The smartest way to finance apartments vs houses in Victoria

When you're self-employed and considering buying a home in Victoria, understanding how lenders view apartments versus houses can significantly impact your borrowing capacity and loan amount. The property type you choose affects everything from your interest rate to lenders mortgage insurance (LMI) requirements.

How Property Types Affect Your Home Loan Application

Lenders assess apartments and houses differently during the application process. Houses typically offer more straightforward financing because they include land ownership, which lenders consider more stable. Apartments, while often more affordable, come with additional considerations that can influence your Home Loan options.

For self-employed borrowers, your financial situation becomes even more crucial. Banks statements and income documentation carry extra weight, regardless of whether you're purchasing an apartment or house. However, the property type can affect your loan to value ratio (LVR) requirements and available interest rate discounts.

Key Differences in Apartment Financing

When applying for a home loan for an apartment, several factors come into play:

• Higher deposit requirements: Some lenders require larger deposits for apartments, affecting your LVR
• Building restrictions: Lenders may have specific requirements about building height, construction type, or location
• Strata considerations: Body corporate fees and building management can influence your borrowing capacity
• Resale concerns: Lenders consider apartment resale values when calculating home loan repayments

House Financing Advantages

Houses often provide more flexibility in the Home Loan application process:

• Land value: Owning land typically means access to more Home Loan options from banks and lenders across Australia
• Renovation potential: Houses offer opportunities to increase home equity through improvements
• Fewer restrictions: Most lenders have standard policies for house purchases

Understanding Interest Rates and Loan Features

Both variable interest rate and fixed interest rate options are available for apartments and houses, but your property choice might influence the rates offered. Variable home loan rates can fluctuate with the property market conditions, while a fixed interest rate home loan provides payment certainty.

Self-employed borrowers should consider an offset account to maximise their loan efficiency. This feature works equally well for both property types and can reduce your home loan interest rate impact over time.

Getting Pre-Approved: The Process for Both Property Types

Home Loan pre-approval helps you understand your borrowing power before you start property hunting. The streamlined application process considers:

1. Your income documentation as a self-employed person
2. The property type you intend to purchase
3. Your deposit amount and LVR requirements
4. Stamp duty considerations for your chosen location in Victoria

Making Your Decision

Whether you choose an apartment or house, the key is understanding how each affects your specific financial situation. Apartments might offer entry into desirable Melbourne suburbs at lower price points, while houses provide land ownership benefits and potentially broader lender acceptance.

Consider these factors when calculating home loan repayments:

• Ongoing costs like strata fees for apartments
• Maintenance responsibilities for houses
• Growth potential in your chosen area
• Your long-term housing needs

Working with the Right Mortgage Broker

As a self-employed Victorian, having expert guidance through the home loan process is valuable. A knowledgeable mortgage broker can help you get pre-approved and access Home Loan options that suit both your employment situation and property choice.

At Archbold Financial, we understand the unique challenges self-employed individuals face when buying a home. We work with multiple lenders to find solutions that match your circumstances, whether you're purchasing your first apartment or upgrading to a family house.

Call one of our team or book an appointment at a time that works for you to discuss your apartment or house financing options.