Lenders assess apartments and houses differently when you apply for a home loan.
If you're an SRE looking at property options, the apartment versus house decision affects your deposit requirements, which lenders will approve your application, and how much you can borrow. This matters because a $750,000 apartment in an inner suburb might require a larger deposit than a $750,000 house further out, even though the price is identical.
Loan to Value Ratio Differences for Apartments
Most lenders cap loans on apartments at 90% LVR, meaning you need at least a 10% deposit plus costs. For houses, that same lender might lend up to 95% LVR.
Consider a buyer who has saved $80,000 and wants to purchase in an area where apartments cost around $700,000. At 90% LVR, they would need $70,000 for the deposit plus another $20,000-$25,000 for stamp duty and other costs. Their savings fall short. The same buyer looking at a house at $700,000 could borrow at 95% LVR, requiring only $35,000 for the deposit, leaving more for costs. This LVR restriction exists because lenders view apartments as higher risk in some markets, particularly buildings with fewer than six dwellings or those with commercial ground floor tenancies. Home loans for software engineers working remotely often face these calculations when deciding between inner city apartments and suburban houses.
Lenders Mortgage Insurance Costs by Property Type
When your deposit is below 20%, you'll pay LMI regardless of property type. The premium varies based on your loan amount and deposit size.
Some lenders charge slightly higher LMI premiums for apartments compared to houses at the same LVR. On a $650,000 loan at 90% LVR, the difference might be $500-$1,500 depending on the insurer. This affects your upfront costs or the total loan amount if you capitalise the premium into your borrowing. In our experience, SREs with access to RSUs and bonuses as genuine savings can sometimes avoid this issue entirely by bringing their LVR below 80%, though this depends on how the lender assesses equity-based income.
Which Lenders Approve Apartments Under 50 Square Metres
Many major banks won't lend on apartments smaller than 50 square metres. Some won't touch anything under 40 square metres.
This becomes relevant if you're looking at studio or one-bedroom apartments in high-density areas where floor plans often sit between 38-48 square metres. A property at 48 square metres immediately eliminates several lenders from your options, potentially affecting your interest rate and loan features. Smaller lenders and non-bank lenders are more flexible on minimum size requirements, though they may have different rate structures. When you're getting loan pre-approval, specify the property type and approximate size so the assessment reflects what you'll actually purchase.
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Offset Accounts and Variable Rate Options
Both apartments and houses can access offset accounts when you choose a variable rate home loan. The property type doesn't limit this feature.
An offset account linked to your home loan reduces the interest you pay by offsetting your account balance against the loan amount. If you have $30,000 in your offset and owe $600,000, you only pay interest on $570,000. For SREs with irregular income from on-call payments or performance bonuses, this creates flexibility. You can deposit lump sums as they arrive and reduce interest without formally making extra repayments you can't access later. Both owner occupied home loan products and investment loans typically offer offset functionality, though the structure differs. Investment loans for tech industry workers often have slightly higher variable rates but the same offset capability.
Fixed Rate and Strata-Related Valuation Issues
Fixed interest rate home loans are available for both property types, but apartments carry valuation risk that affects your settlement.
Consider a scenario where you've locked in a fixed rate and signed a contract on a two-bedroom apartment at $680,000. At settlement, the lender orders a valuation and it comes back at $650,000. You're now $30,000 short because the lender will only provide the agreed percentage of the lower valuation. This happens more frequently with apartments than houses because valuers rely heavily on recent comparable sales, and if similar units in your building sold for less in recent months, your valuation drops. With houses, land value provides a more stable floor. You can't solve this with home loan refinancing for tech industry workers because you haven't settled yet. You either need to find the shortfall or renegotiate the purchase price.
Strata Levies and Your Borrowing Capacity
Lenders include your quarterly strata levy in their serviceability calculations. This reduces how much you can borrow compared to a house with no levies.
If your gross income is $160,000 and you're looking at apartments with strata levies around $1,500 per quarter, that's $6,000 annually the lender treats as an ongoing expense. On a house without levies, that $6,000 could support additional borrowing of roughly $35,000-$40,000 depending on the interest rate and loan term. SREs evaluating mortgages for tech industry workers often underestimate this impact because strata fees don't feel like debt servicing, but lenders treat them identically to personal loan repayments when calculating what you can afford.
Interest Only Loans and Investment Property Considerations
Interest only repayments are available for both apartments and houses, though the structure matters more for investment properties.
An interest only loan lets you pay only the interest portion for a set period, typically one to five years. This lowers your repayments during the interest only period but doesn't reduce the principal. For investors, this improves cash flow and maximises tax deductions since principal repayments aren't deductible. Property type becomes relevant when the interest only period ends and you switch to principal and interest repayments. Apartments with high strata levies mean the jump in repayments can be more significant because the levy was already reducing cash flow. If you're planning to build equity through capital growth rather than paying down the loan, the property's growth trajectory matters more than the structure itself.
Call one of our team or book an appointment at a time that works for you to discuss which property type aligns with your deposit, income structure, and lending options.
Frequently Asked Questions
Do apartments require a larger deposit than houses?
Most lenders cap apartment loans at 90% LVR, requiring at least a 10% deposit, while houses can sometimes reach 95% LVR. This means you'll need a larger deposit for an apartment at the same purchase price, plus additional funds for stamp duty and costs.
Can I get an offset account on an apartment loan?
Yes, offset accounts are available for both apartment and house loans when you choose a variable rate product. The property type doesn't restrict access to offset functionality, which reduces interest by offsetting your account balance against the loan amount.
Why do lenders have minimum size requirements for apartments?
Many major banks won't lend on apartments smaller than 50 square metres because they're seen as higher risk and harder to sell if the loan defaults. Apartments under this size limit your lender options, which can affect your available interest rates and loan features.
How do strata levies affect how much I can borrow?
Lenders include quarterly strata levies in their serviceability calculations as an ongoing expense. A $1,500 quarterly levy reduces your borrowing capacity by approximately $35,000-$40,000 compared to a house without levies, depending on interest rates and loan terms.
What happens if my apartment valuation comes in low?
If the lender's valuation is lower than your purchase price, they'll only lend based on the lower figure, leaving you to cover the shortfall. This happens more often with apartments than houses because valuers rely on recent comparable sales in the same building, which can fluctuate significantly.
