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Home loans for apartments

It's harder to get a home loan approved when buying off-the-plan apartments, apartments smaller than 40 square metres, or apartments in postcodes with an oversupply of similar properties.

Buying an apartment is often much more affordable and practical than buying a house, particularly for first home buyers.

While getting a home loan for an apartment can be a seamless process and no different to buying a house, there can be restrictions on apartments that you should be aware of.

How do I get a home loan for an apartment?

Taking out a home loan for an apartment is really no different to taking out a loan to buy a house. Depending on the size of the apartment and the area you're looking to buy there may be some restrictions, so you should consider speaking to a mortgage broker or checking with lenders before submitting an application. There'll be more on that below.

1. Work out your borrowing power.

You can use our borrowing power calculator for a good guide or speak to your mortgage broker. This will give you an idea of what you can borrow, and therefore what size of apartment you should be looking for.

2. Speak to lenders.

If you know the rough size of the apartments you're looking at and the area you're looking in, it's a good idea to check with different lenders about any potential apartment restrictions. Do this before you submit any applications, as multiple credit applications can reflect poorly on your credit score.

3. Get pre-approval.

Once you know the lenders which are willing to lend for apartments, you can apply for pre-approval. By getting pre-approval from a lender you know how much it is willing to lend to you. This gives you a much clearer idea of what apartments you should be looking at.

4. Find the right apartment.

Head to open houses and do your property market research to find a place you want to bid for. Looking for apartments of at least 50 square metres (excluding the balcony and car spaces) and checking property market reports to check there's not an oversupply of units will help when it comes to getting finance.

5. Collect your home loan application documents - and apply!

Once you've found the apartment, you need to submit a proper application right away. You'll need to gather documents for proof of identification, proof of income and finances, and details about the property.

Why are there restrictions on some apartments?

Lenders can be more cautious when approving home loans for apartments. This is because the lender uses your property as security for your loan.

So, if you are unable to repay your loan, the lender can force the sale of your property to recover your debt.

However, apartments can be harder to sell than houses, especially very small apartments or studio apartments, which is why the lender may not choose to take the risk.

To improve your chances of getting a loan for an apartment approved, you can save a bigger deposit, shop around for a lender with more flexible lending criteria or get expert advice from a mortgage broker.

Why was my apartment loan application rejected?

Every lender has their own restrictions about apartment lending. But here are the most common reasons your apartment loan application could get rejected.

1. The apartment is too small

As a general rule, the apartment will need to be at least 45 or 50 square metres (excluding the balcony and any car spaces) in order to qualify for a loan.

2. No separate bedrooms (studio apartment)

If the apartment doesn't have separate bedrooms it is a studio apartment. Some lenders won't lend for these properties, or will require a bigger deposit.

3. Postcode restrictions

There are a number of reasons that certain postcodes may be restricted by lenders. It could be that the area has too many apartments, that it's too rural or it's in something like a mining town.
If you apply to buy in a restricted postcode, your lender might reject your application, ask for a bigger deposit or limit the amount you can borrow.

4. The apartment has a company or stratum title

Most apartments have a strata title. But there are other property titles, such as company or stratum titles. These are much less common, and ownership is structured differently. Lenders are reluctant to lend to anyone buying an apartment with a company or stratum title.

5. The property is not a residential apartment

It's much harder to get a home loan if you're buying an apartment that isn't designated as a residential property. This includes commercial properties or serviced apartments.

6. You're buying off the plan

When you buy an off-the-plan apartment you're often putting money down before the apartment is built. A lot can happen in the months and years between signing the contract and the completion of construction. Prices can fall. Your lender might reject your loan application or value the apartment below what you paid for it.

In that case the lender might approve a smaller loan amount, forcing you to come up with extra cash to meet the shortfall.

4 tips to help get your apartment loan approved


1. Save a bigger deposit

The larger the deposit you've saved, the greater your chances of approval. Having a minimum 20% deposit saved can significantly increase your borrowing power.

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2. Check with multiple lenders

Every lender has different rules, restrictions and appetite for risk. Just because one lender doesn't want to lend to you doesn't mean another won't.

Enquire with a few lenders and ask if they have restrictions on apartments in the postcodes you're looking to buy in. Importantly, don't submit full applications: this could impact your credit score. Ask about the restrictions before applying.

Helping hand

3. Get help where you can

A mortgage broker can help you find a lender that has no issues with your apartment or postcode. If your deposit is too small, you could boost your borrowing power with a guarantor.


4. Check your credit score

Check your credit score to see if there are any negative listings or errors on your credit report. Dealing with these improves your chances of getting a home loan approved.

Example: An apartment buyer shops around for a home loan

Brian has just signed a contract to buy a 2-bedroom apartment in inner-city Melbourne. He has a 20% deposit saved. He also has pre-approval with his bank.

But when he applies for a loan the bank says he'll need a 30% deposit. Why? Because there are lots of 2-bedroom apartments in his postcode and the bank's worried it is over-exposed to this type of property.

Brian can't come up with a 30% deposit on top of stamp duty and everything else. Instead, he enquires with an online lender. Before applying he emails the lender and is put in touch with someone from the credit assessment team. They assure Brian that there's no issue with his address or postcode, and a 20% deposit is fine.

He applies, is approved, and buys his apartment.

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Frequently asked questions about home loans for apartments

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2 Responses

    Default Gravatar
    DavidMay 30, 2017

    Are there any lenders that now finance properties under 40sqm?

      Default Gravatar
      LiezlMay 30, 2017

      Hi David,

      Thanks for your question.

      Although most lenders require at least 45 or 50 square metres of floor space, there are still lenders who finance smaller apartments. Unfortunately, we do not have them in our panel of lenders.

      If you’re looking for financing, it would be best to enlist the services of mortgage brokers who can help you find suitable lenders.


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