Buying a Smaller Apartment? Here’s What You Need to Know

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Quick Summary

Smaller apartments can offer excellent value, convenience, and rental potential — especially in metro areas. However, lenders and mortgage insurers have strict rules about what types of apartments they’ll accept as security. Here’s how to make sure your dream apartment also makes financial sense.

Why Apartment Size Matters

When you buy an apartment, the lender’s main concern isn’t just your income — it’s the marketability of the property.
Smaller apartments, especially those under 50 square metres, are often seen as higher risk because they can be harder to resell or rent out in some markets.

That means you may still be eligible for finance — but with different lending criteria, deposit requirements, or restrictions.

Before you sign a contract, contact info@pinpointfinance.com.au to check if your chosen apartment meets lender guidelines.

How Lenders Assess Smaller Apartments

When assessing a loan for a small apartment, lenders focus on the property’s size, location, and use type — all of which impact resale potential.

Typical Lender Requirements

Internal living space: usually at least 40–50 sqm, excluding balconies or car spaces
Separate bedroom: required (studio apartments are often restricted)
Basic amenities: must include a bathroom and kitchen
Building composition: low concentration of serviced or short-stay units
Zoning: residential or mixed-use with proven demand

Tip: Some lenders will consider apartments as small as 35 sqm — but you’ll likely need a higher deposit and a strong income position.

Common Property Features That Affect Finance

Before making an offer, confirm:

The exact internal area (check the contract of sale and floor plan)
Whether the apartment has a car space or storage unit
The number of apartments in the development
The ratio of owner-occupiers to investors
Whether the complex includes commercial tenants or retail shops

These factors can influence the property’s market value and a lender’s willingness to finance it.

Types of Apartments Lenders Commonly Restrict

Apartment Type	Why It’s Considered Risky
Studio apartments	Often too small or lack separate bedroom
Serviced apartments	Income tied to management agreements
Student accommodation	Limited resale market and strict zoning
High-density buildings	Oversupply risk in some inner-city areas
Company title properties	Complicated ownership structure

Related Reading: Understanding Property Titles in Australia

Deposit and Loan Considerations

If the apartment falls outside standard guidelines, the lender may:

Require a larger deposit (up to 20–30%)
Apply lower valuation figures than the purchase price
Exclude certain buildings or postcodes entirely

That’s why it’s crucial to get finance guidance before you sign.

Related Reading: Property Profile Reports | Risk Insurance: Protect What Matters Most

Other Things to Consider

Body Corporate Fees: Higher for buildings with lifts, gyms, or pools.
Short-Term Letting Restrictions: Some buildings restrict AirBnB-style rentals.
Natural Light and Layout: These influence valuation and buyer demand.
Re-Sale Appeal: Smaller apartments sell best when well-located and well-designed.

How Pinpoint Finance Helps

We help clients understand how different lenders view apartment lending — so you don’t risk losing your deposit or facing unexpected finance challenges later.

At Pinpoint Finance, we’ll:

Review the property’s characteristics against lender policy
Identify banks that accept smaller apartments
Help secure pre-approval that aligns with your target property type
Coordinate valuations and settlement timing to reduce stress

Thinking of buying a smaller apartment? Reach out to info@pinpointfinance.com.au before you make an offer.

Pinpoint Finance