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    Here’s what you need to know

    It’s all in the details – What is changing?

    With the current housing market changes having taken shape as of 27th March 2021, the ripple effect has continued with some lenders shaking up the way they assess apartments now as well.

    With a focus on getting first home buyers onto the property ladder some lenders are giving customers a gate way to easier access to home ownership and they are doing this by freeing up tight lending criteria rules to give better access. With the dramatic increases to property prices recently it may have pushed the goal posts out of reach for some could-be property owners.

    So why buy an apartment vs standalone housing?

    Some apartments come with extra benefits such as a shared gym pool. Depending on locality often apartments are found in or near to the central suburbs giving people in some instances better access to their location of work.

    Smaller commute means greater convenience and who wouldn’t want easier access to inner central shopping at the same time.

    Benefits of apartment Mortgage

    Often apartments are a more affordable way for people to get onto the property ladder. Although banks deem apartments a riskier proposition and requiring higher deposits as measures to mitigate risk.

    Low maintenance – A lock up and leave is commonly promoted by real estate agencies and for good reason. Having a brand-new apartment with all the furnishings in place can mean everything you need to make your home yours. The faucets are new, the carpet is new, all the furnishings are modern and not dated. Reduced maintenance costs means this can free up cash for other aspects of your life. So even if your financials are not quite there you may still be able to get on the property ladder. Often it takes the lawn mowing out of the mix too if that really isn’t your thing. Apartment normally have a body Corp who look after insurance, BWOF, fire alarm, evacuation, cleaning, rubbish removal, etc. Body Corp charges a levy for the above. The levy doesn’t include land and water rates for the units.

    So, what is the bank criteria? What measures do you need to meet for an apartment mortgage?

    First on the list is measuring up what square meterage is the size of your apartment you intend to purchase.

    Lenders up until recently were only lending on apartments that would be of a certain size, more often than not somewhere between the range of 40sqm and 50sqm.

    Generally, there aren’t any limitations on borrowing capacity on apartment lending for apartments larger than these sizes, but you may be able to get better options or terms. The real question to ask is what standard lending criteria is. As security for lending criteria differs from bank to bank.

    Under new rules some lenders such as ANZ only require their customers to need a 20 percent deposit for freehold, standard apartments that are 38sqm or larger. So, what this means is essentially lenders have made it easier to get your foothold on the apartment ladder.

    Is the apartment Leasehold or Freehold?

    Leasehold, is where the owner has purchased just the apartment, effectively giving you the right to live in the apartment for an extended length of time. You don’t own the land. What this means is that the land is owned by a landlord therefore requiring ground rent as one of your annual costs. Often these types of apartments are situated on prime spots like the CBD waterfronts etc.

    Whereas, a Freehold (Fee simple) unit title is when the owner owns the apartment outright.

    Some lenders may not want to lend on leasehold apartments so pay careful attention to what method of ownership is on offer.

    What’s the deal with deposit?

    A minimum of 20% deposit is typically required when buying an owner occupied property but not the case for all apartments. If you come in under the standard rules such as the apartment not meeting say a 50sqm requirement, you may need more than the typical 20% deposit. A thing to note that this square meterage requirement generally excludes the balcony.

    If you come in under the standard, then the rule is generally a 50% deposit being required.

    If you are purchasing an investment property, then a deposit of 40% or more will be required.

    A range of factors ultimately go into whether your loan will get over the line. Factors such has where you are purchasing like the area, the building, the deposit needed and also your servicing capabilities.

    Loan the easy way

    Here at Global Finance why not make the process easy on yourself. Speak to an experienced adviser for your mortgage needs from a team that is in the know. We have already walked this road before, so it pays to get top quality advice when you need it most. That just may be getting your foot on the property ladder, so why not make your first shot an apartment.

    Talk to the team at Global Finance today 09 255 5500.

    **These are general guidelines and are by no means a reflection of bank or lending policies