When to Choose Apartment vs House Financing

The property you buy determines how lenders assess your application.

Apartments and houses are priced differently in Marrickville, valued differently by banks, and financed under different rules. A lender might offer you 90% on a house but cap you at 80% on an apartment in the same postcode. They might add loading to your interest rate, ask for a bigger deposit, or decline the property altogether based on size, zoning, or how many other apartments share the same block. Understanding how lenders split these two categories helps you pick the right property type for your borrowing capacity and avoid surprises at pre-approval.

How Lenders Categorise Apartments vs Houses

Lenders treat an apartment as any dwelling in a strata scheme with shared common property, while a house is typically on its own title with land.

In Marrickville, this distinction matters more than you might expect. A terrace on a single title is usually treated as a house, even if it shares a wall with a neighbour. But a townhouse in a small strata complex with a shared driveway might be assessed as an apartment. Some lenders will assess a dual-occupancy property as a house if it sits on one title, while others treat it as two separate dwellings and apply apartment lending criteria. The difference affects your loan to value ratio, your interest rate, and whether the lender will even consider the property.

Loan to Value Limits and Deposit Requirements

Most lenders cap apartment lending at 80% to 90% loan to value ratio, while houses can often reach 95% with Lenders Mortgage Insurance.

Consider a buyer looking at a two-bedroom apartment near Marrickville Metro. The property is valued at $850,000, and they have a 10% deposit saved. A lender might approve 90% on a house in the same suburb but limit them to 80% on the apartment, meaning they would need to find an extra $85,000 in cash or pull out of the contract. In our experience, apartment buyers underestimate how much deposit they need because they assume the same lending limits apply across all property types. If you are set on an apartment and already stretching your deposit, check the loan to value ratio with your lender before you start looking at properties.

Interest Rate Differences Between Property Types

Some lenders add a rate premium to apartment loans, usually between 0.10% and 0.30%, depending on the building size and location.

This loading is not advertised on rate sheets. It appears during the application when the lender's valuer reviews the property and flags it as higher risk. A 50-square-metre studio in a building with more than four storeys might attract a rate loading, while a three-bedroom apartment in a low-rise block on the same street does not. The premium is not always applied, but when it is, it compounds over the life of the loan. On a $700,000 loan amount, a 0.20% loading costs you roughly $1,000 per year. If your mortgage broker is comparing home loan rates across multiple lenders, ask them to flag which lenders apply apartment loadings and under what conditions.

Strata Report and Building Size Restrictions

Lenders review the strata report for any apartment purchase, and some will decline properties in buildings with more than a certain number of units or storeys.

A lender might cap apartment lending at buildings with fewer than 50 units, or restrict lending on properties above the 20th floor. In Marrickville, most apartment stock sits in low-to-mid-rise developments, so this is less of an issue than in suburbs closer to the CBD. But if you are looking at a newer development on Illawarra Road or near the train station, check how many units are in the building and whether the strata report shows any outstanding defects or sinking fund shortfalls. A lender will not approve the property if the sinking fund is below a certain threshold, or if there are unresolved building issues flagged in the most recent AGM minutes.

Serviced Apartments and Non-Standard Use Properties

If the apartment is listed as a serviced apartment, hotel suite, or part of a dual-key arrangement, most mainstream lenders will not finance it under a standard owner occupied home loan.

These properties are treated as commercial or investment assets, even if you plan to live in them. You would need a commercial loan or a lender that specialises in non-standard residential property. Interest rates are higher, loan terms are shorter, and the deposit requirement is typically 30% to 40%. This also applies to properties with a commercial component on the ground floor, or apartments in mixed-use buildings where more than 50% of the floor area is commercial. If the strata plan shows multiple uses, flag it with your broker before you sign a contract.

Why Houses Often Have More Loan Features Available

Houses tend to qualify for a wider range of home loan features, including offset accounts, redraw facilities, and portability.

Some lenders limit offset accounts on apartment loans, or exclude apartments from certain home loan packages altogether. This is not a blanket rule, but it happens often enough that you should check before assuming you will get the same product features on an apartment as you would on a house. If you are relying on a linked offset to reduce interest or improve your borrowing capacity over time, confirm that the lender allows it on the property type you are buying. A split loan structure with part fixed and part variable is usually available on both property types, but again, check the fine print.

Local Market Conditions in Marrickville

Marrickville has a strong mix of Victorian-era terraces, post-war houses, and newer apartment developments clustered around the Metro and Illawarra Road precinct.

Lenders tend to favour houses in the inner-west postcode because of land value and resale demand, but apartments near transport and close to Marrickville Metro Station are still well-regarded. The challenge is that median prices for apartments and houses in Marrickville sit in different brackets, so your borrowing capacity might push you toward one property type even if you prefer the other. If you are a first home buyer trying to enter the market, apartments offer a lower entry point, but you need to factor in the deposit gap and potential rate loading when comparing your options.

When an Apartment Makes Sense for Your Borrowing Capacity

If your income supports a $650,000 loan amount but not a $900,000 loan, an apartment might be the only way to buy in Marrickville without moving further out.

The trade-off is that you might pay a slightly higher interest rate, need a bigger deposit, and have fewer loan features to choose from. But if the alternative is renting for another two years while saving for a house deposit, the apartment can help you build equity now and refinance or upgrade later. Just make sure the property is not too small, too high, or in a building that limits your future resale or refinancing options. A 45-square-metre studio in a 10-storey block might get you into the market, but it could also make it harder to refinance or sell down the track.

If you are weighing up apartment versus house financing in Marrickville and want to know what you actually qualify for across different property types, call one of our team or book an appointment at a time that works for you.

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