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Things to consider before buying a studio apartment

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These days, studio apartments are becoming more and more popular amongst home owners and renters. They’re often centrally located and are much cheaper than a 1 bedroom apartment. For prospective buyers, the studio apartment is ideal. However, it’s important to remember that any apartment has its own set of home loan rules, especially for a studio.

Keep reading to find out what home loans you can apply for, the costs of buying and maintaining a studio apartment and any pros and cons to consider.

What is a studio apartment?

Unlike a standard apartment which can be divided into various rooms, a studio apartment is made up of one single space. Rather than having walls that separate your bedroom, bathroom, living room, kitchen and laundry room, all of these (with the exception of the bathroom) are situated in one room. Some people divide these spaces with shelves or partitions.

What types of home loans can I get for a studio apartment?

The affordability of a studio apartment can come with stricter lending criteria. Since studio apartments are typically smaller than a standard apartment, some lenders may not approve loans for properties under 40m².

Some lenders may or may not approve loans for apartments that don’t amount to 50m² of internal space. However, depending on your budget and how much you plan on borrowing, some lenders can sway their guidelines for smaller properties.

As with any other property, lenders review your loan-to-value ratio (LVR). For smaller apartments, you’ll likely need to pay a deposit of at least 20% of its price. The maximum LVR you can usually borrow with is 90%. Lenders generally view having a wall between a bedroom and a lounge room more marketable.

What are the costs of owning a studio apartment?

There are significant financial differences between a studio apartment and a 1 bedroom apartment. For younger generations looking to move out of their family homes and rent elsewhere, studio apartments are not only regarded as hip, but they’re relatively affordable for the central locations they’re typically situated in.

Studio apartments are generally cheaper to rent than 1 bedrooms. The weekly rent of a unit in Sydney sits at about $530 on average. If you’re looking to save money, a studio apartment can be a cheaper alternative.

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The bonus of a single multi-purpose space means that you'll may pay less in heating, cooling, water and electricity. This also means less space for clutter and accumulating any junk. A studio apartment can help restrict any unnecessary spending on furniture.


Pros of a studio apartment

  • Centrally located at a lower price
  • Typically close to public transport
  • The ability to declutter and live minimalistically
  • Generally cheaper than a regular-sized 1 bedroom apartment
  • Good rental return potential

Cons of a studio apartment

  • Lack of privacy
  • Noisy living complex
  • Difficulty getting a home loan
  • Restrictive space
  • Extra amenity and utility fees (e.g: strata fees)
  • Extra lending restrictions

Whether you’re looking to invest or buy, speak to a Lendi Home Loan Specialist today and discover your home loan options.

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Tags: property, apartment, granny flat or studio, home loan, home, new purchase, first home buyer

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# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of lenders including ClickLoans, a related body corporate of Auscred Services. Although Lendi compares over 1600 products from over 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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