Buying a home is one of the biggest purchases you will make. Whether it's your first home, you're upgrading or downsizing, or purchasing an investment property, there are many financial matters to consider. Take your time and understand the detail to help you make the right choices.


Buying a home can be very exciting, but it is also one of the biggest purchases you are ever likely to make. Property comes with high entry and exit fees, so do your research before you commit.

When buying a home, consider you and your family’s needs, for example, schools, shops, transport and recreational facilities. Check local council websites for socio-economic data and planned developments, so you don’t buy somewhere they’re planning to build a freeway next to. Check whether the area is prone to flooding or bushfires, is it under a flight path? These are some of the questions you might want to answer when making such a large investment.

If you are buying an investment property, think about your target tenant and what aspects will make the property attractive to your target market. Also consider vacancy rates and turnover rates for similar properties in the area, you don’t want a property that’s going to sit vacant costing you money.

How much do you need for a deposit?

Aim for a 20% deposit, if you borrow more than this you are likely to have to pay lenders mortgage insurance (LMI). This is a one-off insurance premium to protect the lender should you default on your home loan. Borrowers with larger deposits can also usually negotiate lower interest rates, which could save you tens of thousands of dollars over the life of your loan.

Check real estate websites to get an idea of property prices in your preferred area, and to view recent sales data.

Work out what you can afford

Decide how much you can comfortably afford to spend on mortgage repayments and use a mortgage calculator to work out how much you can borrow. Ideally this would be 80% of the purchase price or less.

For example, based on repayments of $1,000 per fortnight, at 5% interest, over 30 years, you estimate you could borrow $400,000. If this is 80% of the purchase price, you would need a deposit of $100,000. So assuming you can save the required deposit, you could look at properties around the $500,000 mark. Keep in mind you will have other purchasing costs such as building and pest reports, stamp duty and legal fees which also need to be factored in.

You may need to consider different types of property or other areas, to buy something you can afford. If it’s your first home, it may be a stepping stone to what you really want in the future.


Understanding loan to value (LVR) ratio

A loan to value ratio (LVR) is a measure of the mortgage over the property, as a percentage of the value of the property. This is calculated by dividing the amount of your home loan by the purchase price (or appraised value) of the property.

For example, a mortgage of $400,000 over a property worth $500,000 (400,000 ÷ 500,000) = 0.80 or 80%. In this case the LVR = 80%. Lenders use your LVR to gauge how risky it would be to give you a loan. In general, the higher the LVR, the higher the risk the lender could lose money if you have difficulty making repayments. If they take on an increased risk they expect a greater reward, which means you pay a higher rate of interest. In addition, it’s likely you’ll be required to pay LMI.


Buying a home to live in

When buying a home to live in, there are a number of grants and subsidies that might be available to you, depending on your circumstances and where you are buying the property. These include:

  • Defence Home Ownership Assistance Scheme (DHOAS) – a scheme to help ADF members own their own home. DHOAS provides eligible members with a monthly subsidy paid directly into your qualifying home loan. You may also be able to take some of the subsidy up front as a lump sum, providing you meet the requirements, but this may have tax implications, so consider getting tax advice first. A DHOAS loan is only beneficial if the interest rate is competitive. If you can get a cheaper rate on a similar loan elsewhere, you don’t have to use DHOAS. Alternatively, negotiate a better rate with a DHOAS lender.
  • Home purchase assistance scheme (HPAS) – payable only once during a member’s ADF service, this provides a one-off payment to eligible members if they buy a home in their posting location and live in it.
  • Home purchase or sale expenses allowance (HPSEA) – reimbursement to an eligible member of the reasonable costs of selling a home, purchased under HPAS, and purchasing another home they will live in at the next posting location.
  • First home owner grant – is a national scheme, administered and funded by each state and territory, which provides a one-off grant to eligible first home owners.

Investing in property

When choosing an investment property, consider the investment potential, not just the tax breaks. Buy in markets you are familiar with or have researched thoroughly, after all, you’ll be putting a lot of money into a single asset.

Understand that if your property is negatively geared, it means you are making a loss. You only get a tax break because the loss on the property reduces your taxable income, which reduces the amount of tax you have to pay. See our Investing page for more information.