Everything You Need to Know About Buying a Townhouse

Understanding Townhouse Ownership for First Home Buyers

Buying your first home is an exciting milestone, and for many first home buyers in Henley Beach, a townhouse represents the perfect entry point into the property market. Townhouses offer a balance between apartment living and standalone homes, often providing more space than a unit while requiring less maintenance than a house. If you're considering purchasing a townhouse as your first property, understanding your home loan options and the application process is essential.

Townhouses in Henley Beach and surrounding coastal areas have become increasingly popular among first home buyers due to their affordability compared to traditional houses, while still offering lifestyle benefits and potential capital growth.

Assessing Your First Home Buyer Budget

Before you start viewing properties, establishing a realistic first home buyer budget is crucial. Your budget will depend on several factors, including your income, existing debts, living expenses, and deposit amount. A finance broker can help you determine your borrowing capacity and identify suitable home loan options that align with your financial situation.

When calculating your budget, consider:

• Your deposit amount (typically 5%, 10%, or 20% of the property value)
• Stamp duty costs (though concessions may apply)
• Legal and conveyancing fees
• Building and pest inspections
• Ongoing strata fees for townhouse complexes
• Contents and building insurance

Many first home buyers are surprised to learn that low deposit options are available. With schemes like the First Home Loan Deposit Scheme, eligible buyers can purchase with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI).

First Home Buyer Eligibility and Support Schemes

Australia offers several support schemes designed to help first home buyers enter the property market. Understanding your first home buyer eligibility for these programs can save you thousands of dollars.

First Home Owner Grants (FHOG)

The first home owner grants provide financial assistance to eligible first home buyers. In South Australia, the grant amount and eligibility criteria are specific to new builds and properties under certain value thresholds. While townhouses can qualify, it's important to check whether your chosen property meets the requirements.

First Home Buyer Stamp Duty Concessions

First home buyer stamp duty concessions can significantly reduce your upfront costs. South Australian first home buyers may be eligible for full or partial exemptions from transfer duty, depending on the property value and whether it's your principal place of residence.

First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme allows eligible first home buyers to purchase a property with a 5% deposit or 10% deposit without paying LMI. This government-backed scheme helps reduce the barrier to entry for those who have stable employment but haven't yet saved a 20% deposit.

Regional First Home Buyer Guarantee

While Henley Beach itself may not qualify, the Regional First Home Buyer Guarantee extends similar benefits to buyers in eligible regional areas, potentially offering more property options if you're flexible with location.

Understanding Your Home Loan Options

When it comes to financing your townhouse purchase, you'll encounter various home loan options that cater to different financial situations and preferences.

Interest Rate Types

You'll need to choose between a fixed interest rate, variable interest rate, or a combination of both (split loan):

• Fixed Interest Rate: Locks in your interest rate for a set period (typically 1-5 years), providing certainty with your repayments. This option protects you from interest rate increases during the fixed period.
• Variable Interest Rate: Fluctuates with market conditions, which means your repayments can increase or decrease. Variable loans often offer features like offset account and redraw facilities.
• Interest Rate Discounts: Many lenders offer interest rate discounts for first home buyers or based on your loan-to-value ratio.

Loan Features to Consider

An offset account links to your home loan and uses your savings to reduce the interest charged. For example, if you have $20,000 in your offset account against a $400,000 loan, you only pay interest on $380,000.

A redraw facility allows you to access extra repayments you've made on your loan, providing financial flexibility for unexpected expenses or opportunities.

Your First Home Buyer Checklist

To ensure a smooth purchase process, follow this first home buyer checklist:

1. Review your finances: Assess your savings, income, and expenses
2. Research the market: Understand townhouse prices in Henley Beach
3. Get pre-approval: Apply for a home loan pre-approval to know your budget
4. Engage professionals: Hire a conveyancer and building inspector
5. Understand strata reports: Review the strata company's financial health and rules
6. Calculate ongoing costs: Factor in strata fees, council rates, and utilities
7. Finalise your first home loan application: Complete all documentation
8. Arrange insurance: Organise building and contents insurance
9. Plan for settlement: Prepare for moving costs and connection fees

The Home Loan Application Process

Once you've found your ideal townhouse, you'll need to complete your home loan application. While pre-approval gives you an indication of borrowing capacity, the formal application requires comprehensive documentation.

When You Apply for a Home Loan

Your first home loan application will typically require:

• Proof of identity (driver's licence, passport)
• Income verification (payslips, tax returns, employment contracts)
• Bank statements (showing your deposit and spending habits)
• Details of existing debts and liabilities
• The contract of sale for the townhouse
• Strata inspection report

If you're using a gift deposit from family members, lenders will require a signed gift letter confirming the funds don't need to be repaid.

Additional Considerations for First Home Buyers

First Home Super Saver Scheme

The first home super saver scheme allows you to save for your deposit inside your superannuation fund, potentially benefiting from tax concessions. You can contribute up to specific annual and total limits and then withdraw these contributions (plus earnings) to put towards your first home purchase.

Lenders Mortgage Insurance (LMI)

When you borrow more than 80% of the property value, lenders typically require Lenders Mortgage Insurance (LMI). This insurance protects the lender (not you) if you default on the loan. LMI can add thousands to your loan costs, which is why schemes that waive this requirement are so valuable for first home buyers.

Strata Considerations

Townhouses usually fall under strata title, meaning you own your dwelling but share ownership of common areas with other residents. Before purchasing, review:

• Quarterly strata fees and what they cover
• The strata company's financial position
• Building maintenance plans
• Strata by-laws that may affect your lifestyle (pet restrictions, renovation approvals)

Lenders will also assess the strata report as part of your home loan application, as the building's condition and financial health can impact the property's value.

Working with a Mortgage Broker in Henley Beach

Partnering with an experienced mortgage broker can streamline your journey to homeownership. A broker has access to multiple lenders and can help you:

• Compare interest rates and loan features across different lenders
• Identify which first home buyer grants and concessions you're eligible for
• Prepare your documentation for the strongest application
• Understand the true cost of different loan structures
• Secure pre-approval before you start house hunting
• Negotiate with lenders on your behalf

At Blackfish Finance, our team specialises in helping first home buyers in Henley Beach and surrounding areas secure suitable finance for their property purchases. We understand the local market and can guide you through each step of the process.

Making Your Townhouse Dream a Reality

Purchasing your first home is one of the most significant financial decisions you'll make. With proper planning, understanding of available support schemes, and the right financing structure, buying a townhouse in Henley Beach is an achievable goal.

Whether you're just starting to save or you're ready to apply for a home loan, taking time to understand your options will position you for success. Remember that every first home buyer's situation is unique, and what works for one person may not suit another.

The combination of government support through first home owner grants, stamp duty concessions, and deposit schemes, along with competitive loan products, means there's never been a more supported time to enter the property market as a first home buyer.

Call one of our team or book an appointment at a time that works for you to discuss your townhouse purchase and explore the home loan options available to match your circumstances.