if rates go up. This is mandated by APRA and it significantly reduces your theoretical borrowing power compared to what you might calculate on a basic repayment calculator.

The point is this: the only way to know where you stand across the market is to run the numbers properly. A quick calculator on a bank's website will give you one answer. A broker running your profile across multiple lenders will give you the full picture.

The Home Loan Process, Step by Step

Step 1: Get Your Assessment

Talk to a mortgage broker. Provide your income details, a summary of your expenses and debts, and how much deposit you have saved. The broker will assess your borrowing power across multiple lenders and come back to you with your options.

This does not cost you anything. Mortgage brokers in Australia are paid by the lender, not by you. And at this stage, nothing hits your credit file.

Step 2: Get Pre-Approved

Once you know what you can borrow, the next step is pre-approval (also called conditional approval or approval in principle). This is a formal indication from a lender that they are prepared to lend you a specific amount, subject to conditions — usually a satisfactory property valuation and no material change in your financial circumstances.

Pre-approval typically lasts 90 days, though this varies. It is not a guarantee, but it gives you confidence to make offers and bid at auction knowing you have finance likely to be approved.

At this stage, the lender will do a credit check, which does appear on your credit file. One or two enquiries in the context of buying a home is completely normal and will not meaningfully affect your credit score.

Step 3: Find Your Property

With pre-approval in hand, you know your budget. This is where the fun starts.

Whether you are buying at auction, via private treaty, or off the plan, the process is roughly the same: find the property, do your due diligence (building and pest inspections, strata reports if applicable, contract review by a solicitor or conveyancer), and make your offer or place your bid.

Step 4: Formal Approval

Once you have a signed contract on a property, your broker submits the full loan application to your chosen lender. The lender will verify everything — your income documentation, the property valuation, your identity, and your financial position.

This is where the paperwork matters. Having your documents organised and complete makes a significant difference to how quickly this moves. Your broker will tell you exactly what is needed.

Step 5: Loan Documents and Signing

Once formally approved, the lender issues your loan documents. You review and sign them (your broker and solicitor can walk you through anything unclear), and return them to the lender.

Step 6: Settlement

Settlement is the day ownership officially transfers. Your solicitor or conveyancer handles this process in coordination with the lender, the seller's legal representative, and the real estate agent. The lender releases the funds, the title transfers to your name, and you get the keys.

In most states, settlement occurs four to six weeks after exchange of contracts, though this is negotiable.

How Much Deposit Do You Need for a Home Loan?

Most lenders want at least 5% of the property value as a genuine savings deposit, but borrowing with less than 20% means you will likely need to pay Lenders Mortgage Insurance (LMI).

LMI is a one-off insurance premium that protects the lender (not you) if you default on the loan. It can be a significant cost — tens of thousands of dollars on a large loan — and it is usually capitalised into the loan amount, meaning you pay interest on it over the life of the loan.

If you can get to a 20% deposit, you avoid LMI entirely. That is not always realistic, especially in expensive markets, but it is worth understanding the cost difference.

There are also government schemes — like the First Home Guarantee — that allow eligible first home buyers to purchase with as little as 5% deposit without paying LMI. A broker can tell you if you qualify.

What Are the Costs Beyond the Deposit?

The purchase price is not the total cost. Budget for:

• Stamp duty (or transfer duty) — this varies by state and can be substantial. First home buyers may be eligible for concessions or exemptions depending on the state and the property value.
• Conveyancing or solicitor fees — typically $1,500 to $3,000.
• Building and pest inspections — around $500 to $800.
• Loan application fees — some lenders charge these, some do not.
• LMI — if your deposit is less than 20%.
• Moving costs, utility connections, and any immediate repairs or furnishing.

A good broker will walk you through all of these so there are no surprises.

Should I Choose a Fixed, Variable, or Split Home Loan?

This is one of the most common questions, and there is no universally right answer.

Variable rate loans move with the market. When the Reserve Bank changes the cash rate, your rate will typically move in the same direction (though not always by the same amount). Variable loans usually offer more flexibility — features like offset accounts, extra repayments without penalty, and redraw facilities.

Fixed rate loans lock in your rate for a set period (usually one to five years). You get certainty on your repayments, but you lose flexibility. Breaking a fixed rate early can be expensive.

Split loans let you fix a portion and leave the rest variable. This is a common middle ground.

The right choice depends on your circumstances, your risk tolerance, and what is happening in the rate environment. Your broker can model the scenarios for you.

Why Use a Mortgage Broker?

A mortgage broker's job is to find you the right loan from across the market — not just from one bank.

Here is the part most people do not think about: the incentive structure actually works in your favour. Brokers earn an upfront commission when your loan settles, but they also earn a trail commission — a small ongoing payment for as long as you stay on that loan. That trail is what separates good broking businesses from great ones.

Why does that matter? Because it means your broker is financially incentivised to keep you in the best possible position for the long term. If a better rate becomes available elsewhere, a good broker will proactively move you — they earn a new upfront commission on the refinance, and they keep you on their book. They are not incentivised to park you in a loan and forget about you.

This is a structural alignment of interests, not just a sales pitch.

Brokers also do not cost you anything directly. They are paid by the lender. The comparison rate you see advertised already accounts for this.

What to Do Next

If you are thinking about buying a home — or even just curious about what you could afford — the single best thing you can do is get an assessment from a broker. It does not commit you to anything. It does not affect your credit score. And it gives you the one thing most buyers lack at the start: a real number to work with.

You can get a free, no-obligation assessment from Mage. We will tell you what you can borrow, what it will cost, and what budget that gives you to buy a home. No jargon, no pressure — just the numbers.

Get your free assessment →

Frequently Asked Questions

How long does it take to get a home loan in Australia?

The full process from first broker conversation to settlement typically takes 8 to 14 weeks, depending on how long your property search takes. The assessment and pre-approval stage takes 1 to 2 weeks, and once you have a signed contract on a property, settlement usually occurs 4 to 6 weeks after exchange.

Do I need a 20% deposit to get a home loan?

No. Most lenders will accept a deposit as low as 5% of the property value, provided the funds are genuine savings. However, borrowing with less than 20% means you will likely need to pay Lenders Mortgage Insurance (LMI), unless you qualify for a government scheme like the First Home Guarantee.

Does using a mortgage broker cost me anything?

No. Mortgage brokers in Australia are paid by the lender, not by you. Using a broker does not add to your loan costs. The comparison rate you see advertised already accounts for broker commissions.

What is the difference between pre-approval and formal approval?

Pre-approval is a conditional indication from a lender that they are prepared to lend you a certain amount, based on an initial assessment of your finances. Formal approval happens after you find a property, when the lender fully verifies your documentation and values the property. Pre-approval is not a guarantee. Formal approval is the final step.

What is Lenders Mortgage Insurance (LMI)?

LMI is a one-off insurance premium that protects the lender if you default on your loan. It applies when your deposit is less than 20% of the property value. LMI can cost thousands of dollars and is usually added to your loan balance. It protects the lender, not you.