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.
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.
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.
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.
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