Studio Apartment Home Loans

Looking to buy a studio apartment and need finance? It may be easier than you think! The amount you are entitled to borrow, largely depends on the size of the apartment. Read on to find out more.

How much can you borrow?

Less than 18 m²: There is no lender that can accept a property less than 18m2 as security for a home loan.

18 m² to 40 m²: You can borrow up to 80% of the property value.

40 m² to 50 m²: You can borrow up to 90% of the property value. You may be able to borrow up to 95% of the property value if you are in a strong financial position.

More than 50 m²: You can borrow up to 95% of the property value.

Low doc: Unfortunately for properties under 40 m² there are no lenders that can assist with a low doc loan. Low doc loans are available for properties that are 40 m² and above.

Discounts: Competitive professional package and basic loan discounts are available.

Please note that the above sizes are in meters squared and are exclusive of balconies & car spaces, we are referring to the internal living area of the unit.

What are studio apartments?

Banks define studio apartments as any unit that does not have a wall separating the bedroom from the living areas / kitchen. Unlike other property types, studio apartments have a bathroom and usually a small kitchenette.

Generally studio apartments are very small, often less than 40 m² and can even be as small as 25 m².

They are also known as bachelor apartments, bedsitter units, bedsits or 1 bedroom apartments.

Note that 1 bedroom units that have a separate bedroom to the rest of the living areas and that are over 50 m² can be considered for normal home loans.

The unit size is everything!

Every lender has their own guidelines as to the minimum unit size that they will accept. Typically most lenders will not accept units that do not have an internal living area (excluding balconies & car spaces) of 50 m². We have lenders that can consider smaller properties, depending on the percentage of the property value that you need to borrow.

In addition to this one bedroom units are seen as a lower risk than studio apartments. This is because lenders believe having a wall between the bedroom and the living area makes a unit more marketable.

How can I borrow over 80% for a unit under 40m2?

An alternative way to borrow over 80% is with a guarantor home loan. Because the lender has your parent’s property additional security they can consider lending 100% of the purchase price.

Why are the banks so conservative?

Australian lenders believe that small units are unusual properties and that there are less potential buyers that would be interested in these properties. As a result they believe that they may take longer to sell than ordinary units.

In our opinion this is an outdated policy as studio apartments are becoming increasingly popular.

Who buys studio apartments?

Many young Australians prefer to live on their own in units from 25 m² ranging to 30 m² for studio apartments and 30 m² to 40 m² for smaller 1 bedroom units.

The average household size has been shrinking and more people prefer to live in a block with facilities such as a swimming pool, gym or sauna which are often a feature of studio apartments.

In particular young men living in the CBD often don’t spend much time in their apartment at all. For this reason a small kitchenette with a microwave, a bed & a bathroom is all that they need.

Investing in a studio apartment

Many investors typically like to buy studio apartments and rent them out. The rent received from these apartments is usually quite significant, especially if they are situated in inner city areas. Investors are attracted to areas such as Darlinghurst in Sydney, the Docklands in Melbourne or Southbank in Brisbane & Melbourne.

Advantages of buying this property type

Studio apartments can be a very appealing property type for many individuals. Some positive aspects of buying are:

  • Cheaper than a regular sized city unit.
  • Usually close to the city.
  • Generally re-sale is easy because they high demand accomodation.
  • If you are investing, they have high rental return.

Disadvantages of buying this property type

  • Can be a noisy living complex
  • Lenders Mortgage Insurance (LMI) can sometimes be high
  • Very small living space
  • Often there are many levies and fee’s associated with living in a studio complex that has extra amenities.

Apply for a loan today!

If you would like to purchase a studio apartment to live in or invest, please contact us on 1300 889 743 or enquire online. Our specialist mortgage brokers know which banks will approve your loan. Speak to us today!