When to Choose a Townhouse as Your First Home

A townhouse often gives first home buyers more property for less upfront money than a standalone house.

That matters on the Bellarine Peninsula, where freestanding homes in Ocean Grove and Barwon Heads sit well above what many first buyers can comfortably borrow. A townhouse in the same areas can bring the purchase price down without forcing you out to the fringe. You get more living space than an apartment, often with a courtyard or small garden, and in many cases you are still close to the beach, schools, and cafes that make the Peninsula liveable year-round.

The question is whether a townhouse suits your borrowing position, your ownership timeframe, and the kind of loan structure that will keep your repayments manageable over the first few years. That is what this article covers.

Do Lenders Treat Townhouses Differently Than Houses?

Most lenders treat a townhouse the same way they treat a freestanding house, provided it has a separate title. You borrow against the property value, and the loan-to-value ratio (LVR) is calculated the same way. If the townhouse is part of a strata or owners corporation, some lenders will ask for a copy of the strata report to check for defects or pending levies, but that rarely changes the loan amount unless there are serious issues with the building.

Where it can matter is if the townhouse is listed as company title rather than torrens title, which is uncommon but does happen with older developments. Company title properties are harder to finance and usually require a larger deposit. Before you make an offer, confirm the title type with the selling agent or conveyancer.

How Much Deposit Do You Actually Need?

You can purchase a townhouse with as little as a 5% deposit if you qualify for the First Home Guarantee scheme, which was expanded in late 2025 to remove income caps and place limits. This scheme lets you avoid Lenders Mortgage Insurance (LMI) even with a small deposit, which can save several thousand dollars at settlement.

If you are buying in Ocean Grove, Point Lonsdale, or Portarlington, a 5% deposit is often the difference between buying now and waiting another year or two to save more. Consider a buyer purchasing a two-bedroom townhouse near the Ocean Grove town centre. With a 5% deposit and the First Home Guarantee, they can move forward without LMI and without needing a guarantor. Their main costs at settlement are conveyancing, building and pest inspections, and any strata or owners corporation fees due at handover.

The catch is that a smaller deposit usually means a higher interest rate, because lenders price loans based on risk. A 5% deposit loan will typically attract a rate 0.10% to 0.30% higher than a 20% deposit loan. Over the life of the loan that adds up, but if the alternative is renting for another two years while property values rise, the trade-off often makes sense.

If you can stretch to a 10% deposit, you will usually get a lower rate and a wider choice of lenders. Some lenders also offer better offset account features and flexibility on redraw once you hit that 10% threshold.

Fixed or Variable for a Townhouse Purchase?

A fixed interest rate locks in your repayment amount for a set period, usually one to five years. That certainty can help if your income is tight or if you want to budget without worrying about rate movements. A variable interest rate moves with the market, which means your repayments can go up or down, but you also get full access to an offset account and the ability to make extra repayments without penalty.

In our experience, first home buyers purchasing townhouses on the Bellarine Peninsula tend to split their loan between fixed and variable. They might fix 50% to 70% of the loan for two or three years to lock in a base repayment, then keep the rest variable so they can use an offset account and pay down the loan faster if their income improves.

Consider a buyer who borrows at 90% LVR to purchase a townhouse in Drysdale. They fix 60% of the loan at a competitive rate for three years, which gives them a stable repayment for most of the mortgage. The remaining 40% stays variable with a full offset account. They use the offset to park savings, bonuses, and tax refunds, which reduces the interest charged on the variable portion. When the fixed period ends, they can reassess and either refix or let the whole loan revert to variable, depending on where rates are sitting at the time.

What to Watch for in the Strata or Owners Corporation

Most townhouses on the Bellarine Peninsula sit within a small owners corporation, often just a handful of properties sharing a driveway, common garden, or external insurance policy. Your quarterly or annual owners corporation fee covers maintenance of shared areas, building insurance, and sometimes water or rubbish collection.

Before you commit, ask for a copy of the owners corporation statement. You want to see if there are any upcoming special levies, whether the sinking fund is healthy, and if there are any disputes between owners. A poorly managed owners corporation can mean surprise costs down the track, and some lenders will refuse to finance a property if the owners corporation has less than a certain amount in the sinking fund or if there are unresolved defects.

If the townhouse is in a newer development, check whether the builder or developer still controls the owners corporation. If they do, it is worth finding out when that control transfers to the owners, because fees and decisions can change once the owners take over.

Stamp Duty Concessions and How They Apply

Victoria offers a full stamp duty exemption for first home buyers on properties valued up to $600,000, and a tapered concession between $600,000 and $750,000. Most townhouses on the Bellarine Peninsula fall within that range, which means you pay little to no stamp duty if you qualify as a first home buyer.

To be eligible, you need to be an Australian citizen or permanent resident, over 18, moving into the property as your principal place of residence, and you cannot have owned property in Australia before. If you are buying with a partner and one of you has owned property previously, you will not qualify for the concession.

The stamp duty concession applies to both new and established townhouses, which is different from the $10,000 First Home Owner Grant (FHOG) in Victoria, which only applies to new homes. If you are buying an established townhouse, you will not receive the grant, but you can still access the stamp duty concession and the federal First Home Guarantee.

When Does a Townhouse Make More Sense Than an Apartment?

A townhouse usually comes with land, which means you own both the building and the ground it sits on. That is not always the case with an apartment, where you own the airspace within your unit but the land is shared. From a lender's perspective, that distinction matters less than it used to, but from a resale and long-term value perspective, owning land generally gives you more upside.

On the Bellarine Peninsula, apartments are less common than townhouses outside of central Geelong. If you want to live in Ocean Grove, Barwon Heads, or Portarlington, a townhouse is often the only medium-density option available. You also get more space, more privacy, and often a courtyard or small outdoor area, which matters if you have pets or children.

The trade-off is that townhouses usually come with higher owners corporation fees than apartments, because there is more external maintenance involved. A two-storey townhouse with a private courtyard and shared driveway will have higher quarterly fees than a single-level apartment in a large complex where costs are spread across more owners.

How Pre-Approval Works for a Townhouse Purchase

Pre-approval gives you a conditional loan offer before you make an offer on a property. It tells you how much you can borrow, what deposit you need, and what your repayments will look like. Most pre-approvals are valid for three to six months, which gives you time to find the right townhouse without rushing.

To get pre-approved, you will need to provide proof of income, savings statements, identification, and details of any debts or ongoing expenses. If you are using a gift from family as part of your deposit, the lender will want a signed letter confirming the money is a gift, not a loan. If you have accessed your super through the First Home Super Saver Scheme, you will also need to show the withdrawal statement.

Once you have pre-approval, you can make an offer with confidence. The lender still needs to value the property and review the contract, but the heavy lifting is already done. If the valuation comes back lower than the purchase price, you may need to renegotiate or increase your deposit, but that is rare if you have bought at market value.

Structuring the Loan for Flexibility

Most first home buyers want flexibility in case their income changes, they need to make extra repayments, or they decide to turn the property into an investment loan down the track. That flexibility usually comes from having an offset account, the ability to redraw extra payments, and the option to split the loan between fixed and variable.

An offset account is a transaction account linked to your home loan. Every dollar in the offset reduces the balance on which interest is calculated, which can save thousands over the life of the loan. If you have a variable rate loan with an offset, you can deposit your salary, park savings, and build up a buffer without locking the money away.

Redraw lets you access extra repayments you have made on the loan, but it is not as flexible as an offset. Some lenders charge a fee for redraw, and some limit how often you can access the funds. If you plan to make regular extra repayments and might need access to that money, an offset is usually the safer option.

If you think you might move out and rent the townhouse in the future, keep the loan structure clean from the start. Do not redraw for personal expenses, and keep the offset account separate from other savings. That makes the interest deduction clearer if the property becomes an investment.

If you are ready to look at what you can borrow, what your repayments will be, and which loan structure suits your situation, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions