Simple hacks to get approved for apartments vs houses

The property type you choose determines more than just your lifestyle.

When you apply for a home loan, lenders look at apartments and houses through completely different lenses. That difference shows up in your deposit requirements, how much you can borrow, and which loan products you can access. For couples buying together, understanding these differences before you start searching saves you from finding the perfect place only to discover it doesn't fit what lenders will approve.

How lenders value apartments differently

Lenders apply a higher risk weighting to apartments, which directly reduces your borrowing capacity. An apartment in the same suburb at the same price as a house will typically let you borrow around 5-10% less, depending on the lender and the specific building.

The loan to value ratio matters more with apartments. Most lenders cap apartments at 90% LVR without requiring specialised lending, whereas houses can often reach 95% under schemes like the Home Guarantee Scheme. Some lenders won't lend on apartments at all if the building has more than three levels or contains a commercial ground floor. Others impose stricter servicing buffers, meaning your income needs to stretch further to meet their approval criteria.

Consider a couple looking at a two-bedroom apartment versus a two-bedroom townhouse in Clayton. Both properties sit at similar price points, but the apartment sits in a building with 60 units. One major lender reduces the borrowing capacity by $45,000 for the apartment compared to the townhouse, purely based on property type. The couple has stable dual incomes and identical savings either way, but the apartment requires them to either increase their deposit or look at a lower price range.

When apartments need a bigger deposit

Most lenders require a 10% deposit minimum for apartments, compared to 5% for houses under government schemes. If the building is still under construction or was completed in the last 12 months, many lenders push that to 20%, regardless of your income or credit history.

Strata reports also influence deposit requirements. If the building has less than $50,000 in its sinking fund or shows major works planned without adequate reserves, lenders either decline the application or ask for a larger deposit to offset the risk. Buildings with high investor concentrations, typically above 50%, trigger similar responses. You can check the strata report during your cooling-off period, but by then you've already committed to the purchase.

Some apartment buildings in Melbourne's inner suburbs have been flagged by multiple lenders due to cladding issues or incomplete defect rectification. Even if the building looks fine and the price fits your budget, those properties might not be financeable at all until remediation finishes. That leaves buyers needing to pull out of contracts or scramble for alternative lenders at higher rates.

Why apartments suit variable rates better

Fixed rate products often come with lower maximum LVRs for apartments. Where a lender might offer a house buyer a fixed rate at 90% LVR, the same rate for an apartment might only be available up to 80% LVR. That forces apartment buyers into variable rates unless they have a larger deposit.

Variable rates also give you more flexibility if you want to sell within the first few years. Apartments in high-density areas tend to have higher turnover than houses, and a variable rate means you avoid break costs if your situation changes. For couples buying their first home loan together, that flexibility matters if your income, family size, or work location shifts.

Offset accounts pair well with variable rates, and they're particularly useful for apartment buyers who might have ongoing strata levies and want to keep extra cash accessible. A linked offset reduces the interest you pay without locking funds into the loan itself, which helps if special levies get announced or if you're saving to upgrade in a few years.

What actually affects apartment borrowing capacity

Building size matters more than most buyers expect. Lenders classify anything above 50 units as high-density, and some won't lend on buildings above 100 units regardless of location. Others apply a reduced valuation, which shrinks your borrowing power even if you have the deposit sorted.

Servicing calculations change when strata levies enter the equation. A $6,000 annual levy might only be $500 a month, but lenders add that to your existing commitments when calculating how much you can afford to repay. For a couple earning $150,000 combined, that levy can reduce borrowing capacity by $30,000 to $40,000 compared to a house with equivalent council rates.

Studio and one-bedroom apartments face even stricter lending criteria. Many lenders won't touch them at all, while others cap LVR at 70%. If you're buying a smaller apartment as your entry point, your options narrow quickly, and you'll likely need a bigger deposit than you planned.

When houses unlock better loan features

Houses give you access to a wider range of products. Construction loans, land loans, and some renovation finance options are rarely available for apartments. If you're comparing a house-and-land package in Mulgrave against an off-the-plan apartment in the same area, the house gives you more lender choice and often a lower interest rate.

Portable loans also favour houses. If you plan to keep the property long-term but might relocate, a portable loan lets you take your existing rate and terms with you when you move. Most lenders restrict portability to houses or limit it to low-density dwellings, so apartment buyers lose that option.

Equity release works more predictably with houses. Lenders reassess apartments more conservatively when you want to pull equity out for renovations, investment, or other purposes. A house that increases in value by $100,000 might let you access $80,000 in usable equity, whereas an apartment with the same increase might only release $60,000 due to the lender's higher risk margin.

Strata and body corporate costs that change your borrowing

Strata levies aren't just an ownership cost, they're a borrowing cost. Lenders treat them like any other ongoing expense, so a building with high levies reduces how much you can borrow even if your income stays the same.

Buildings with amenities like pools, gyms, and concierge services sound attractive, but they come with levies that can hit $8,000 to $12,000 per year. That's $1,000 a month that a lender deducts from your servicing capacity before approving your loan. For couples at the edge of their borrowing limit, those levies can be the difference between approval and decline.

Sinking fund balances also matter. A building with $200,000 in the sinking fund and 100 units has $2,000 per unit in reserve, which most lenders see as healthy. A building with $50,000 across the same number of units raises red flags, and lenders either decline or require a larger deposit to compensate for the risk of special levies.

How location changes lending appetite for apartments

Lenders have postcode-based restrictions that hit apartments harder than houses. Some won't lend on apartments in certain suburbs at all, while others apply stricter LVR caps or higher interest rates. Melbourne's CBD and Southbank have been particularly affected, with several lenders pulling back after oversupply concerns in recent years.

Proximity to public transport and employment hubs helps. Apartments in Box Hill, Glen Waverley, and Brighton tend to get better lending terms than identical apartments in outer growth corridors, purely because lenders see stronger demand and lower resale risk. If you're comparing two apartments at the same price, the one closer to a train station or established shopping precinct will usually give you more borrowing capacity and better product options.

Regional apartments face the tightest restrictions. If you're looking outside Melbourne, expect most major lenders to either decline or require a 20% deposit minimum, even for new builds. The smaller the town, the fewer lenders you'll have access to, and the higher the rate you'll likely pay.

Getting pre-approval that actually holds

Pre-approval for an apartment needs to be property-specific. A general pre-approval based on your income and deposit might say you can borrow $600,000, but when you find an apartment and the lender reviews the building, that figure can drop to $550,000 or get declined entirely.

Request a full assessment that includes the building type, unit count, and strata details. Some lenders will give you conditional approval based on a specific address even before you make an offer, which removes the uncertainty. That approach works well if you're comparing a few apartments in the same area and want to know which ones are actually financeable.

Have your strata report reviewed by your broker before you go unconditional. Issues like pending litigation, low sinking fund balances, or fire safety defects can kill your approval even if everything else stacks up. Waiting until after you've signed the contract leaves you scrambling, and pulling out costs you your deposit if you can't meet finance conditions.

Call one of our team or book an appointment at a time that works for you.

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