Home Loans for First Home Buyers in South East Melbourne, Buy From a 2% Deposit
Buying your first home in South East Melbourne feels like it should be impossible right now, and the deposit maths does not help. Every suburb median you look at sits well above what you thought you would need to save, and the gap between your account balance and a 20% deposit keeps widening. But the deposit requirement is not what you think it is, and that is the misconception worth correcting first.
Federal guarantee schemes let eligible first home buyers purchase with as little as 2% to 5% down, with no lenders mortgage insurance charged on top. The catch is a price cap of $950,000, which in South East Melbourne means the scheme applies to units and apartments rather than houses in almost every suburb. A unit median of $512,000 in St Kilda or $580,000 in Oakleigh sits well inside that cap, which is where most first home buyer lending here actually happens.
Our team helps first home buyers across South East Melbourne work through deposit options, scheme eligibility and lender choice across 60+ lenders. The scheme and lender combination you use makes a material difference to how much you need upfront and what you pay over time.
Key takeaways
- Federal schemes let eligible buyers purchase with 2% to 5% deposit.
- Every South East Melbourne house median sits above the $950,000 scheme cap.
- 22 of 28 approved suburbs have a unit median under the cap.
Can first home buyers in South East Melbourne actually get into the market?
Yes, though you need to be clear-eyed about what the market looks like. House medians across South East Melbourne range from $1,280,000 in Moorabbin to over $3,000,000 in Middle Park, so a scheme capped at $950,000 does not open up the house market here. What it does open up is the unit market, and that is substantial. Suburbs like Cheltenham, Carnegie and Oakleigh have unit medians between $580,000 and $700,000, all well inside the cap and well-connected by rail.
How do lenders assess first home buyers in South East Melbourne?
Lenders assess your serviceability the same way they do for any borrower, using the APRA buffer of 3.0% added to the actual loan rate to stress-test your repayments. What differs for first home buyers is that you typically have a shorter income history, a smaller deposit and, often, a HECS debt sitting in the background. Each of these affects a different part of the assessment.
Your HECS repayment is counted as an ongoing commitment regardless of your balance. Lenders assess the compulsory repayment amount, not the debt itself, so even a small balance can reduce your borrowing capacity if your income is above the repayment threshold. Paying out a small balance before applying can lift capacity; for a large one, the cash is usually more useful as part of your deposit.
Casual or contract income is counted by most lenders once you have around 12 months of consistent history in the same role or field. Permanent employment makes the assessment cleaner, but it is not a requirement. Parental leave income is assessed differently again, and a return-to-work letter is usually what lenders want to see rather than the leave pay itself.
The clients who struggle most are the ones who applied to their own bank first, got a number, and then came to us convinced that number was their ceiling. It almost never is. What a bank tells you is what that lender will lend, not what you can borrow across the market.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What eligibility criteria apply to first home buyers?
Eligibility for the federal schemes and the Victorian state grant each carry their own conditions, and they do not all overlap. Meeting one does not guarantee you meet the others.
What lenders and schemes check:
- › First home buyer status: you must never have owned residential property in Australia, either alone or with someone else.
- › Citizenship or residency: Australian citizen or permanent resident required for the FHOG; New Zealand citizens or PRs qualify for the duty concession.
- › Residence requirement: you must move in within 12 months of settlement and live there for at least 12 continuous months, for both the FHOG and the duty concession.
- › Property type for the FHOG: the $10,000 grant applies to new homes only, priced at $750,000 or under, and not previously sold or occupied.
- › Price cap for schemes: the First Home Guarantee and Family Home Guarantee both carry a $950,000 cap for every approved suburb in South East Melbourne.
- › Rentvesting trap: buying an investment property before your first home costs you FHOG and scheme eligibility permanently. That decision needs to happen before you buy, not after.
What government schemes can first home buyers in South East Melbourne use?
Four federal pathways are currently open to South East Melbourne buyers. The state shared-equity scheme, the Victorian Homebuyer Fund, is closed to new participants and is not an available option here.
The options worth weighing:
- › First Home Guarantee: 5% deposit · no LMI · no income test · $950,000 cap · first home buyers only
- › Family Home Guarantee: 2% deposit · no LMI · genuinely single parents only · not first-home-buyer only · $950,000 cap
- › Help to Buy: government co-buys up to 40% of a new home or 30% of an existing one · income caps $103,000 single, $165,000 joint · $950,000 cap · 2% deposit
- › First Home Super Saver Scheme: withdraw voluntary super contributions toward a deposit · up to $50,000 total, $15,000 per year · no price cap
The duty concession sits alongside these. In Victoria, a first home purchase at $600,000 or under attracts no transfer duty at all, and a partial concession applies up to $750,000. Every eligible unit in suburbs like Windsor, Prahran and South Yarra with medians around $500,000 to $530,000 falls inside the full exemption. That can save tens of thousands at settlement, and it applies whether the home is new or established.
Source: Housing Australia and State Revenue Office Victoria.
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How much can first home buyers borrow in South East Melbourne?
CoreLogic data shows unit medians across South East Melbourne running from $470,000 in Ripponlea to $935,000 in Bentleigh, with most of the accessible stock sitting between $500,000 and $700,000. At 95% LVR under the First Home Guarantee, a $600,000 purchase requires a $30,000 deposit plus stamp duty and purchase costs. At 5% LVR without a scheme, the same purchase requires $30,000 plus lenders mortgage insurance, which at that price point runs to approximately $21,000 added to the loan.
Borrowing capacity depends on your income, existing debts and living expenses assessed against the HEM benchmark. Your HECS repayment, any car finance and credit card limits are all counted as ongoing commitments before a lender arrives at a number. The assessment rate is approximately 9% regardless of the actual loan rate, which is what the 3.0% APRA buffer is there to create. Two people with the same salary and different credit card limits will receive materially different offers from the same lender.
If your capacity comes in short on the first approach, a guarantor structure is one path worth understanding. The lender takes a limited mortgage over the guarantor's property to cover the gap between your deposit and 20%, typically 15% to 25% of the purchase price, which removes the LMI entirely. No money changes hands at settlement, and the guarantee can be released once the LVR falls below 80%, usually within three to seven years.
Source: CoreLogic (via YIP, June 2026) and APRA.
How does a mortgage broker improve outcomes for first home buyers?
The lender and scheme combination you use decides more than the rate does. Three policy differences move the outcome for first home buyers, and none of them is published side by side anywhere.
- › Scheme access: not every lender on the market is a participating lender for the First Home Guarantee or Help to Buy, so your choice of lender and your scheme eligibility interact directly.
- › HECS assessment: some lenders assess your HECS repayment more conservatively than others, which changes the borrowing number without any change to the loan itself.
- › High-density postcode policy: some lenders restrict LVR or tighten conditions on apartments in certain postcodes, and a broker who knows this avoids a declined application sitting on your credit file.
Comparing across 60+ lenders finds the combination that fits your deposit, your income shape and the property type you are looking at.
When does buying your first home not make sense yet?
If your income has changed significantly in the last six months and your tax return does not yet reflect it, pushing an application through now usually produces a lower assessed income than waiting one reporting period. The approval is cleaner, the rate is better, and the assessed figure more accurately reflects what you actually earn.
Help to Buy's income caps of $103,000 for singles and $165,000 for joint buyers cut out a portion of South East Melbourne's first home buyer population, particularly dual-income couples in professional roles. If your combined income is above the threshold, you are better served by the First Home Guarantee or a guarantor structure, depending on your deposit position.
If I were buying my first home in South East Melbourne today, I would be targeting a well-connected unit under $700,000 and running the First Home Guarantee and the duty exemption together. Both can apply to the same purchase, and the combined saving on LMI and duty is often larger than people expect.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What approval challenges do first home buyers face in South East Melbourne?
Where the application can stall:
- › Genuine savings requirement: most lenders want to see the deposit held in your own account for at least three months, not received as a gift in the weeks before application.
- › Buy now pay later on statements: BNPL accounts appear on bank statements and are treated as a commitment by most lenders, even at small balances. Closing unused BNPL accounts before applying is one of the faster capacity fixes.
- › Low valuation on the unit: where the lender's valuation comes in under the contract price, you cover the shortfall in cash or renegotiate. In higher-supply apartment postcodes this happens more often than buyers expect, and knowing the valuation risk before exchanging is worth the preparation.
- › Credit enquiry accumulation: each application registers on your credit file and stays there for five years. Applying to three lenders in a week to compare offers leaves three enquiries, which reduces your assessed creditworthiness at the fourth. Compare through one broker, not across multiple direct applications.
- › Off-the-plan settlement risk: finance cannot be formally locked for the duration of a build, so if the market moves or your circumstances change between exchange and completion, the approval you received 18 months ago may not hold at the same terms.
Frequently Asked Questions
Can first home buyers in South East Melbourne use the First Home Guarantee on a unit?
Yes, the First Home Guarantee applies to units as well as houses, subject to the $950,000 price cap. In South East Melbourne, 22 of 28 approved suburbs have a unit median under that cap, making units the main first-home pathway here.
Does a HECS debt stop first home buyers from getting approved?
No, it does not stop approval, but it does reduce borrowing capacity because lenders count your compulsory repayment as an ongoing commitment. Paying out a small remaining balance before applying can recover some of that capacity.
Can first home buyers in South East Melbourne use the stamp duty exemption on a new apartment?
Yes. Victoria's first home buyer duty exemption applies to both new and established properties at $600,000 or under, with a partial concession up to $750,000. The off-the-plan temporary concession may also apply to eligible strata units under contracts before 21 April 2027.
Is the First Home Guarantee better than Help to Buy for first home buyers here?
The First Home Guarantee suits higher-income buyers with a 5% deposit, since it has no income test. Help to Buy suits lower-income buyers with less saved, as the 2% deposit requirement is lower and the government takes an equity share to reduce the loan size.
Can first home buyers use the FHOG in South East Melbourne?
Yes, for a new home priced at $750,000 or under. The $10,000 Victorian FHOG applies to new builds only, so a first home buyer purchasing a new apartment off the plan in South East Melbourne may qualify where the contract price is under the cap.
Is a mortgage broker worth using for first home buyers in South East Melbourne?
A mortgage broker, every time. First home buyers benefit most from scheme matching, lender policy differences and avoiding credit file enquiry damage, none of which a single lender can help with. A broker compares across the panel before any application is lodged.
Your Next Steps
Getting your first home purchase right in South East Melbourne is a unit story, a scheme story, and a lender-policy story, and all three interact in ways that a single bank conversation will not show you. The right combination of scheme, deposit structure and lender makes a real difference to what you need upfront and what the loan costs over time.
Ready to find out which lenders will work best for your first home purchase? Contact the EverLend team or call 03 7036 3356. We'll canvas our 60+ lender panel and find the most suitable options for your circumstances.
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External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
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