Avoid These 5 Fixed Rate Mistakes First Home Buyers Make

Fixed Rate Loans Lock Your Rate but Also Lock Your Flexibility

A fixed rate loan holds your interest rate steady for one to five years, which means your repayments stay the same regardless of what the Reserve Bank does. For someone on shift work, that predictability makes budgeting easier. But most lenders restrict what you can do during the fixed period, and those restrictions aren't always clear until you've signed.

The two features that get locked out most often are offset accounts and unlimited extra repayments. If you're planning to use your offset to park your pay between bills or if you want the option to throw lump sums at the loan when you can, a standard fixed rate product will block both. Some lenders allow a partial offset during a fixed term, others cap extra repayments at $10,000 or $20,000 per year, and a few offer neither.

Consider a first home buyer working in Darwin who locked in a three-year fixed rate without checking the repayment cap. Six months later, they received a payout from leave accrual and wanted to put $15,000 toward the loan. The lender's cap was $10,000 per year, so the extra $5,000 sat in a savings account earning minimal interest instead of reducing the debt. Over the remaining fixed term, that $5,000 would have saved more in interest than it earned externally.

Why Most First Home Buyers Choose a Split Rate Structure

Splitting your loan between fixed and variable rates gives you partial rate protection without losing all flexibility. You decide how much to fix and how much to leave variable. A common split is 50/50, but the ratio should match your priorities.

If certainty matters more than flexibility, you might fix 70% and leave 30% variable with an offset attached. If you're expecting irregular income or want room to make lump sum payments, reverse the split. The variable portion keeps your offset account active and lets you pay down the loan when cash is available. The fixed portion keeps a floor under your budget.

In our experience, officers who've just purchased and are still adjusting to the cost of running a property often prefer a heavier fixed weighting in the first year or two. Once they've settled into the repayment rhythm and built some savings, they refinance or reweight toward variable. That approach works well if your lender allows partial early exit from the fixed portion without charging break costs on the entire loan. Not all do, so confirm the terms before you commit.

Break Costs Can Wipe Out the Benefit of Refinancing Early

Break costs are the penalty you pay if you exit a fixed rate loan before the term ends. They're calculated based on the difference between your fixed rate and the lender's current wholesale funding cost for the remaining term. If rates have dropped since you fixed, the lender has lost money by locking you in at the higher rate, and they recover that loss from you.

The calculation isn't transparent, and most lenders won't give you a figure until you formally request a payout. In some cases, the break cost can exceed $10,000 on a loan of $400,000 if you're exiting two or three years early and rates have fallen sharply. That wipes out most of the refinancing benefit unless the new rate is significantly lower or you're accessing features the current loan doesn't offer.

If you're considering a fixed rate loan and there's any chance you'll need to sell, refinance, or move within the fixed period, ask the lender for a worked example of break costs at different rate scenarios. Some lenders also offer portability, which lets you transfer the fixed rate to a new property without penalty. That feature is uncommon but worth seeking out if you're buying a starter property in Darwin or Palmerston and expect to upgrade within a few years.

The $50,000 HomeGrown Territory Grant Requires a New Build

Northern Territory first home buyers purchasing a new home under a contract signed by 30 September 2027 can access a $50,000 grant. That's the highest first home grant in the country. The grant only applies to new builds, which means house and land packages, off-the-plan units, or newly completed homes that haven't been occupied. It doesn't apply to established homes.

If you're using the Australian Government 5% Deposit Scheme to purchase with a lower deposit, you can combine it with the HomeGrown Territory Grant as long as the property price stays under the relevant cap. From 1 July 2026, the cap for Darwin is $750,000 and $600,000 for the rest of the Northern Territory. The grant reduces the cash you need upfront, but the property still needs to meet the lender's valuation and construction standards.

Most lenders will also want to see that you can service the loan based on a higher assessment rate than the actual rate you'll pay. That's usually the loan rate plus a buffer of around 3%. For someone on a rostered income with penalty rates and allowances, structuring your application so the lender includes your full earning capacity makes a significant difference to borrowing capacity.

Fixed Rate Loans Don't Always Include a Redraw Facility

Redraw lets you access extra repayments you've made above the minimum. It's a standard feature on most variable rate loans, but it's often excluded or restricted on fixed rate products. Some lenders allow redraw during the fixed term but charge a fee each time you access it. Others don't offer it at all.

If your lender allows extra repayments up to a certain cap, check whether those funds sit in a redraw facility or whether they're locked in until the fixed term ends. If they're locked, you've reduced your loan balance but you can't access that money if something comes up. That's not ideal for someone in a high-demand role where circumstances can change quickly.

A variable rate loan with an offset account gives you the same interest saving as making extra repayments, but the funds stay accessible in the offset. For a first home buyer who's still building an emergency buffer, that liquidity can matter more than locking in a slightly lower fixed rate. If you do choose a fixed rate product, make sure you understand whether redraw is available, how much it costs to use, and whether there's a minimum withdrawal amount.

Most Lenders Won't Let You Increase Your Fixed Rate Loan Limit

If you fix your rate and then want to borrow more for renovations, a car, or another purpose, most lenders won't let you increase the loan without breaking the fixed term and refinancing the entire amount. That triggers break costs and removes any rate advantage you locked in.

Some lenders will allow you to take out a separate variable rate top-up loan alongside your fixed rate loan, but that means you'll be managing two loans with different rates, terms, and repayment schedules. It's administratively messier and can limit your options if you want to refinance later.

If you're buying a property that might need work in the next few years, either leave enough variable debt in a split structure to cover future borrowing or wait until you've completed the renovations before fixing. Alternatively, look at lenders who offer a construction or renovation facility within the fixed rate loan structure. Those products are less common but they do exist, particularly if you're using a house and land package loan or buying a property that needs immediate work.

When you're ready to move forward, call one of our team or book an appointment at a time that works for you. We'll walk through your situation, your roster, and the features that matter most, then match you with a lender and loan structure that fits. You can reach us on the number listed or book directly through the site at a time that suits your shift pattern.

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