A townhouse can be a smart first home, as long as you know what you are signing up for.
Townhouses sit between an apartment and a freestanding house. They often come with more space and a bit of outdoor area, and you may be a short trip from Coogee Beach. They also come with strata costs and shared rules. This article covers both sides so you can decide with confidence.
What Are the Pros and Cons of Buying a Townhouse as a First Home Buyer?
The main advantage of a townhouse is that it can give you house-style living at a lower entry cost than a detached home. The main drawback is that you share ownership of common areas, which usually means ongoing strata levies and rules you must follow. Not every townhouse is strata-titled, so check how the property you are considering is titled.
On the plus side, townhouses are eligible for the main first home buyer schemes. Help to Buy, for example, can be used for a house, townhouse, apartment or unit. On the downside, strata levies are a regular cost on top of your loan repayments, and the property must be insurable. Some lenders also have their own rules on property types. It pays to check the strata costs and the lender's rules before you make an offer. You can read more about our approach for first home buyers on our main page.
How Much NSW Stamp Duty Could a First Home Buyer Save?
In NSW, first home buyers pay no transfer duty (stamp duty) on a home valued at $800,000 or less, and pay a reduced amount on a home valued above $800,000 and below $1,000,000. At $1,000,000 or more, no exemption or concession applies. These rules apply to contracts exchanged on or after 1 July 2023.
As an example of how the concession works, consider a first home buyer whose townhouse is valued at $850,000. This is a scheme illustration only, not a Coogee price. Revenue NSW and the NSW Government publish the duty for the current financial year. General duty at that value is $32,437, but the first home buyer figure is $9,796.75. The buyer saves $22,640.25.
The outcome depends on the buyer meeting the rules. They must move in within 12 months of settlement and live there for at least 12 continuous months. Neither the buyer nor their spouse or partner can have owned residential property in Australia before. Your solicitor or conveyancer lodges the claim, so ask them about it early.
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Which First Home Buyer Schemes Work With a Townhouse?
The Australian Government 5% Deposit Scheme, Help to Buy and the First Home Super Saver scheme can all be used with a townhouse. Each has its own trade-offs. Help to Buy participants cannot receive help from other schemes, including shared equity and loan support or backing, so confirm with Housing Australia or a participating lender before relying on any combination.
The 5% Deposit Scheme lets eligible first home buyers buy with a 5% deposit and avoid Lenders Mortgage Insurance (LMI). There are no income caps. The trade-off is that the government backing protects the lender, not you, and you still carry the full loan. You must move in within six months of settlement. In NSW, the purchase price and the lender's valuation must both sit under the price cap for your suburb and postcode, which you can check in Housing Australia's postcode search tool. You apply through a participating lender, not directly.
Help to Buy is a shared equity scheme where the government contributes between 5% and 30% of the price of an existing home, and between 5% and 40% of a new one. There are no monthly repayments or interest on the government's share. The trade-off is that the government owns part of your home, so its share rises and falls with the property's value. The share must be repaid on sale or refinance. If your income is above the threshold for two consecutive years and you can afford it, you may have to buy back part or all of the share. Income limits apply: the current threshold is $103,000 for a single applicant and $165,000 for joint applicants. You also need at least a 2% deposit from savings.
The First Home Super Saver scheme lets you put voluntary contributions into super and later release them toward a deposit. Up to $15,000 a year and $50,000 in total count towards release. Tax applies to the released amount, so speak to your accountant before using it.
Does a New Townhouse Qualify for the NSW First Home Owner Grant?
A new townhouse can qualify for the NSW First Home Owner Grant of $10,000, but established townhouses cannot. The grant covers newly built, off-the-plan or substantially renovated homes with a purchase price of $600,000 or less.
There is no means test, and you need to live in the home for at least 12 continuous months. The trade-off is the price limit, so check the price against the $600,000 cap before you rely on it. If you buy off the plan to live in the home, you may also be able to defer transfer duty for up to 12 months. Duty then falls due at the earliest of 15 months after signing, settlement, or assigning part of the contract.
How Do Strata Costs Affect Your First Home Buyer Budget?
Strata levies are a regular cost you pay as an owner of a strata-titled townhouse, and they belong in your budget from day one. They are separate from your loan repayments and council rates. Levies usually cover the building insurance, though you may still need contents insurance.
Before you commit, ask for the strata records. Look at the levy amounts and the building's maintenance plans. Lenders look at your whole financial picture when they work out how much you can borrow, so it helps to understand your borrowing capacity early. You can also test different loan sizes with our mortgage repayment calculator.
Why Use a Broker Instead of Going Straight to a Bank?
A mortgage broker can compare loans from a range of lenders for you, while a bank can only offer its own products. That matters more when schemes are involved, because the 5% Deposit Scheme and Help to Buy are only available through participating lenders.
The list of lenders offering Help to Buy is short, and Housing Australia says it will be updated gradually. A broker can liaise with a participating lender on your behalf and check whether a scheme actually suits your situation, including whether a lender will accept your townhouse. If you are weighing up family support, we can also explain how guarantor loans work and the risks for the guarantor.
Speak with our local mortgage broker in Coogee team. Call one of our team or book an appointment at a time that works for you, and we will work through the numbers on your townhouse with you.
Frequently Asked Questions
Can first home buyers use the 5% Deposit Scheme for a townhouse?
Yes, the scheme applies as long as the purchase price and the lender's valuation are at or below the price cap for the property's suburb and postcode. You apply through a participating lender, and you must move in within six months of settlement.
Do first home buyers pay stamp duty on a townhouse in NSW?
Not on a home valued at $800,000 or less, where the first home buyer exemption applies. Homes valued above $800,000 and below $1,000,000 pay a reduced amount, and no concession applies at $1,000,000 or more.
Can I get the NSW First Home Owner Grant for an established townhouse?
No. The $10,000 grant is only for newly built, off-the-plan or substantially renovated homes, and the purchase price must be $600,000 or less.
Can I combine Help to Buy with the 5% Deposit Scheme?
Help to Buy participants cannot receive help from other schemes, including shared equity and loan support or backing. Confirm with Housing Australia or a participating lender before relying on any combination. You can still receive first home owner grants and stamp duty concessions.
