Property Types and Home Loans — How Lenders Assess Different Properties
This article provides general information only and does not constitute financial advice. For advice tailored to your situation, consult a licensed financial adviser. Learn more.
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Not all properties are treated equally by Australian lenders. The type, location, and characteristics of a property directly affect whether a lender will accept it as security, and at what loan-to-value ratio (LVR). Understanding these distinctions before you make an offer can prevent significant disappointment — and avoidable costs.
How Lenders Assess Property as Security
When you borrow to buy a property, the property itself is the lender’s security. If you default, the lender needs to be confident the property can be sold to recover the outstanding debt. Properties that are harder to sell (illiquid), volatile in value, or unusual in structure attract more conservative LVR limits.
LVR (loan-to-value ratio) is the loan amount divided by the property’s assessed value. Standard residential properties typically support LVRs of 80–95%, while properties with perceived higher risk may be capped at 50–70%.
Standard vs Non-Standard Properties
| Property type | Typical LVR cap | Notes |
|---|---|---|
| House on a standard block | Up to 95% (with LMI) | Most lenders — full range of products |
| Townhouse / villa | Up to 95% | Similar treatment to houses |
| Apartment (< 4 storeys, standard size) | Up to 90–95% | Treated as standard by most lenders |
| High-density apartment (> 4 storeys) | 70–85% depending on lender | Some lenders restrict high-rise |
| Studio / small apartment (< 50 sqm) | 60–80% | Lenders restrict small apartments |
| Off-the-plan apartment | Varies; some lenders avoid | Valuation risk at completion |
| Rural / acreage (< 100 hectares, lifestyle) | 70–80% | Depends on location and comparables |
| Rural (large farm / agricultural) | 50–70% | More specialist lenders |
| Company title | 60–70% | Ownership of shares in company, not land |
High-Density and Small Apartments
High-rise apartments — particularly those above four storeys in inner-city Melbourne and Sydney — carry additional lender risk due to:
- Resale concentration: Buildings with hundreds of identical units create competing inventory if multiple owners sell simultaneously
- Quality and defect concerns: Many completed buildings in Sydney and Melbourne have experienced significant structural and waterproofing defects (the Opal Tower and Mascot Towers in Sydney are prominent examples)
- Oversupply risk in some postcodes: Postcodes with high apartment development may have lender-imposed restrictions
Small apartments under 50 square metres (excluding car park) face restrictions from many mainstream lenders because they appeal to a narrower buyer pool — particularly problematic as student accommodation demand fluctuates.
Off-the-Plan Apartments
Buying off-the-plan means purchasing before construction is complete. The key risk for borrowers is valuation risk at settlement: your bank will conduct a new valuation when construction finishes. If the market has moved against you during the construction period (1–3 years), the completed property may value below your purchase price — meaning the lender will only fund a lower amount and you may need to cover the shortfall in cash.
During property downturns, off-the-plan buyers have been caught by exactly this scenario — committed to a purchase price, but the property values 10–15% below it at settlement. This is particularly acute for inner-city apartment markets where new supply waves compress valuations.
Rural and Regional Properties
Rural properties (lifestyle blocks, hobby farms, working farms) are assessed differently due to lower demand and fewer comparable sales. Lenders typically:
- Cap LVR at 70–80% for lifestyle properties up to 10–50 hectares
- Apply more conservative LVRs for larger agricultural holdings
- Require the property to have a sealed road, electricity connection, and potable water
- Restrict lending on very remote properties where there are no comparable sales
Some rural properties may only be accessible through specialist or regional lenders, which may carry higher rates than mainstream lenders.
Company Title Properties
Company title is an ownership structure used in some older apartment buildings — particularly in Sydney and Melbourne — where buyers own shares in a company that owns the building, rather than owning the lot and common property via strata title. This is considered a non-standard security type.
Most mainstream lenders will lend on company title but at reduced LVRs (typically 60–70%) and with stricter conditions. This affects resale — subsequent buyers face the same lending restrictions, which reduces the pool of buyers and affects price.
Frequently Asked Questions
Can I get a home loan for a high-rise apartment in Australia? Yes, most lenders will finance high-rise apartments, but typically at lower LVR limits (70–85%) compared to standard properties. Some lenders restrict lending in specific postcodes with high new apartment supply. Check with your broker which lenders are comfortable with the specific building before exchanging contracts.
What is the minimum apartment size for a home loan in Australia? Most mainstream lenders require an apartment to be at least 50 square metres (internal area, excluding car space and balcony) for standard LVR lending. Some lenders require 40 sqm minimum. Studio apartments below this threshold can still be financed but at lower LVRs and through a smaller pool of lenders.
What is company title and why do lenders treat it differently? Company title means you buy shares in a company that owns the building, rather than owning a specific lot outright. Because it is not real property title, lenders have less certainty about enforcing security in the event of default — hence more conservative lending terms and LVR caps.
Property type assessment varies between lenders. For advice tailored to your situation, speak with a licensed mortgage broker. Find one through MoneySmart.