First Home Buyer Mortgage Guide: Everything You Need to Know

Preparing for Your First Mortgage

Buying your first home is one of the biggest financial decisions you will make. Understanding how mortgages work before you start shopping can save you thousands of dollars and significant stress.

Types of Mortgages

Fixed-Rate Mortgages

Your interest rate stays the same for a set period (typically 1–5 years). This gives you payment certainty, which is valuable for budgeting. The trade-off is that fixed rates are often slightly higher than current variable rates.

Variable-Rate Mortgages

Your rate moves with the market (tied to the central bank rate). Payments can go up or down. Variable rates are often lower initially but carry the risk of rate increases.

Split Mortgages

You can fix a portion of your loan and leave the rest variable. This provides partial certainty while maintaining some flexibility.

How Much Can You Borrow?

Lenders typically assess your borrowing capacity based on:

• Income: Your salary, bonuses, and any other regular income.
• Expenses: Your living costs, existing debts, and financial commitments.
• Deposit: Generally, 20% of the purchase price is ideal (to avoid Lenders Mortgage Insurance). However, some loans allow 5–10% deposits.
• Credit history: A clean credit history improves your chances of approval and better rates.

The True Cost of Your Mortgage

Beyond the purchase price, factor in:

• Closing costs (varies by state)
• Legal and conveyancing fees
• Building and pest inspections
• Private Mortgage Insurance / PMI (if down payment is below 20%)
• Moving costs and immediate repairs

First Home Buyer Incentives

Federal and state programs offer significant help for first-time buyers, including FHA loans (as low as 3.5% down), VA loans (zero down for veterans), USDA loans for rural areas, and various state-level down payment assistance programs. Research what is available in your state — these can significantly reduce upfront costs.

Setting Yourself Up for Early Payoff

Even as a first-time buyer, you can plan for early mortgage payoff from day one:

• Choose a loan that allows extra repayments without penalties
• Consider a mortgage recast after a lump-sum payment to lower monthly payments
• Start with the highest repayments you can comfortably afford
• Use our early payoff calculator to see how extra payments affect your timeline