Home loans for apartments
Of all the different types of home loan available, home loans for apartments are perhaps the most complicated. There are a number of additional restrictions in this area that can make it harder for you to find the right one, but if you’re patient and you approach your search in the right way, you should be able to source something that works for you.
Deposits on apartments
Apartment loans are complicated because lenders consider them higher risk than houses, particularly if they are newer dwellings. This is mostly because it’s more difficult to sell an apartment than a house, so if you default on your loan they may struggle to recover their money. For this reason, they usually ask for at least a 20 per cent deposit. Because apartments tend to be cheaper, however, this won’t necessarily stop you from being able to get the deal you want. If you’re really struggling, finding a guarantor may help your situation.
Size and bedroom requirements
In order to reduce the risk of them being unable to sell if you default, many lenders refuse to offer loans for apartments under 45m² (not including the balcony). They sometimes also insist that the property has a separate bedroom and living area, because studio apartments are particularly difficult for them to shift. This means that in some cases you may find it’s easier to buy a property that’s slightly larger than you need.
Risks for the lender
As well as worrying about resale, lenders providing home loans for apartments don’t like putting too much of their money into one building, because if something goes wrong with the building it could place them at serious financial risk. This means that if they have already invested in other apartments in the same complex, they may be less willing to invest in yours. In this situation you will usually be able to find a different lender willing to help you.
What do you need?
It’s much easier to obtain a loan like this if you begin the process with a clear idea of what you need. Start by thinking about the size of property you want and how many rooms it should have, and then think about what you need from a loan. Are low interest rates the most important thing, are you anxious to pay it off as fast as you can, or are there special features that could make all the difference to whether or not you will accept a deal?
Comparing home loans
Once you’ve identified a group of loans that could meet your requirements, you’ll need to compare them to establish which offers the best financial deal. Ask for the Key Facts sheet to help you compare the details of the loans at a glance, and use the comparison rate to determine which offers the best deal when taking into account both interest rates and fees.
Pros and cons
Ideal for urban living;
Easy to rent out;
Restrictions on borrowing;
Harder to sell;
Slower growth in value.