Top tips to buy your first terrace house in NSW

Terrace houses appeal to first home buyers for good reason: they often sit closer to inner-city employment and transport, provide more space than apartments, and hold their value in established suburbs.

Before you start viewing properties, work out what you can actually borrow and what deposit you'll need. This shapes every decision that follows, from which suburbs you search in to whether you qualify for government support.

How much deposit do you need for a terrace house?

You can purchase a terrace with as little as a 5% deposit if you qualify for the First Home Guarantee Scheme. This federal program removes the need for Lenders Mortgage Insurance when you're buying with a smaller deposit, which can save you thousands. The scheme was expanded in late 2025 and no longer has income caps or place limits, making it accessible to far more buyers than before.

If you're not using the guarantee, most lenders will accept a 10% deposit but you'll pay LMI on top of your loan. A 20% deposit avoids LMI altogether, but it also means saving for longer while prices continue moving.

Consider a buyer looking at a terrace priced at the median for their target suburb. With a 5% deposit under the guarantee, they could secure the property without the added cost of LMI, leaving more room in their budget for legal fees, inspections, and the inevitable repairs that come with older housing stock. Without the guarantee, that same buyer would need to factor in LMI, which could add several thousand dollars to their upfront costs or be capitalised into the loan.

Stamp duty concessions in NSW for first home buyers

NSW offers a stamp duty exemption for eligible first home buyers purchasing a property valued under $800,000, or vacant land under $350,000. This exemption can save you tens of thousands compared to what other buyers pay.

If your terrace is priced between $800,000 and $1 million, you may still qualify for a concessional rate rather than paying full duty. These concessions apply to both new and established properties, which matters because most terraces fall into the established category.

The $10,000 First Home Owner Grant in NSW applies only to new homes valued up to $600,000, or house and land packages up to $750,000. Given that terraces are rarely new builds, most buyers won't access this grant. Your real saving comes from the stamp duty exemption.

What loan features matter when buying a terrace?

An offset account makes sense if you're disciplined about keeping savings accessible while reducing the interest you pay. Every dollar sitting in the offset reduces the balance your lender charges interest on, which adds up over time. Some lenders also offer redraw facilities, which let you access extra repayments you've made, though this tends to be less flexible than an offset.

Fixed interest rates give you certainty for a set period, usually one to five years, which helps with budgeting if you're stretching to afford the repayments. Variable interest rates move with the market, which means your repayments can go up or down. Many buyers split their loan between fixed and variable to get some certainty without locking in the entire amount.

When comparing home loan options, check whether the lender charges ongoing fees, how much flexibility you have to make extra repayments, and what happens if you want to refinance down the track. Some loans that look attractive on rate alone come with restrictions that cost you more later.

Borrowing capacity and what lenders actually assess

Lenders calculate how much you can borrow based on your income, existing debts, living expenses, and the deposit you have saved. They also factor in a buffer above the current interest rate to make sure you can still afford repayments if rates rise.

If you're carrying personal loans, car finance, or credit card debt, those repayments reduce what you can borrow. Paying down or closing those accounts before you apply can lift your borrowing capacity significantly.

In our experience, buyers underestimate how much lenders scrutinise spending. Three months of bank statements get reviewed in detail, so frequent cash withdrawals, gambling transactions, or unexplained transfers can raise questions. If you're planning to apply soon, keep your statements clean and be ready to explain anything unusual.

Should you get pre-approval before you start looking?

Yes. Pre-approval tells you what you can borrow and gives you confidence when you're ready to make an offer. It also signals to agents and vendors that you're a serious buyer, which matters in a competitive market.

Pre-approval isn't a guarantee, and it's subject to a full assessment once you find a property, but it does lock in your borrowing amount for a set period, usually three to six months. If your circumstances change during that time, such as changing jobs or taking on new debt, your pre-approval may no longer be valid.

When you apply for pre-approval, you'll need payslips, tax returns if you're self-employed, bank statements, and details of any other assets or liabilities. The process usually takes a few days to a week, depending on the lender and how organised your documents are.

Strata or torrens title and why it affects your loan

Some terraces, particularly those in rows or converted blocks, sit on strata title rather than torrens title. Strata means you own your dwelling and a share of the common property, and you'll pay quarterly strata fees to cover insurance, maintenance, and building upkeep.

Lenders treat strata properties differently. They'll want to see that the strata scheme is well managed, that there's money in the sinking fund, and that no major works are planned that could result in a special levy. If the strata report shows issues, some lenders won't approve the loan at all, or they'll lend you less than you expected.

If you're buying a freestanding terrace on torrens title, you won't have strata fees, but you're responsible for all maintenance yourself. This affects your budget and how lenders assess your ability to service the loan.

Using the First Home Super Saver Scheme for your deposit

The First Home Super Saver Scheme lets you save for a deposit inside your superannuation fund, where contributions are taxed at 15% instead of your marginal rate. You can contribute up to $15,000 per financial year and withdraw up to $50,000 in total to put towards your deposit.

If you've been making voluntary contributions to super with the intention of buying a home, this can be a useful way to build your deposit faster. You'll need to apply to the ATO to release the funds, and the process takes a few weeks, so plan ahead if you're relying on this money for settlement.

The scheme works particularly well if you're a higher income earner, because the tax saving is greater. If you're earning below the tax-free threshold, the benefit is minimal.

Finding the right loan structure for your situation

Not every loan suits every buyer. If you're buying a terrace in an inner suburb and planning to hold it long-term, you might prioritise offset accounts and the ability to make extra repayments without penalty. If you're buying further out and stretching your budget, a fixed rate might give you the breathing room you need to settle into ownership without worrying about rate rises.

Working with a mortgage broker means you're not limited to one lender's products. Different lenders have different policies on terrace houses, strata title, and low deposit loans, and some will lend more than others based on your employment type or income structure. A broker can also help you navigate the first home buyer eligibility requirements for government schemes and make sure you're applying for the right support before you sign a contract.

Call one of our team or book an appointment at a time that works for you at Personalised Finance. We'll walk you through your options, run the numbers, and help you put together a loan that fits your situation.

Frequently Asked Questions