13 Mistakes to Avoid as a First Home Buyer in NSW

Budget mistakes before you start looking

1. Setting your budget before checking grants and concessions

Every first home buyer program has a price limit, and some are hard cut-offs. The $10,000 First Home Owner Grant is only for new homes up to $600,000 (or $750,000 for land plus a building contract): one dollar over and there’s no grant. The First Home Buyers Assistance Scheme removes transfer duty up to $800,000, but at $850,000 you’d pay $9,796.75 under 2026–27 rates, and from $1 million you pay full duty of $39,187 or more. Outside Sydney and the regional centres, the 5% Deposit Scheme cap is $800,000.

Avoid it: check the caps first and set your search range around them. Our guide to first home buyer assistance in NSW lists every limit in one place.

2. Saving the deposit but forgetting the buying costs

The deposit isn’t the only cash you need. Add conveyancing, building and pest or strata reports, loan and settlement fees, any transfer duty the scheme doesn’t cover, lenders mortgage insurance (LMI) if you borrow more than 80% without a scheme, insurance and the move itself.

Avoid it: list these costs with your broker and conveyancer before you set a savings target, and plan to keep a buffer in the bank after settlement.

3. Waiting for a 20% deposit when a smaller one could work

A 20% deposit avoids LMI, and it’s still the safest position. But saving it in Sydney can take years. The Australian Government 5% Deposit Scheme lets eligible first home buyers borrow up to 95% with no LMI and no income cap, and Help to Buy works with a 2% deposit. A family guarantee is another path. The trade-off is a bigger loan, more interest over time and less equity if prices fall.

Avoid it: compare buying now with a smaller deposit against saving for longer, using real numbers. Our blog on lenders mortgage insurance explains the costs you’d be avoiding.

4. Borrowing the most a lender will offer

A lender’s maximum isn’t the same as a comfortable budget. It doesn’t know you plan to start a family, go part time or travel. Moneysmart suggests working out your repayments as if rates were 2% higher, to leave yourself breathing room. Then add the costs of owning a home that renters don’t pay: council rates, strata levies, building insurance, maintenance and repairs.

Avoid it: test your repayments at a higher rate with our home loan repayments calculator and choose a price that still leaves room to save.

Home loan mistakes

5. House hunting without pre-approval

Pre-approval tells you how much a lender is likely to lend, based on your income, debts and expenses. Moneysmart says it usually lasts three to six months. Without it, you can spend weekends at open homes you can’t finance, or miss out because you can’t act quickly. Pre-approval isn’t final approval: the lender still values the property you choose.

Avoid it: get pre-approved before you start looking, and renew it if your search runs long. Our pre-approval blog explains the documents you’ll need.

6. Only asking your own bank

Your bank only offers its own loans. Lenders differ on rates, fees, how they treat casual or bonus income, and whether they offer the 5% Deposit Scheme or Help to Buy at all (both run only through participating lenders). Moneysmart suggests getting loan options from at least two lenders, and notes that a rate even 0.5% lower can save thousands over time.

Avoid it: compare before you commit. We compare 50+ lenders for you, at no cost to you.

7. Taking on new debt or changing jobs before settlement

Your lender can recheck your finances before the loan is settled. A car loan, a new credit card, a buy now pay later account or a move to a new job on probation can change what you can borrow. Many lenders assess a credit card by its limit, not the balance you owe.

Avoid it: keep your finances steady from pre-approval to settlement. If a change is coming, talk to us first.

8. Choosing a loan on interest rate alone

The rate matters, but so do the fees, features and flexibility. An offset account, free extra repayments or a redraw facility can be worth more than a slightly lower rate, and fixed loans can carry break costs if you sell or refinance early.

Avoid it: choose the structure that suits your plans for the next few years. Our blog on fixed or variable home loans walks through the choice.

Mistakes when you find the right home

9. Signing the contract before a conveyancer reviews it

In NSW, a home can’t go on the market until the seller’s contract is ready, so you can ask the agent for it early. Your solicitor or conveyancer checks the title, special conditions, inclusions and settlement date, and negotiates changes: the agent can’t change the contract. For private sales, you have a five business day cooling-off period after exchange. Pulling out in that time costs 0.25% of the price, or $250 for every $100,000. You can waive cooling-off with a 66W certificate, but get advice before you do.

Avoid it: have the contract reviewed before you exchange. Our blog on contract clauses to check in NSW covers what to look for.

10. Skipping the building and pest inspection

A building inspection looks for structural problems, damp, electrical safety issues and repair costs. A pest inspection looks for termites and other pests. For an apartment or townhouse, a strata report shows the building’s finances, planned works and any disputes. If a report turns up problems, you can ask the seller to fix them, negotiate on price, or walk away before you’re committed.

Avoid it: book the inspections before exchange or during cooling-off, and before auction day if you’re bidding. Read our building and pest inspection blog for what the report covers.

11. Bidding at auction without your finance ready

There’s no cooling-off period at auction in NSW, or when you exchange on the same day after the property is passed in. The contract isn’t subject to finance or inspections, and the deposit is usually due on the day, often 10% of the price.

Avoid it: before auction day, have pre-approval, inspections, a contract review and your deposit ready, and set a firm limit. If your deposit is under 10%, ask your conveyancer to negotiate the deposit amount with the seller before the auction.

Paperwork and after-settlement mistakes

12. Missing scheme paperwork and deadlines

Each program has its own paperwork and timing. The ones that catch buyers out:

• Transfer duty relief: your conveyancer lodges the First Home Buyers Assistance Scheme form and your proof of identity after exchange. Any duty payable is due within three months of the contract date, or at settlement if that’s sooner.
• First Home Owner Grant: apply through your lender if you need the money at settlement. Otherwise apply to Revenue NSW within 12 months of settlement or completion.
• 5% Deposit Scheme: it’s arranged through a participating lender before you buy, and you have 90 days after pre-approval to sign a contract.
• First Home Super Saver: request your ATO determination before settlement and tell the ATO within 90 days of signing a contract.

Avoid it: tell your broker and conveyancer early which schemes you’re using, so nothing is left to settlement week.

13. Moving out or renting the home too soon

For contracts signed on or after 1 July 2023, both the duty scheme and the grant require you to move in within 12 months of settlement and live there for 12 continuous months. If you can’t, you lose the benefit: you must tell Revenue NSW and pay the duty or repay the grant, and interest, penalties or fines can apply if you don’t. Under the 5% Deposit Scheme you must move in within six months and keep living there while the guarantee applies. Renting the home out ends the guarantee, and your lender may then charge LMI.

A first home buyer checklist for NSW

Run through this list before you make an offer:

• I know the grant, duty and deposit scheme caps for the area I’m buying in.
• I’ve budgeted for buying costs and kept a buffer for after settlement.
• I’ve tested my repayments at a higher interest rate.
• I have current pre-approval, from a participating lender if I’m using a government scheme.
• I’ve compared more than one lender and I understand the loan’s features and fees.
• My conveyancer has reviewed the contract.
• I have building and pest reports, and a strata report for a unit.
• My deposit is ready, and I know whether it’s due at exchange or at auction.
• I know which scheme forms need lodging, by whom and when.
• I can move in within the required time and stay for the required period.

For the full sequence from budget to keys, read how to buy a house in Sydney, or see how we support buyers on our first home buyers page.

Frequently asked questions

How much deposit do I need to buy my first home in NSW?

A 20% deposit avoids lenders mortgage insurance, but it isn’t the only option. Eligible first home buyers can buy with a 5% deposit and no LMI through the Australian Government 5% Deposit Scheme, or with 2% through Help to Buy. On top of the deposit, keep money aside for buying costs such as conveyancing, inspections, loan fees and any transfer duty the first home buyer scheme doesn’t cover.

How long does home loan pre-approval last?

Moneysmart says pre-approval usually lasts three to six months, depending on the lender. It shows what a lender is likely to lend, but it isn’t final approval: the lender still has to assess the property you choose. Under the 5% Deposit Scheme, you have 90 days after pre-approval to find a home and sign a contract. If pre-approval expires, the lender reassesses you with updated documents.

Is there a cooling-off period when you buy at auction in NSW?

No. The NSW Government says there is no cooling-off period when you buy at auction, or when you exchange on the same day after the property is passed in. The contract is binding once you sign, so finance, inspections and a contract review need to be done before auction day. For private sales there’s a five business day cooling-off period, and withdrawing costs 0.25% of the price.

What happens if I can’t move into my first home within 12 months?

If you used the First Home Buyers Assistance Scheme or the First Home Owner Grant for a contract signed on or after 1 July 2023, you must move in within 12 months and live there for 12 continuous months. If you can’t, tell Revenue NSW straight away. You’ll need to pay the duty or repay the grant, and interest and penalties can apply if you don’t. Revenue NSW can consider exceptional circumstances.

Can I buy my first home with a friend or sibling?

Yes. The 5% Deposit Scheme accepts two applicants, such as partners, friends or family members, as long as both meet the rules. For the NSW duty scheme, if your co-buyer isn’t eligible you can still apply when the eligible buyers purchase at least half the property; the other buyer pays duty on their share. This doesn’t apply if the ineligible buyer is your spouse.

Sources

1. Moneysmart: Buying a house (opens in a new tab)
2. NSW Government: Contracts and deposits when buying property in NSW (opens in a new tab)
3. Revenue NSW: First Home Buyers Assistance Scheme (opens in a new tab)
4. Revenue NSW: First Home Owner (New Homes) Grant (opens in a new tab)
5. Housing Australia: 5% Deposit Scheme frequently asked questions (opens in a new tab)
6. Revenue NSW: Who pays transfer duty and when (opens in a new tab)