Do you know what to check before buying a three bedroom home?

Most three bedroom homes in Surrey Hills sit in that price band where a 10% deposit might cover the purchase, or it might not, depending on which street you buy in.

The difference between needing Lenders Mortgage Insurance and avoiding it is rarely about the property. It's about how you structure the loan before you apply.

How much can you borrow for a three bedroom property?

Your borrowing capacity depends on your income, living expenses, existing debts and the type of property you're buying. Lenders assess owner-occupied loans differently to investment loans, and they'll apply a serviceability buffer of around 3% above the current variable rate to stress-test your repayments. That means even if rates are sitting at 6%, the lender will calculate whether you could manage repayments if they climbed to 9%.

Consider a couple earning a combined $180,000 with minimal debt and moderate living expenses. At current variable rates, they might borrow around $900,000 for an owner-occupied purchase. If one of them has a car loan with $30,000 outstanding, that figure could drop by $150,000 or more, depending on the lender's policy. We regularly see buyers miss out on properties because they didn't know a personal loan or buy-now-pay-later account was cutting their capacity by 15% or more.

If you're looking at upgrading into a three bedroom home from a smaller property, refinancing to release equity or selling first will determine how much you can access for the new purchase.

Should you choose a variable, fixed or split rate for a three bedroom home?

A variable rate gives you full flexibility to make extra repayments, redraw funds and refinance without penalty. A fixed rate locks in certainty for one to five years, but limits your ability to repay early or exit the loan without break costs. A split loan divides your borrowing between both, giving you partial rate protection and partial flexibility.

In a scenario where a buyer in Surrey Hills is purchasing a three bedroom home at the upper end of their budget, a split structure with 50% fixed and 50% variable could make sense. The fixed portion provides repayment certainty over the first few years, while the variable portion allows them to direct bonuses or savings into the loan without hitting fixed rate repayment caps. If rates fall, they benefit on half the loan immediately. If rates rise, half the loan is insulated.

There's no universal answer. Your income stability, risk tolerance and plans for the property over the next few years should drive the decision, not the current rate environment alone. We walk through this structure decision with every buyer because getting it wrong at the start is expensive to undo later.

What deposit do you need for a three bedroom home in Surrey Hills?

If you're borrowing more than 80% of the property value, you'll pay Lenders Mortgage Insurance. LMI protects the lender if you default, and the premium increases sharply once your loan-to-value ratio exceeds 80%. For a property valued at $1,200,000, LMI on a 90% loan could sit somewhere between $25,000 and $40,000, depending on the lender and your income profile.

A 20% deposit avoids LMI entirely, though some lenders offer LMI waivers for certain professions or under specific government schemes. First home buyers may be eligible for the Australian Government 5% Deposit Scheme, which allows you to borrow up to 95% of the property value without paying LMI, provided the property price and your circumstances meet the eligibility criteria.

If you're buying in Surrey Hills, where median prices for three bedroom homes have remained firm, a 10% deposit might look manageable on paper. But once you add stamp duty, conveyancing, building and pest inspections, and a buffer for settlement costs, the upfront requirement is closer to 13% or 14% of the purchase price. That distinction catches a lot of buyers mid-campaign.

How does an offset account reduce interest on a home loan?

An offset account is a transaction account linked to your home loan. Every dollar sitting in the offset reduces the balance on which interest is calculated, without locking that money away. If you have a $900,000 loan and $50,000 in your offset, you only pay interest on $850,000.

Offset accounts work well for buyers who receive irregular income, run a business, or want to keep funds accessible for renovations or investment opportunities. They're typically only available on variable rate loans, though some lenders offer partial offset on fixed rates. If your home loan is structured as a split, you'd only get the offset benefit on the variable portion.

The alternative is making extra repayments directly into the loan, which reduces the principal faster but requires a redraw facility if you need access to those funds later. Redraw isn't guaranteed, and some lenders restrict how much or how often you can pull money back out.

What fees and features should you compare when choosing a home loan?

Upfront fees vary widely. Some lenders charge application fees between $300 and $1,000, while others waive them entirely. Ongoing monthly fees range from $10 to $15 for packaged loans, though basic variable products often come with no monthly account-keeping fee at all.

Rate discounts, offset availability, redraw terms, and the ability to make extra repayments without penalty all matter more than the advertised interest rate on its own. A loan with a slightly higher rate but no monthly fee and a full offset could cost less over five years than a loan with a lower rate but a $15 monthly fee, no offset and limited flexibility.

Portability is another feature worth checking. A portable loan allows you to transfer the same loan to a new property without refinancing, which can save you thousands in discharge and application fees if you plan to move again within a few years. Not all lenders offer it, and those that do may apply conditions around timing or loan-to-value ratio at the time of transfer.

If you're buying a three bedroom property with plans to renovate or extend in the next few years, check whether the lender allows you to increase your loan amount without a full reapplication. Some lenders offer pre-approved limit increases if your circumstances haven't changed and the property value supports it.

How does pre-approval help when buying in Surrey Hills?

Pre-approval gives you a conditional commitment from a lender before you make an offer. It confirms how much you can borrow, subject to a satisfactory property valuation and final checks on your financial position. In a suburb like Surrey Hills, where stock is tightly held and auctions move quickly, having pre-approval in place means you can bid with confidence or make an unconditional offer if the property and timing suit.

Pre-approval is typically valid for three to six months, depending on the lender. If your financial circumstances change during that window, such as a job move, new debt or a drop in income, the lender may reassess or withdraw the approval. That's why we recommend applying for pre-approval only when you're genuinely ready to buy, not months in advance as a general guide.

One thing to watch is the valuation. Even if you're pre-approved for $1,000,000, the lender will only advance funds based on their valuer's assessment of the property you're buying. If the valuer comes in $50,000 under the purchase price, you'll need to cover that gap with additional cash or renegotiate the sale terms.

When should you speak to a mortgage broker?

Before you start looking at properties. Your borrowing capacity, deposit position and loan structure options shape where and what you can buy. Waiting until you've found a property and signed a contract leaves you with no time to fix issues with your credit file, reduce debt, or compare lenders properly.

We work with buyers in Surrey Hills and across Boroondara who want clarity on what they can borrow, what it will cost, and which loan structure fits their plans. Every buyer's situation is different, and the lenders that suit one income profile or deposit level won't necessarily suit another.

Call one of our team or book an appointment at a time that works for you. We'll walk through your numbers, explain your options, and make sure your loan is set up properly from the start.

Frequently Asked Questions