Buying an apartment as a first home buyer

Yes, an apartment can be a sensible first home, and as a first home buyer an apartment often gets you into the market with a smaller loan than a house on the same street. The trade off is that apartments come with extra things to check, such as body corporate costs and the building itself, and the home loan rules can be a little different for units and for buying off the plan. This guide walks through what changes when your first home is an apartment, so you can weigh it up with clear information rather than guesswork.

Throughout, the numbers below are general guides from ASIC’s Moneysmart. What you can actually borrow, and on what terms, depends on your circumstances and the lender’s criteria. If you want it mapped to your own situation, the team at Finance Lab can talk it through with you.

Why an apartment can work for a first home buyer

For many people an apartment is the most affordable way into a suburb they want to live in. A lower purchase price usually means a smaller deposit in dollar terms and a smaller loan, which can bring the goal of owning a first home closer.

The size of your deposit still drives a lot of the maths. A common savings goal for a deposit is 20% of the purchase price, plus enough to cover the costs of buying, and a 20% deposit means you can avoid paying lenders mortgage insurance. Some lenders may accept a deposit as little as 5%, though a smaller deposit usually means extra costs such as lenders mortgage insurance.

Your loan to value ratio, or LVR, is the amount of your loan as a percentage of the property’s value. It is worked out by dividing the loan amount by the value of the asset. As an example, a $450,000 loan on a $600,000 property is a 75% LVR. If your LVR is above 80%, you may need to pay lenders mortgage insurance. Whether a given LVR is acceptable depends on the lender and on your circumstances. For a closer look at how lenders weigh your loan against the property value, see What is lvr first home buyer.

What changes when the home is an apartment

The borrowing basics are the same for a unit as for a house, but a few apartment specific points are worth knowing before you sign anything.

Lenders look at the building, not just you

Some lenders treat smaller apartments, high density blocks, or buildings with a lot of investor owners differently, and a few apply their own minimum size or location rules. None of this is automatic approval or refusal. It simply means the property itself can affect what a lender will offer, on top of your income and deposit. This is one reason to get your finance position checked early.

Body corporate or strata costs are ongoing

An apartment usually sits inside a body corporate, also called an owners corporation or strata. You share the cost of maintaining common areas such as the lobby, lifts, gardens, and the building’s insurance. These fees are ongoing and sit on top of your loan repayments, council rates, and water, so factor them into what you can comfortably afford. The amount varies by building, so ask for the records before you commit.

Check the building, not only the apartment

A building inspection examines structural issues, damp, electrical safety, and maintenance costs, and a pest inspection checks for termites and other pest activity. For an apartment, also look at the body corporate records for the whole building, including any planned major repairs or special levies, because the condition of the building affects every owner.

Buying an apartment off the plan

Buying off the plan means signing a contract and paying a deposit for an apartment that is not built yet, then settling once it is finished. For a first home buyer it can offer a brand new home and more time to save before settlement, and a new home may open up first home grants or concessions in some states. It also carries risks that an existing home does not.

The build can take longer than planned, the finished apartment can differ from the display or the plans, and the property’s value at completion can end up higher or lower than the price you agreed. Because settlement may be a year or more away, the loan you can get at completion depends on the lender’s criteria and your circumstances at that time, not today. Get help from a solicitor or conveyancer to review the contract before signing, and check what your deposit is protected by and what happens if the project is delayed or does not go ahead.

Cooling off rights differ by sale type and state. Private treaty sales usually include a short cooling off period in most states and territories, so you can typically get out of the contract and get most of your deposit back if you give written notice. There is no cooling off period if you buy at auction, so the sale is final and is not subject to finance or a building or pest inspection. Off the plan rules vary, so confirm the cooling off terms in your contract with your conveyancer.

The steps to buy your first apartment

It is worth estimating your repayments before you commit. Try the borrowing power calculator to get a feel for repayments at different loan sizes, then we can pressure test it against real lender criteria.

Grants, concessions, and the costs around settlement

First home buyers may be exempt from stamp duty or eligible for a concession, depending on the state or territory and the property. The First Home Owner Grant is a payment provided by state governments to first home buyers, and the amounts and eligibility are set by each state and territory, so check your state revenue office for the current rules and whether a new apartment qualifies. Treat any grant or concession as something you may qualify for rather than something you are guaranteed.

How Finance Lab can help

Working out whether an apartment, including one off the plan, suits your first home depends on your deposit, your income, the building, and the lender’s criteria. The team at Finance Lab can review your position, explain your options in plain English, and help you compare lenders. Reach out and we will talk it through.

Frequently asked questions