How much can you borrow?

Serviced apartments are normal apartments that are leased out for short term stays.

What sets them apart from normal units is that there is usually a management agreement in place, a pooled rental scheme or restrictions on the use of the unit as an owner occupied home.

  • Apartment is in a block with serviced apartments: 90% of the property value on a case by case basis. This is only available if the unit is not being used as a serviced apartment but is in a block where most of the apartments are serviced.

  • Apartment can be released from management agreement: 80% of the property value. The management agreement must allow for the serviced apartment to be released from the agreement within a maximum of 6 months and with few, if any, fees to do so.

  • Apartment has a restrictive management agreement: 70% of the property value on a case by case basis. Please call us and give us the address and we can then check to see which of our lenders can accept your apartment as security for a loan.

  • Resort style / Part of a resort: 60% to 70% of the property value. Please call us and give us the address and we can then check to see which of our lenders can accept your apartment as security for a loan.

  • Serviced apartment low doc loan: 70% of the property value. Applies to serviced apartments in a metro/city location and a good development. The management agreement must allow for the serviced apartment to be released from the agreement within a maximum of 6 months and with few, if any, fees to do so.

  • Discounts: Competitive professional package and basic loan discounts are available in most cases.

  • Guarantor solution: By choosing the right lender and with a guarantor to secure your mortgage, you may actually be able to borrow up to 105% of the property value!

  • First home buyer: Not applicable.

Note: First home buyers cannot get a loan for serviced apartments because serviced apartments are always used as an investment property. Lenders do not include the furniture package as being part of the property value, so please deduct the value of any furniture before calculating how much our lenders can offer you.


Extra rules for serviced apartments

To borrow 80% the serviced apartment must meet the following criteria:

  • Permanent occupancy of the property must be permitted (i.e. there are no restrictions on permanent occupancy of the property under the management agreement or under local zoning restrictions.
  • An “Alternative Use” valuation (i.e. a valuation undertaken on the basis that the unit is not a serviced apartment) provides support and is to exclude the value of furniture, fittings and equipment.
  • The property is not a hotel/motel type of apartment.
  • The property can be removed from the letting pool (where applicable) within a maximum term of six months from the giving of such release notice. Where this involves the payment of a fee or penalty in any form, the fee/penalty is to be deducted from the valuation.
  • Rental income utilised as the basis for servicing/repayment calculations reflects that considered achievable in the ‘Alternative Use’ valuation.

To borrow 70% the serviced apartment must meet the following criteria:

  • Property must be >50m2 internally (excluding car spaces and balconies).
  • Prior approval from the lender must be given to each complex. Call us with the address as in most cases this has already been obtained.
  • Valuation as a serviced apartment.
  • Your serviceability (ability to repay the loan) must be very strong.
  • Rental income is assessed at only 60% of actual rental being received.

We can help you to borrow 80% or 70% depending on the type of apartment you are buying. Please enquire online to discuss your situation with one of our mortgage brokers.


Why are the banks so conservative?

Banks have been burnt in the past by poorly run serviced apartments that did not return the promised rental yields and were difficult to sell because of the restrictions put in place by the management agreement.

Typically, the entire block is leased through the one managing agent who operates the block like a small hotel and pools the rent to then be distributed to the owners.

When applying for a home loan you will need to prove to the bank that your apartment does not represent a higher risk than other apartments or will need to have a larger deposit.

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