Borrowing at Maximum Capacity Without a Buffer
Borrowing the maximum amount a lender will approve leaves no room for rate rises or changes to your circumstances. A buyer approved for $850,000 may find repayments unmanageable if variable rates increase even modestly or if income changes due to parental leave or a career shift.
Consider a buyer who secures pre-approval at maximum capacity based on dual incomes. Eighteen months after settlement, one partner reduces hours to part-time. The repayment that was manageable at approval now absorbs a much larger portion of take-home income. This scenario plays out regularly in Kew, where buyers often stretch to enter the market near the Eastern Freeway or around Kew Junction. Building a buffer of 10-15% below your maximum borrowing capacity provides breathing room for these changes.
Missing Stamp Duty Concessions You Qualify For
Victoria offers full stamp duty exemption on properties up to $600,000 and a reduced rate up to $750,000 for eligible first home buyers. Missing this concession means paying thousands in avoidable duty.
The exemption applies regardless of whether the property is new or established, provided you meet residency and occupancy requirements. A unit in Kew priced within the threshold can deliver significant savings, but only if the concession is claimed at the time of purchase. The concession is not automatically applied and must be nominated on the contract. Buyers who overlook this step or assume it applies retrospectively often discover the error too late. If you are unsure whether your purchase qualifies, check eligibility before signing any contract.
Choosing a Loan Based Only on the Advertised Rate
The lowest advertised rate rarely delivers the lowest cost over the life of the loan. Lenders offering headline rates often restrict features such as offset accounts, redraw, or partial prepayments.
A buyer comparing a 6.10% variable rate with full offset against a 5.95% rate with no offset may assume the latter is the better option. Over five years, however, parking a $30,000 emergency fund and regular salary credits in an offset account can save more in interest than the 0.15% rate difference costs. This calculation matters in Kew, where buyers often hold higher savings balances and benefit from offset functionality. Loan structure should be assessed based on how you manage money, not just the interest rate percentage.
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Ignoring Lenders Mortgage Insurance When Comparing Low Deposit Options
Lenders Mortgage Insurance is charged when you borrow more than 80% of the property value, but the cost varies significantly between lenders. A buyer with a 10% deposit may pay $15,000 in LMI with one lender and $11,000 with another for the same loan amount.
The First Home Guarantee removes LMI entirely for eligible buyers with a 5% deposit, which can reduce upfront costs by tens of thousands of dollars. This scheme was expanded in late 2025 with no income caps, making it accessible to a much wider group of buyers. Even if you have saved a 10% deposit, applying under the Guarantee with 5% and retaining the additional savings for furniture, renovations, or an offset account can be the more efficient approach. Not all lenders participate in the scheme, so your choice of lender directly affects whether this option is available to you.
Skipping the First Home Super Saver Scheme
The First Home Super Saver Scheme allows you to contribute up to $15,000 per year into superannuation and withdraw up to $50,000 for a deposit. Contributions are taxed at 15% rather than your marginal rate, which creates a meaningful saving for most income earners.
A buyer on a marginal tax rate of 32.5% saves 17.5% in tax on every dollar contributed under the scheme. Over three years, contributing the maximum $15,000 annually builds $45,000 in accessible savings with a tax benefit of approximately $7,875 compared to saving the same amount in a standard bank account. This scheme works well for buyers in Kew who are planning ahead and have stable employment, as contributions must be made over multiple financial years to maximise the benefit. The withdrawal process takes several weeks, so timing is important if you are close to making an offer.
Failing to Budget for Ongoing Costs Beyond the Mortgage
Ownership costs extend well beyond the monthly loan repayment. Buyers who budget only for the mortgage often face financial pressure within the first year.
Strata fees in Kew typically range from $3,000 to $6,000 annually for apartments, with some buildings charging more depending on amenities and age. Council rates, water, insurance, and maintenance add further cost. A townhouse or older unit may also require unexpected repairs shortly after settlement. Buyers who allocate every dollar of available income to the mortgage repayment have no capacity to absorb these costs without relying on credit. Factor these expenses into your first home buyer budget before committing to a purchase price.
Locking in a Fixed Rate Without Understanding Break Costs
Fixed rates provide repayment certainty but come with restrictions. Breaking a fixed loan early to sell, refinance, or make large extra repayments can trigger break costs that run into tens of thousands of dollars.
A buyer who fixes for three years and then needs to sell after eighteen months due to a job relocation may face a break cost equivalent to the interest differential over the remaining fixed period. If rates have fallen since the loan was fixed, this cost is unavoidable. Splitting your loan between fixed and variable rates reduces this risk while still providing some stability. A 50/50 split allows you to lock in part of your repayment while retaining flexibility on the remainder. If you are weighing up your options as a fixed rate expiry approaches or are considering fixing for the first time, break costs should be part of the decision.
Applying for Credit or Changing Jobs During Pre-Approval
Pre-approval is conditional, not final. Lenders reassess your application at settlement, and any change to your financial position can result in the approval being withdrawn.
Buyers who take out car finance, apply for a new credit card, or change employment between pre-approval and settlement put their purchase at risk. A buyer in Kew who switched jobs for a higher salary two weeks before settlement found their approval delayed because the new role included a probation period. The lender required an additional letter from the employer and extended payslips, which pushed settlement back by ten days and required negotiation with the vendor. Avoid any new credit applications or employment changes until after settlement, and inform your broker immediately if circumstances do change.
Not Using a Broker to Compare Home Loan Options
Banks offer their own products. A broker compares across multiple lenders and structures your home loan application to match your circumstances.
Some lenders assess rental income at 100% when calculating serviceability, while others use 80%. Some waive LMI for certain professions. Some offer better rates for loans above $500,000 or for borrowers with offset balances above a certain threshold. These differences are not visible unless you are comparing across lenders, and they can affect both your approval outcome and your ongoing interest cost. A mortgage broker in Kew works with you to identify the lender and loan structure that aligns with your deposit size, income type, and property choice, rather than fitting you into a single bank's lending criteria.
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Frequently Asked Questions
What is the biggest mistake first home buyers make with borrowing capacity?
Borrowing at maximum capacity leaves no buffer for rate rises or changes to income. Building a buffer of 10-15% below your maximum approval amount provides room for these changes and reduces financial stress.
Can I claim the Victorian first home buyer stamp duty concession after settlement?
No, the concession must be claimed at the time of purchase and nominated on the contract. It is not applied retrospectively, so confirming eligibility before signing is essential.
Should I choose a home loan based on the advertised interest rate?
Not on rate alone. Loan features such as offset accounts, redraw, and prepayment flexibility can deliver greater long-term value than a slightly lower rate with restrictions. Your loan structure should match how you manage money.
What happens if I change jobs between pre-approval and settlement?
Lenders reassess your application at settlement, and a job change can delay or jeopardise your approval. Avoid employment changes or new credit applications until after settlement, and notify your broker immediately if circumstances do change.
How much does Lenders Mortgage Insurance vary between lenders?
LMI can vary by thousands of dollars for the same loan amount and deposit. The First Home Guarantee removes LMI entirely for eligible buyers, which can reduce upfront costs significantly and is worth exploring even if you have a 10% deposit saved.
