Finance on apartments?

[Gigantor]

Hi there,

i have a query about finance on apartments, specifically inner city melbourne apartments.

I know from browsing the forum and making phone calls that apartments generally need to be not studios & > 50sqm in size for banks to be OK with lending, yet they are OK with older style strata titled units/apartments?

i realise that the answer depends on the LVR amount, and the higher this goes the less likey they are to approve, but im mainly asking about suburbs.

assuming any apartment in question is >50sqm, 1 or 2 bdr, and for PPOR purposes :

if bank x says NO to lending on apartment X in the CBD , what about the same sort of apartment in the same sort of development in suburbs like south melbourne, port melbourne? what about the docklands?

is it apartments (high rise?) in general they dont like, or the areas?

ie there are apartments in port melbourne, in similar developments to the CBD/Docklands, but in a "safer" suburb - would this be viewed any differently?

ideally i would like to purchase as close to the CBD as possible, but if >60% LVR isnt possible on apartments in areas like the docklands & southbank, is port & south melb any different? Otherwise we may look at suburbs like elwood, older style units near the beach.

Cheers!

 

[The Y-man]

It's not the suburb. It's the zoning.

If it is Residential A then you'll have no issues.

If it is CBD 1 or 2 (or whatever they are called now), or commercial, you'll be in for a harder time.

Cheers,

The Y-man

 

[Gigantor]

Ahh...that makes alot of sense, thanks Y-Man

where can i find the zoning?
melb city council?

 

[The Y-man]

Ahh...that makes alot of sense, thanks Y-Man

where can i find the zoning?
melb city council?

In the section 32 contract of sale - look for the rates notice.

Cheers,

The Y-man

 

[dave99]

http://www.dse.vic.gov.au/planningschemes/melbourne/map.html

Finance is also dependent on the postcode, some postcodes (like 3000, 3006) have additional restrictions on LVR. So the same apartment in a different postcode may have different restrictions on lending.

For Melbourne, all the CBD and some Southbank is under Capital City Zone (CCZ). Most surrounding areas where residential apartments appear are Mixed Use (MUZ) or Residential 1 (R1Z).

- Dave99

 

[Gigantor]

thanks alot for the quick replies guys,
i've spoken to Westpac (as an example) - they wont lend above 80% on 3000-3008 postcodes, and properties must be >50sqm, but other than that no restrictions.

Cheers

 

[Peter_Tersteeg]

Like Gigantor says, postcodes 3000-3008 can be a bit dicey. Most lenders these days don't have too many issues with appartments over 50sqm, but make sure you're paying a fair price.

I've seen a number of cases where Melbourne city appartments have been independantly valued lower than the rates valuation.

You might also want to think about your LVR. If it's over 80%, you might run into a few issues, otherwise you'll probably be fine.

Despite all this, consider if a Melbourne city appartment is really going to be the best use of your money. In my opinion (and it's only an opinion), there's better deals out there to be found.

 

[Celeste]

Hi all

I understood that the problem with getting finance for properties under 50sqm, had to with the insurance needed if you were borrowing over 80%, not the bank it's self. do I need correcting?

I had a problem with my 1st reno sale, as the buyer could not get finance thru Wizard for this reason, he did however go to a broker who got him the finance.

I had no problems getting finance for 100% from NAB for a 42sqm apartment.


Celeste

 

[Shonnie]

We had issues getting a lend on a > 50 sq.m apartment in South Melbourne (3205)-

Virgin refused to lend coz it won't lend over 80% on ANY high density apartments no matter what the location..

All the bigger banks had no issues- westpac, anz, comm and nab were all willing to lend. But we were told they still have concerns if its Melbourne (3000), Docklands (3008) or Southbank (not sure of postcode).. Lucky ours is a south melbs one

p.s I agree with the comment about not looking at buying in melbourne CBD. We were looking there initially, and although no one told us straight out it was a bad idea- the concept was tip toed around until we finally came to our senses..

One of my mates purchased a $300k melbourne CBD apartment in 2004 and he had it revalued this year. It came in at $300k despite the improvements they had made to it- definately not something I'd be looking at.

Try city fringe instead, Brunswick, South Melbs, Richmond etc. in fact anywhere except inner city! Worth looking at trust me..

 

[Bandita]

Hi Gigantor,

I feel your frustration!! Postcodes and Banks were totally the reason we purchased our first IP in South Melbourne - we were using the FHOG and I wanted to live in the CBD, but the banks wouldn't go over 80% in CBD, Southbank, Docklands, or St Kilda Rd - and so we bought the exact same apartment - it was still in a high rise, the same as two blocks behind us and 1/2 block to the left, but those were considered Southbank and St Kilda Rd, and ours was South Melbourne (postcode 3205) and the banks would lend 95%. We got a fantastic deal on the place, absolutely LOVED living in South Melbourne while we there, it now rents out at 7%, has just had a valuation 12 months later it where it increased in value - and the only real downside has been the body corp fees, although the higher rent covers that.

If you can look a little outside the square, you'll find exactly what you're looking for in a location within 1/2 block from it! If you're not willing to compromise, we did find some lenders who would go over 80% (95% I think) - but their interest rates were higher - if you're desperate, send me a PM and I'll give you their details.

Cheers,
Jen

 

[sailor]

How does one find out about the post codes and how banks appraise them? Is there a web site please?

 

[Rolf Latham]

Hiya

really almost case by case...............its not so much the banks but the mortgage insurers.

They may accept one exposure in a complex but not another for any number of diff risk reasons, not just the postcode.

ta
rolf

 

[Les]

G'day Rolf,

They may accept one exposure in a complex but not another for any number of diff risk reasons

Like, if they've already "over-lent" to other buyers in the same complex? I guess they would look to diversify where they can...

Regards,

 

[Shonnie]

Yeah thats what we got told too- if the mortgage insurers have already lent too much in that building they won't lend anymore.. best bet is to grab yourself a good broker and get them to do the hard yards for you..

 

[Gigantor]

thanks for all the replies guys

im not especially fussed about being "right in" the CBD - we are renting in docklands at the moment, and although its really convenient, its also very pricey, and i dont trust these massive complexes for CG.

our current thought (though it changes all the time!) is to buy a unit in elwood somewhere similar, still close to CBD, good transport facilities in a leafy inner east type 'burb. Use FHOG, buy a 2 bdr for under <300k, live in it for a few years

Cheers

 

[Bandita]

our current thought (though it changes all the time!) is to buy a unit in elwood somewhere similar, still close to CBD, good transport facilities in a leafy inner east type 'burb. Use FHOG, buy a 2 bdr for under <300k, live in it for a few years

Just to warn you, a 2-bedder in Elwood for under 300k is quite hard to find! We've yet to find it, and I have several friends who started looking there and ended up buying elsewhere as that price is pretty unrealistic for the area. Let us know if you find something though, I hope you can!

Cheers,
Jen

 

[Gigantor]

Hi Jen,

i've seen a few advertised for 270, 290, 300, 310 etc in elwood.

Budget is probably around 330k max.

obviously these are just net prices and if they go to auction they could well go for alot more than that.

Plus, we arent set on that suburb, most of the properties in elwood seem to be apartments. I've also been looking around the east/north east and places like ivanhoe, where villas are affordable (and more spacious).

on that topic, can anyone answer me the following query -

what defines a prop as an "apartment" as opposed to a "unit" or "flat"?

some places i see advertised as units, i would have considered to be apartments or flats. i usually only think of units as villa units - detatched mini houses on small bits of land, but im obviously wrong?

what is the definition?

 

[The Y-man]

what is the definition?

Depends on the agent you talk to, and the state you are in

Units can mean apartments (also known as flats), but a flat could be a granny flat, it could be a villa unit (stand alone or not), which could also be called a townhouse if it has more than one level.....

Sometimes, there is no other way than to go there and see it....

Cheers,

The Y-man

ps. and if you are is SA, you get homettes as well!

 

[Jamie]

I had no problems getting finance for 100% from NAB for a 42sqm apartment.Celeste

Celeste,

Was the 100% finance secured solely against the apartment itself, or are you counting x-colled equity used in another property towards the 100%? Did you have to offer another security to get the deal across the line?

Jamie.

 

[dave99]

I've seen a few advertised for 270, 290, 300, 310 etc in elwood.

Budget is probably around 330k max.

Hi Gigantor,

Be aware that some apartments in Elwood are company title as apartments have been built there since the 1930s. This might explain some of the relatively low prices you have seen advertised. You would need to double check your finances before purchasing such an apartment.

I was looking there about 12 months ago in the 330 - 350 range and couldn't really find any liveable 2 bed in that price range, on separate title. Prices may have moved since then though.

- Dave99