The property you choose shapes your loan structure, deposit requirement and rental return.
Lenders treat units differently from houses, and a vacant block attracts different lending rules again. In Thomastown, a suburb with a mix of older brick units near the Plaza, newer townhouse developments along Station Street, and established family homes on larger blocks, understanding how lenders assess each property type helps you secure the right finance and avoid surprises at settlement.
Units and apartments: what lenders assess
Lenders approve unit purchases based on size, body corporate health and location within the complex. A two-bedroom apartment in a small block of six generally attracts more favourable lending terms than a one-bedroom studio in a high-rise development. Loan to value ratios for units typically max out at 90 per cent, and some lenders reduce that to 80 per cent for apartments in buildings taller than four storeys or in complexes where more than 50 per cent of lots are owned by a single entity.
Body corporate issues affect serviceability. If the sinking fund sits below the recommended level or if special levies are flagged in recent minutes, some lenders decline the application outright. Consider a buyer who finds a well-priced unit near Thomastown Station with strong rental demand from commuters. The property ticks every box until the broker requests body corporate records and discovers a major roof repair levy of $18,000 due within six months. The lender treats that levy as an immediate liability, reducing the borrower's serviceability and requiring a larger deposit to proceed. The buyer either negotiates a price reduction to offset the levy or walks away. Quarterly body corporate fees also count as an ongoing expense in serviceability calculations, so higher fees shrink your borrowing capacity even when the property itself is affordable.
Standalone houses: rental yield and land component
Standalone houses in Thomastown, particularly older weatherboard and brick homes on 500 to 600 square metre blocks, are valued by lenders for their land component and renovation potential. Lenders typically allow higher loan amounts on houses than on units at the same purchase price because the land retains value independently of the dwelling. A three-bedroom house on a standard block may support a 90 per cent LVR without additional scrutiny, while the same loan amount on a unit in the same suburb triggers a more conservative assessment.
Rental yield on houses varies with condition and layout. A renovated three-bedroom home with off-street parking and a second living area near Thomastown's schools and parkland achieves stronger rental demand and lower vacancy periods than an unrenovated two-bedroom cottage with limited street appeal. Vacancy periods directly affect serviceability. Lenders apply a rental income buffer, usually discounting the advertised rent by 20 per cent, and if the property type historically shows higher vacancy rates in that area, some lenders apply a larger discount. In our experience, houses in Thomastown with updated kitchens and heating attract tenants quickly, while properties requiring immediate work sit vacant longer, which eats into cash flow during the first year of ownership.
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Townhouses: body corporate with a backyard
Townhouses sit between units and houses in both price and lending treatment. They offer a small private courtyard or garden, which appeals to families, but they also come with body corporate fees and shared wall obligations. Lenders assess townhouses using similar criteria to units when it comes to body corporate health, but they often allow slightly higher LVRs than they would for an apartment in a larger complex.
A two-storey townhouse in a small development of eight to twelve properties near High Street typically faces fewer lending hurdles than a unit in a 50-lot complex. The body corporate fees are lower, the sinking fund is easier to manage, and there's less risk of special levies for shared infrastructure like lifts or basement car parks. Rental demand for townhouses in Thomastown comes primarily from small families who want more space than a unit offers but can't afford a full house. The additional space and private outdoor area often mean lower tenant turnover, which improves cash flow consistency over the long term.
Vacant land and off-the-plan: higher deposits and progress payments
Buying vacant land to hold or build on later attracts different lending rules. Most lenders cap land loans at 80 per cent LVR, and some won't lend on land at all unless construction is scheduled within 12 months. If you're buying land as a long-term hold while you save for a build, you'll need a 20 per cent deposit plus costs, and the interest rate may sit higher than a standard investment loan on an established property.
Off-the-plan townhouses and units require careful timing. Lenders issue conditional approval based on the current property market and your current financial position, but that approval typically lapses after three to six months. If your off-the-plan purchase in Thomastown settles 18 months after contract signing, you'll need to reapply for finance closer to settlement, and any change in your income, employment or the lender's assessment policy can affect the final loan amount. Progress payments during construction also require separate drawdown approvals, and if the developer delays completion, your holding costs can stretch longer than planned. We regularly see this with townhouse developments where buyers lock in a price but underestimate the time between contract and keys, leaving them paying rent and loan interest simultaneously for several months.
How property type affects your interest rate and loan features
Units in high-density developments often attract a rate loading of 0.10 to 0.25 percentage points compared to houses, even when the borrower's financial position is identical. Small blocks of units under ten lots usually avoid that loading. Some lenders also restrict interest-only periods on units to five years instead of the standard ten years available on houses, which increases your minimum repayment earlier than expected if you're relying on interest-only to manage cash flow across multiple properties.
You may find it helpful to review how loan features align with different investment loan options depending on the property type you're considering. Offset accounts, redraw facilities and the ability to split your loan between variable and fixed rates are all standard on house loans but may be restricted or unavailable on some unit or land loans. That flexibility matters when you're managing cash flow across multiple properties or planning to leverage equity for portfolio growth.
Matching property type to your investment strategy
Your choice of property type should align with your broader investment goal. A young investor in Thomastown focused on capital growth over ten years may prioritise a house on a larger block near future infrastructure projects, accepting lower initial rental yield in exchange for land value appreciation. An investor seeking immediate cash flow to offset loan repayments may prefer a renovated unit close to the train station, where rental demand is strong and vacancy periods are short, even though long-term capital growth may be slower.
Each property type also affects your ability to borrow again. Lenders assess your entire portfolio when you apply for a second or third investment property loan, and a portfolio weighted heavily toward units in the same complex or suburb can trigger concentration risk concerns, limiting your ability to expand. Diversifying across property types and locations keeps your borrowing capacity open for future purchases and reduces your exposure to localised market downturns or body corporate issues that affect multiple properties at once.
Call one of our team or book an appointment at a time that works for you. We'll walk through the different property types available in Thomastown, explain how each one affects your borrowing capacity and loan structure, and help you find finance that fits your investment strategy without unnecessary complications.
Frequently Asked Questions
Do lenders treat units differently from houses for investment loans?
Yes, lenders typically apply lower loan-to-value ratios to units, especially in high-density buildings, and may add a rate loading of 0.10 to 0.25 percentage points. Body corporate health and apartment size also affect approval, while houses generally support higher LVRs with fewer restrictions.
What deposit do I need for vacant land in Thomastown?
Most lenders cap land loans at 80 per cent LVR, meaning you'll need at least a 20 per cent deposit plus settlement costs. Some lenders won't approve land loans unless construction is scheduled within 12 months of purchase.
How do body corporate fees affect my borrowing capacity?
Body corporate fees are treated as an ongoing expense in serviceability calculations, reducing the loan amount you can borrow. High quarterly fees or special levies flagged in recent minutes can lead to a declined application or require a larger deposit.
Can I use an interest-only loan on a unit in Thomastown?
Yes, but some lenders restrict interest-only periods on units to five years instead of ten, particularly in high-density developments. Houses generally have access to longer interest-only terms with fewer restrictions.
Why does property type matter for future borrowing?
Lenders assess your entire portfolio when you apply for additional investment loans. A portfolio concentrated in one property type or location can trigger concentration risk concerns, limiting your ability to expand and reducing future borrowing capacity.
