Simple hacks to buy a townhouse as a first home buyer

Why townhouses work for first home buyers

Townhouses offer a practical middle ground between apartments and freestanding homes. They typically deliver more space than a unit at a lower entry price than a detached house, making them accessible for buyers entering the market with limited savings. For first home buyers in Mandurah, where the median townhouse price often sits below the suburb's detached house values, this property type opens up more choice within a limited budget.

Consider a buyer who has saved a 5% deposit and wants to purchase in the Halls Head precinct of Mandurah. A townhouse in that area might fall within reach under the Australian Government 5% Deposit Scheme, particularly if the property sits below the $600,000 regional cap for Western Australia. The buyer avoids paying Lenders Mortgage Insurance and retains additional funds for settlement costs. That same buyer looking at a detached house in the same precinct might exceed the scheme's price cap or need to move further from the coast to stay within budget.

Using the Australian Government 5% Deposit Scheme for a townhouse purchase

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit without paying LMI. Housing Australia guarantees the difference between your deposit and 20% of the property value. No income caps apply, and there are no annual place limits. Applications are made through a participating lender, not directly through Housing Australia.

In Western Australia, the property price cap is $850,000 for Perth and applicable metropolitan postcodes, and $600,000 for the rest of the state. Mandurah falls under the $600,000 cap. Both the purchase price and the lender's assessed value must be at or below the applicable cap. If you are purchasing a townhouse in Mandurah at the suburb's current median, confirm the property price and valuation with your lender before signing a contract.

The scheme can be combined with state stamp duty concessions and the Western Australian FHOG. You can use a fixed rate, variable rate or split loan structure depending on your lender. Check which loan features are available through your chosen participating lender before submitting your application.

Western Australian stamp duty concessions and the FHOG for townhouses

From 7 May this year, Western Australia introduced a single statewide threshold for the First Home Owner Rate of duty, removing the previous distinction between Perth, Peel and regional areas. No duty is payable on homes valued up to $600,000. A concessional rate applies on homes valued between $600,001 and $800,000.

The First Home Owner Grant is $10,000 for new homes only. The grant does not apply to established townhouses. For new townhouses south of the 26th parallel, which includes Mandurah, the value cap is $800,000. The grant cap and the stamp duty threshold are no longer linked, meaning you can access the duty concession on a property that exceeds the grant value cap.

In a scenario where a buyer purchases a new townhouse in Mandurah at a contract price within the $800,000 cap, they receive the $10,000 grant and pay no stamp duty if the property is valued at $600,000 or less. If the townhouse is valued between $600,001 and $800,000, they still receive the grant but pay concessional duty. The buyer must occupy the home as their principal place of residence for at least six continuous months starting within 12 months of completion.

Off-the-plan townhouse purchases and additional duty concessions

Townhouses purchased off-the-plan or under construction within a survey-strata scheme arrangement may qualify for an additional duty concession. From 12 March this year, the off-the-plan duty concession was expanded to include survey-strata schemes, which means smaller developments such as duplexes and triplexes are now eligible.

For pre-construction contracts entered into from that date, a 100% concession applies on dwellings valued up to $800,000, capped at $50,000. For under-construction contracts, a 75% concession applies on dwellings valued up to $800,000, also capped at $50,000. The concession runs until 30 June 2028.

This concession can be used alongside the First Home Owner Rate of duty. If you are purchasing a new townhouse off-the-plan in Mandurah, confirm with your conveyancer or settlement agent which concessions apply to your contract. The structure of the development and the timing of your contract both affect eligibility.

Deposit sources and the First Home Super Saver Scheme

The First Home Super Saver Scheme allows you to make voluntary contributions into your superannuation fund and apply to release eligible amounts toward your deposit. You can release up to $15,000 of personal contributions from any one financial year, with a total cap of $50,000. Concessional contributions are taxed at 15% rather than at your marginal income tax rate.

You need to obtain a determination from the Australian Taxation Office before signing a purchase contract. The released amount can be used as part of your deposit under the Australian Government 5% Deposit Scheme or any other home loan application structure. The scheme is available to all eligible first home buyers, regardless of the property type being purchased.

Gifted deposits are also accepted by most lenders, provided the gift comes from an immediate family member and is accompanied by a signed statutory declaration confirming the funds are a gift and not a loan. If you are combining a gifted deposit with funds released under the First Home Super Saver Scheme, confirm with your lender that your total deposit meets their minimum genuine savings requirements.

Loan features that matter for townhouse buyers

Loan features vary significantly between lenders. An offset account linked to a variable rate loan can reduce the interest charged on your home loan by offsetting the balance in the account against your loan balance. A redraw facility allows you to access additional repayments you have made above your minimum, though some lenders impose conditions or fees on redraw access.

If you are purchasing a townhouse in a strata development, confirm whether your lender requires a review of the strata by-laws or sinking fund balance before approving the loan. Some lenders impose restrictions on lending for properties in developments with low owner-occupier ratios or limited sinking funds.

First home buyers using a fixed interest rate lock in certainty over repayments for the fixed period, but typically forego access to an offset account and may face restrictions on additional repayments. A split loan structure allows you to fix a portion of your loan and keep the remainder on a variable rate, retaining access to features such as offset while managing rate risk.

Pre-approval and contract timing

Pre-approval confirms how much a lender is willing to lend based on your financial position. It is not a formal loan offer, but it gives you confidence when making an offer on a townhouse. Pre-approval is typically valid for three to six months, depending on the lender.

If you are applying under the Australian Government 5% Deposit Scheme, confirm with your lender that they are a participating lender and that the property you intend to purchase meets the scheme's eligibility criteria. Some lenders process scheme applications more quickly than others. Ask your broker or lender about current turnaround times before signing a contract with a short settlement period.

For off-the-plan townhouse purchases, settlement may occur 12 to 24 months after signing the contract. Your pre-approval will expire before settlement, and you will need to reapply closer to the completion date. Your financial position, employment status and the lender's credit policies may all change during that period. Factor this into your planning if you are purchasing off-the-plan.

Settlement costs beyond the deposit

Settlement costs include conveyancing or legal fees, building and pest inspections, loan application fees, and valuation fees. Some lenders waive application or valuation fees for first home buyers or as part of a promotional offer. Strata townhouses may also require a strata report, which typically costs between $200 and $400.

If you are purchasing in a regional area such as Mandurah and your lender requires a valuation, confirm whether the lender has a panel valuer in the area. Some lenders charge higher valuation fees for regional properties or properties in smaller towns.

Budget for these costs in addition to your deposit. If you are using the full extent of your savings as your deposit under the Australian Government 5% Deposit Scheme, you will need to retain sufficient funds outside the deposit to cover settlement costs and any upfront lender fees.

What to do next

Purchasing your first townhouse involves coordinating your deposit, understanding which concessions and schemes apply to your contract, and selecting a loan structure that aligns with your financial position. The rules vary depending on whether you are purchasing a new or established townhouse, whether the property is off-the-plan, and which postcode the property falls under.

Call one of our team or book an appointment at a time that works for you. We work with first home buyers across Mandurah and Australia, and we can confirm which lenders participate in the Australian Government 5% Deposit Scheme, which loan features are available, and how the Western Australian concessions apply to your purchase.

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