What is a Townhouse?
In recent times, we've seen an increase in the prevalence of "Townhouses" for sale, particularly as new builds and for first home buyers and investors.
Put simply, a townhouse is kind of a cross between an apartment and a house - it usually shares its walls with its neighbours, but doesn't have other properties below or above them like apartments do. Many townhouses in the Waikato are built with 2-3 levels to make the most of land space.
This gives the occupiers of a townhouse a little more privacy than an apartment might, and often also includes amenities such as a carpark and grassy outdoor areas similar to a house.
Townhouses are a great way for a first home buyer to find a property that is in a central location, and also has the internal space and amenities that a house has without the property upkeep demands.
They also vary slightly in terms of title - some are unit titles, which share common areas with the rest of the complex, others have their own titles but still have common space which is dealt with separately. Key thing here is to talk to your lawyer about what this means for you.
Can I get a mortgage to buy a townhouse?
Funding townhouses is relatively similar to funding existing properties, for several reasons;
- Deposit is paid on signing agreement to buy the property
- Remainder of lending is drawn down on settlement (most townhouses are built as "turnkey" properties)
- There are no build over runs taken into account, as the price is always fixed, unlike in a build contract
What do I need to be thinking about?
There are a few important things to consider when looking to buy a townhouse, and we can help work through most of these with you.
When is expected completion of the property? With construction costs increasing and labour harder to come by (plus some disruption due to Covid), some developments are taking a bit longer to be built than usual. This means management of your lending approval is key as most banks will only hold an approval for 6 months from application - talk to us if you're unsure about where you sit so we can make sure you're sorted
How much deposit is required? The standard deposit for a townhouse is 10%, but we have seen 5% deposits or even less to secure a townhouse and therefore often guarantee the developer's funding line to build the property. Ensure this is available to you when you sign the agreement or talk to us about utilising Kiwisaver
Are you buying to live in or rent? With townhouses being relatively affordable and easy to rent out, they are great for owner occupiers as they are "lock and leave" but also equally attractive for investors as generally easy to rent and are new, so meet all rental regulation. You may also be eligible for a lower deposit for this type of rental property (normally 40%)
Will anything change in your situation between now and when property is completed? If you're expecting a change in income, family situation or debt, we can make sure we plan for this in advance to avoid any potential stress around settlement
How do I make this happen for me?
The first step as we always recommend is to get a pre-approval to buy your next home, and we can guide you through this process.
We can also recommend a number of developers who we've worked with in the past to make sure the process is smooth, positive and safe for you with reputable builders.
So get in touch with us today and we can make a plan for your next purchase!
Claire, Greg, and The My Mortgage Team