Villas sit between apartments and houses in how lenders see them, and that middle ground comes with its own set of lending quirks.
You're looking at lower maintenance than a house, often a smaller price tag than a standalone home in the same suburb, and shared amenities that can make life easier. But lenders will still ask about body corporate health, strata levies, and whether the title is clear. Understanding how these factors affect your home loan application before you make an offer will save you time and disappointment.
Why villas work well for first home buyers
Villas typically cost less than freehold houses in the same area, which means a smaller deposit and lower ongoing repayments. Consider a first home buyer in regional Victoria looking at a villa priced around the local median. With a 5% deposit under the First Home Guarantee, they can avoid Lenders Mortgage Insurance (LMI) and keep upfront costs down. The body corporate covers external maintenance, insurance on common areas, and sometimes gardening, which reduces the financial and time burden compared to owning a standalone house.
Lenders will still want to see that the body corporate is well-managed and the complex has adequate sinking funds. If those funds are low or there's a history of special levies, some lenders may reduce how much they're willing to lend or decline the application altogether.
How lenders assess villas differently
Lenders treat villas as strata title or community title properties, which means they review the body corporate financials as part of the approval process. They'll look at the sinking fund balance, recent levies, any upcoming major works, and whether the complex has a history of disputes or poor management. A well-run body corporate with healthy reserves makes the lending process smoother. A poorly managed one can delay approval or reduce borrowing capacity.
In Victoria, most villas fall under the Owners Corporation structure. Lenders will request a Section 32 statement during the contract phase, which outlines levies, debts, and planned works. If the statement shows a large upcoming expense or underfunded maintenance, your lender may ask for a larger deposit or decline the loan.
What happens when body corporate costs are higher than expected
Quarterly body corporate levies reduce how much you can borrow because lenders include them in your ongoing expenses when calculating serviceability. In a scenario where a buyer is looking at a villa with quarterly levies of $1,200, that's nearly $5,000 a year added to their cost of ownership. Lenders treat this the same way they would treat higher council rates or strata fees on an apartment, and it reduces the maximum loan amount they'll approve.
If you're comparing two properties at similar prices and one has significantly higher levies, the lower-levy property will often allow you to borrow more. That difference can be the margin between securing a loan or falling short on serviceability.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Trewin Mortgage Broking today.
Stamp duty concessions and grants in Victoria
Victoria offers a full stamp duty exemption on properties up to $600,000 for eligible first home buyers, with a concession available up to $750,000. If the villa you're buying is newly built and valued under $750,000, you may also be eligible for the $10,000 First Home Owner Grant. These concessions can be combined with the federal First Home Guarantee, which allows you to purchase with a 5% deposit without paying LMI.
If you're buying in regional Victoria, the Regional First Home Buyer Guarantee also removes LMI with a 5% deposit, and the income caps and property price limits are more generous than in metro areas. Checking your eligibility before you start looking will help you set a realistic budget and avoid properties that push you outside the concession thresholds.
How to structure your deposit when funds are tight
Most first home buyers purchasing a villa will aim for either a 5% or 10% deposit. With a 5% deposit under the First Home Guarantee, you'll avoid LMI but you'll need to show genuine savings for at least part of that deposit. Lenders typically want to see three months of consistent savings or funds held in your account for at least 90 days. Gift deposits from immediate family can make up part of the deposit, but most lenders will still require some genuine savings.
The First Home Super Saver Scheme (FHSS) is worth considering if you've been contributing to super and want to access those funds for a deposit. You can withdraw up to $50,000 in voluntary contributions and associated earnings, and it's taxed at a lower rate than your regular income. This can be combined with other savings and a gift deposit to reach the required 5% or 10%.
Variable or fixed: what suits a first home buyer
Most first home buyers purchasing a villa will benefit from having an offset account linked to a variable rate loan, especially if you're receiving the First Home Owner Grant or have savings left over after settlement. Every dollar in the offset account reduces the interest you're charged, which can shave years off your loan term without locking you into a fixed rate.
Fixed rates offer certainty, but they come with restrictions. You typically can't make extra repayments beyond a small annual threshold, and if you need to sell or refinance before the fixed term ends, you may face break costs. Splitting your loan between fixed and variable is an option, but for most first-timers with a smaller loan balance, a variable rate with an offset and the ability to make extra repayments offers more flexibility.
What to check before you make an offer
Before you sign a contract on a villa, request the Section 32 statement and review the body corporate financials carefully. Look for the sinking fund balance, recent levy increases, any planned major works, and whether there are outstanding debts or legal disputes. If the sinking fund is under $50,000 for a complex of more than 20 villas, that's a red flag. If there's a special levy planned in the next 12 months, factor that into your budget.
Your broker can also request a pre-approval before you start looking, which gives you a clear borrowing limit and confirms your eligibility for government schemes. Pre-approval is valid for three to six months depending on the lender, and it speeds up the process once you find a property you want to buy.
Buying a villa as your first home can be a smart move if you've done your homework on the body corporate and how lenders assess strata title properties. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Can I use the First Home Guarantee to buy a villa?
Yes, the First Home Guarantee applies to villas as long as the property meets the price cap for your area and you meet the eligibility criteria. You'll need a 5% deposit and the lender will still assess the body corporate financials as part of the approval process.
How do body corporate levies affect how much I can borrow?
Lenders include quarterly body corporate levies in your ongoing expenses when calculating serviceability. Higher levies reduce your borrowing capacity because they increase your total cost of ownership, similar to higher council rates or strata fees.
Do I still get the Victorian stamp duty concession if I buy a villa?
Yes, eligible first home buyers in Victoria can receive a full stamp duty exemption on properties up to $600,000 and a concession up to $750,000. This applies to villas as long as you meet the first home buyer criteria.
What should I look for in the body corporate financials?
Check the sinking fund balance, recent levy increases, any planned major works, and whether there are outstanding debts or disputes. A well-funded sinking fund and stable levies make the lending process smoother and reduce the risk of unexpected costs.
Is a variable or fixed rate loan better for a first home buyer?
A variable rate loan with an offset account usually offers more flexibility for first home buyers, especially if you plan to make extra repayments. Fixed rates provide certainty but come with restrictions on extra repayments and potential break costs if you need to sell or refinance early.
