Everything you need to know about buying a two bedroom home

Getting a two bedroom home sorted with tradie income

A two bedroom place is often the right call when you're starting out or keeping things lean. You'll need a deposit, proof of income that works with how painters actually get paid, and a lender who understands that your tax return doesn't tell the full story. Most lenders want to see 5% to 20% deposit plus settlement costs, and the interest rate you'll get depends on how much you put down and which lender you go with.

Painters applying for a home loan often run into trouble when banks look at taxable income after deductions rather than what you actually earn on the tools. If you're claiming vehicle costs, materials, and equipment against your income, your tax return might show $65,000 while you're pulling in closer to $90,000. Lenders who work with tradies regularly will add back legitimate business expenses to get a realistic picture of your borrowing capacity. That difference can mean the gap between getting knocked back and getting approved for what you need.

Consider a painter who's been working for himself for three years, lodging returns each year showing $68,000 taxable income after claiming $22,000 in vehicle and equipment costs. A tradie-focused lender adds back those deductions to assess serviceability at closer to $90,000, which changes the borrowing ceiling from around $380,000 to around $500,000. That opens up a much wider range of two bedroom properties, particularly in outer metro areas where entry prices sit in that zone.

What deposit do you actually need

You can get into a property with as little as 5% deposit if you qualify under the Australian Government 5% Deposit Scheme, which covers the gap up to 20% so you don't pay Lenders Mortgage Insurance. If you're outside that scheme, most lenders will still approve you with 5% to 10% down, but you'll pay LMI on top, which can add several thousand dollars to your upfront costs depending on the loan amount.

For painters who've been setting aside cash each quarter, it's worth knowing that lenders will accept genuine savings held for at least three months. If you've been keeping funds in an offset or savings account tied to a statement, that counts. Gifted deposits from family usually need a signed declaration, and some lenders won't accept them at all for low deposit loans. If you're planning to use the First Home Super Saver Scheme to pull voluntary super contributions toward your deposit, the ATO allows up to $15,000 per financial year of eligible contributions, which can top up your cash savings without needing a larger lump sum upfront.

Variable, fixed, or split rate for a two bedroom purchase

Variable rates give you flexibility to make extra repayments without penalty and to refinance when a better deal comes up. Fixed rates lock in your repayment amount for one to five years, which helps if you want certainty over your monthly budget. A split loan puts part of your borrowing on variable and part on fixed, so you get some protection against rate rises while keeping the option to pay down the variable portion faster.

In our experience, painters with fluctuating income between residential and commercial jobs tend to favour variable or split structures. If you land a big repaint job and want to throw an extra $10,000 at the loan without cocop a break fee, variable gives you that option. If your income is steady and you'd rather know exactly what's coming out each month, fixed makes sense. Just note that fixed rates generally sit slightly higher than variable at the moment, and if rates drop during your fixed term, you don't benefit until the fixed period ends.

Offset accounts and how they cut interest

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, so if you've got a $400,000 loan and $15,000 in your offset, you only pay interest on $385,000. The money in the offset stays accessible, which matters when you need to cover materials upfront or bridge a gap between finishing a job and getting paid.

For painters who bill on completion or in stages, cash flow can be lumpy. Keeping your working capital in an offset rather than a separate savings account means you're cutting interest every day that money sits there, and you can still pull it out when you need to pay suppliers or cover a lean month. Not every loan comes with an offset, and some lenders charge a higher rate or an annual fee for the feature, so compare the cost against the benefit based on how much you're likely to keep in the account.

How lenders assess painters for borrowing capacity

Lenders calculate how much you can borrow by looking at your income, your fixed expenses, and an interest rate buffer to make sure you can still service the loan if rates go up. For painters working under an ABN, most lenders want two years of tax returns and ATO notices of assessment. If you're a sole trader or running a company, they'll also want your business activity statements to confirm consistent turnover.

Some lenders that focus on finance for tradies will use your business income before deductions or allow you to declare income if you've only got one year of returns, though that usually means a higher rate or a lower maximum loan amount. If you've recently moved from wage work to self-employment, you might need to wait until you've lodged your first full-year return before most lenders will consider your application. Providing clean financials, a letter from your accountant, and evidence of ongoing contracts or repeat clients can smooth the process and sometimes get you over the line sooner.

Principal and interest versus interest only repayments

Principal and interest repayments mean you're paying down the loan balance and covering the interest each month. Interest only means you're covering the interest cost but not reducing the loan itself, which keeps your repayment lower in the short term but means you'll owe the same amount at the end of the interest only period. Most owner occupied loans are set up as principal and interest from day one.

Interest only can make sense if you're planning to sell or refinance within a few years, or if you're stretching to cover the deposit and settlement costs and need breathing room in the first year or two. For a two bedroom owner occupied purchase, lenders typically allow interest only for one to five years before reverting to principal and interest. The monthly saving might be a couple of hundred dollars depending on the loan size, but you're not building equity during that time, so it's a trade-off between cash flow now and equity later.

What settlement costs actually add up to

On top of your deposit, you'll need to cover stamp duty, legal or conveyancing fees, building and pest inspections, loan application and valuation fees, and any LMI premium if applicable. Stamp duty varies by state, and most states offer concessions or exemptions for first home buyers under certain price caps. Legal fees usually run between $1,500 and $3,000 depending on the complexity of the contract. Inspections typically cost $400 to $600 combined. Lender fees vary, but expect $300 to $600 for application and valuation unless the lender is running a fee waiver.

If you're buying in New South Wales as a first home buyer and the property is under $800,000, you won't pay stamp duty. If it's between $800,000 and $1,000,000, you'll get a concession. Victoria offers a full exemption up to $600,000 and a concession up to $750,000 for first home buyers. Queensland has similar thresholds. If you're not a first home buyer, stamp duty on a $450,000 two bedroom unit in most states will sit somewhere between $10,000 and $18,000, so factor that in early.

Using pre-approval to lock in your budget

Pre-approval gives you a conditional commitment from a lender for a specific loan amount before you start looking at properties. It's based on your income, expenses, and credit file, and it's usually valid for three to six months. With pre-approval in hand, you know what you can afford, and sellers or agents take you more seriously because they can see you've already done the groundwork.

For painters, getting pre-approval early means you can sort out any issues with how your income is being assessed before you find a place you want to buy. If a lender is undervaluing your income or asking for documents you don't have, you've got time to fix it or try a different lender. Pre-approval isn't a guarantee, because the lender will still do a full assessment and valuation once you've found a property, but it gives you a realistic ceiling and speeds up the process when you're ready to make an offer.

Call one of our team or book an appointment at a time that works for you. We'll go through your income, work out what you can borrow, and line up lenders who understand how painters get paid so you're not explaining the same thing five times over.

Frequently Asked Questions