Can I get a home loan for an inner city apartment?

Any general questions you might have in regards to loans and finance.
KHATREE
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Joined: Tue Mar 20, 2018 9:22 pm

Can I get a home loan for an inner city apartment?

Postby KHATREE » Thu Jun 14, 2018 1:42 pm

Hi Home Loan Experts.

I live in Victoria and want to buy an investment apartment in the city. I’m looking for a one bedroom inner city in Melbourne or as close as possible to the city at the range of approx $350,000. One of my friends says that these city apartments can be troublesome to get a home loan for. And honestly, I’m not confident due to it.

So I wanted to get some information from you guys. Can I get an inner city apartment home loan? Thanks in advance.

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Otto Dargan
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Re: Can I get a home loan for an inner city apartment?

Postby Otto Dargan » Thu Jun 14, 2018 2:59 pm

Hi KHATREE. Welcome to the forums.

The issue with inner-city units is that their prices can fluctuate more than other property types.

There have been periods when there was an overflow of units in CBDs (Central Business Districts) which led to a drop in their prices. This is particularly true of east coast capitals Sydney, Melbourne and Brisbane

This eventually led to supply far outstripping demand. Lenders see this as a huge risk because if they were forced to sell your property in the event that you defaulted on your mortgage, they could make a significant loss.

Despite the risk attached to these high density apartments, it is still possible to get an investment home loan. There are select few lenders who will consider lending you up to 95% Loan to Value Ratio (LVR) if you can meet the following requirements:
  • What is the area size of the unit?: Generally, lenders will only accept apartments larger than 50m2 excluding balconies and car spaces. Your borrowing will be limited to 90% for units up to 40m2 and 80% or less for anything smaller.
  • How much are the strata fees?: Inner city units usually come with luxuries such as lifts, pools and gyms which means that you will pay a large amount as strata fees. This may lead to a low rental return in such properties and is usually not preferred by lenders depending on how rental reliant you are.
  • How old / big is the block?: Newer blocks will have less potential for growth, especially if they are less than five years old, while smaller blocks are better from an investment viewpoint.
  • Are there new unit developments in progress nearby?: The more developments there are near your apartment, the riskier your application will be for the lenders in case of a need to sell these properties. This comes back to high density areas where there is simply too much supply.
Please call us on 1300 889 743 or enquire online and one of our mortgage brokers can let you know what restrictions apply for your unit.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

KHATREE
Posts: 6
Joined: Tue Mar 20, 2018 9:22 pm

Re: Can I get a home loan for an inner city apartment?

Postby KHATREE » Thu Jun 14, 2018 4:33 pm

Oh, I understand their concern. Still more, are there any specific locations that I need to avoid? I’m looking to buy in Victoria.

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Otto Dargan
Mortgage Specialist
Posts: 7021
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Can I get a home loan for an inner city apartment?

Postby Otto Dargan » Thu Jun 14, 2018 5:56 pm

Hi KHATREE,

All lenders have their own policies regarding inner city units.

In Victoria, the following postcodes and suburbs are considered to be“high risk” to major lenders:
  • VIC postcodes: 3000, 3004, 3005, 3006, 3007, 3008, 3009, 3030, 3067, 3141, 3181 & 3205.
  • VIC suburbs: Melbourne, World Trade Centre, Moorabbin, Docklands, Chartwell, Cocoroc, Derrimut, Point Cook, Quandong, Werribee, Werribee South, Abbotsford, South Yarra, Prahran, Windsor, South Melbourne, and South Melbourne Dc.
We have access to almost 40 lenders on our panel. Please call us on 1300 889 743 or free assessment form to discover which lenders will consider your inner city unit home loan application.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

KHATREE
Posts: 6
Joined: Tue Mar 20, 2018 9:22 pm

Re: Can I get a home loan for an inner city apartment?

Postby KHATREE » Thu Jun 14, 2018 7:23 pm

Good to know, thanks for letting me know the postcode restrictions and what banks consider to be high-risk suburbs. I’ll research further and contact you guys.


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