Choosing between buying an apartment or a house is one of the biggest decisions you'll make as a first home buyer in Victoria. But did you know that your choice can significantly impact your home loan options, interest rates, and overall financial situation? Let's explore the key differences between apartment and house financing to help you understand what lies ahead.
Understanding Loan to Value Ratio (LVR) Differences
When applying for a home loan, lenders assess your loan to value ratio differently for apartments versus houses. Generally, lenders view houses as lower risk investments, which can translate to more favourable lending terms.
For apartments, many lenders cap the LVR at 90%, meaning you'll need at least a 10% deposit. Houses often qualify for higher LVRs, potentially up to 95% with some lenders. This difference affects:
• Your required deposit amount
• Whether you'll need lenders mortgage insurance (LMI)
• The loan amount you can access
• Potential interest rate discounts available to you
If you're looking at no LMI loans or exploring the 5% deposit scheme, understanding these LVR differences becomes crucial for your home loan application.
Interest Rate Considerations
Your home loan interest rate can vary depending on whether you're buying an apartment or house. Some lenders offer interest rate discounts for houses due to their perceived stability in the property market. When calculating home loan repayments, even a small difference in your fixed interest rate or variable interest rate can impact your monthly payments significantly.
Both property types offer access to:
• Fixed interest rate home loan options
• Variable home loan rates
• Offset account facilities
• Various home loan rates from different lenders
At FHOG, we help you access home loan options from banks and lenders across Australia, ensuring you can compare rates regardless of your property choice.
Borrowing Capacity and Application Process
Your borrowing capacity might differ between apartment and house purchases. Lenders consider factors like:
- Property value trends - Houses often show more stable long-term growth
- Rental potential - Important if you plan to use the property for investment later
- Maintenance costs - Apartments have strata fees, houses have individual maintenance
- Insurance requirements - Different for apartments versus standalone houses
The application process remains similar for both property types. You'll need to provide bank statements, proof of income, and undergo the same streamlined application process. However, apartment purchases might require additional documentation like strata reports and body corporate financial statements.
Getting pre-approved helps clarify your position regardless of property type. Our borrowing capacity assessment considers all these factors to give you a realistic picture of your options.
Stamp Duty and Government Schemes
Victorian first home buyers can benefit from stamp duty concessions on both apartments and houses, though the thresholds and benefits may vary. The property value limits for these concessions often favour apartment purchases due to their generally lower price points.
Government schemes like the Home Guarantee Scheme apply to both property types, but availability can depend on location and property value. These schemes can help reduce your deposit requirements and eliminate LMI costs.
Building Home Equity Over Time
Building home equity differs between apartments and houses. Houses typically offer:
• Land value appreciation
• Renovation potential to add value
• No restrictions on modifications
• Generally stronger long-term capital growth
Apartments provide:
• Lower entry costs
• Shared maintenance responsibilities
• Often better locations for the same budget
• Potentially higher rental yields
Making Your Choice
When deciding between apartment and house financing, consider your:
• Current financial situation and deposit size
• Long-term lifestyle goals
• Investment objectives
• Preferred location and budget
• Tolerance for maintenance responsibilities
Both options can work well for first home buyers, and the 'right' choice depends on your individual circumstances. What matters most is understanding how your choice affects your home loan options and ensuring you're getting the most suitable financing arrangement.
As experienced mortgage brokers, we work with you to understand these nuances and find suitable home loan options regardless of whether you choose an apartment or house. We'll help you compare offers, understand the fine print, and make informed decisions about your home loan application.
Call one of our team or book an appointment at a time that works for you to discuss your apartment or house financing options.