Lenders see apartments and houses as different risks
Apartments usually come with tougher lending conditions than houses. Lenders look at loan to value ratio, building size, and sometimes location when deciding how much they'll lend and at what rate. A house on a block in Marrickville with the same purchase price as a two-bedroom unit in Ashfield won't be assessed the same way, even if your income and deposit are identical.
Consider a buyer looking at a one-bedroom apartment in Newtown compared to a house in Stanmore. The apartment might be capped at 90% LVR with one lender, meaning a 10% deposit plus costs, while the house could go to 95% with Lenders Mortgage Insurance. That difference changes how much cash you need upfront and whether you qualify at all. Some lenders also apply a higher interest rate to apartments in buildings over a certain number of storeys or with more than 50 units, which can add thousands over the life of the loan.
Why apartment size and building type matter
One-bedroom apartments often attract stricter lending rules. Some lenders won't lend on them at all, while others will only go to 80% LVR or charge a rate loading. The concern is resale value and the pool of future buyers if they need to recover the loan. Buildings with more than 100 units, or those classified as serviced apartments, can also trigger extra conditions or outright declines from certain lenders.
In the Inner West, this shows up with older walk-up blocks in Leichhardt or Annandale compared to newer high-rise developments near the light rail. The walk-up might have fewer lending restrictions because it's a smaller building with more owner-occupiers, while a 200-unit tower could limit your options even if it's brand new. We regularly see this when buyers assume a newer property will be easier to finance, but the building structure matters more than the age of the paint.
How deposit requirements shift between property types
A house generally gives you more flexibility with your deposit. If you're buying an owner occupied home loan with a 5% deposit, most lenders will consider a house without additional hurdles. For an apartment, especially a one-bedroom or a unit in a larger complex, that same 5% deposit might not be enough. Some lenders will ask for 10% or 15% before they'll approve the loan, or they'll add Lenders Mortgage Insurance at a higher rate.
In a scenario where someone is looking at a two-bedroom apartment in Dulwich Hill near the station, they might find that one lender offers 90% LVR with a standard variable rate, while another will only go to 80% or applies a 0.10% loading on the interest rate. That loading might not sound like much, but over a 30-year loan amount, it adds up. Houses in the same price bracket typically don't carry that loading, which makes them cheaper to service even if the purchase price is similar.
What happens when you want to refinance or switch lenders
Apartments can be harder to refinance down the track. If your building develops a defect issue, or if the number of investor-owned units in the complex increases beyond a certain threshold, some lenders will stop lending on it entirely. That means if your fixed rate expires or you want to switch for a lower rate, you might find yourself stuck with your current lender and whatever rate they offer.
Houses don't usually face this problem. A standalone property in Haberfield or Petersham won't be affected by strata disputes or building reports the way an apartment would. If you're planning to hold the property long-term, or if you think you might want to access equity later for an investment loan or renovation, a house gives you more certainty that lenders will still want your business in five or ten years.
Offset accounts and loan features across property types
Most lenders offer the same loan features for apartments and houses, including offset accounts, split rate options, and the ability to make extra repayments. But the interest rate itself might differ, which affects how much benefit you get from those features. If you're paying 0.10% or 0.15% more on an apartment loan, your linked offset needs to work harder to deliver the same saving.
For someone buying a house in Lilyfield with a variable rate and a full offset account, every dollar in that offset reduces the interest charged. If they're paying a lower base rate compared to an apartment buyer in the same suburb, they're starting from a stronger position. The loan product itself might look identical on paper, but the rate discount you can negotiate often depends on what you're buying and how the lender values it.
When an apartment still makes sense
Apartments aren't always the harder option. If you're buying in a well-maintained block with fewer than 50 units, or a two-bedroom unit in a suburb like Balmain or Rozelle where demand is strong, lenders are usually comfortable. The tighter conditions tend to show up with smaller apartments, larger buildings, or locations where resale could be slower. If the property ticks the right boxes, you'll have access to the same rates and loan to value ratios as a house.
Some buyers also prefer apartments because the purchase price is lower, which means a smaller loan amount and lower repayments even if the rate is slightly higher. For a first home buyer trying to get into the Inner West without stretching their income, a two-bedroom unit in Ashfield or Summer Hill might be more realistic than a house in the same area. The lending conditions matter, but so does what you can actually afford to repay each month.
How we help you compare options for apartments and houses
We look at your deposit, income, and the specific property before recommending a lender. If you're comparing an apartment and a house, we'll run both scenarios through our panel to show you what each property type will cost in repayments and upfront cash. Some lenders are more flexible with apartments, others prefer houses. Knowing which one to approach makes a tangible difference to your interest rate and whether you need Lenders Mortgage Insurance.
If you're weighing up property types in the Inner West and want to know how lenders will treat each option, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Do apartments have higher interest rates than houses?
Some lenders apply a rate loading to apartments, especially one-bedroom units or buildings with more than 50 units. The difference is usually between 0.10% and 0.25%, depending on the lender and the property.
Can I get a 95% home loan on an apartment?
Most lenders cap apartment loans at 90% LVR, though some will go to 95% for two-bedroom units in smaller buildings. One-bedroom apartments and larger complexes are usually limited to 80% or 90%.
Why do lenders care about building size?
Larger buildings carry more perceived risk for lenders due to resale concerns and potential for higher investor concentration. Buildings with more than 100 units often face stricter lending conditions or rate loadings.
Is it harder to refinance an apartment later?
It can be if the building develops defects or if the investor-to-owner-occupier ratio changes. Some lenders will stop lending on a building entirely if issues arise, which limits your refinancing options.
