Can You Get a Home Loan for a Small Apartment Under 50 Square Metres?

Getting a Home Loan for a Small Apartment Under 50 Square Metres

Buying a small apartment can be a smart way to enter the property market, especially in inner-city areas where larger properties are expensive.

But small apartments can also be harder to finance.

Many lenders have minimum size rules for units and apartments. Some may accept apartments under 50 square metres. Others may require at least 40 square metres of internal living area. Some may want a separate bedroom. Some may reduce the maximum LVR if the apartment is very small, high density, studio-style or located in a postcode they consider higher risk.

This guide explains how Australian lenders may assess small apartments, studio units and properties under 50 square metres, based on current policy research.

Why small apartments can be harder to finance

Small apartments can be harder to finance because lenders think about resale risk.

If a borrower cannot repay the loan and the lender ever needs to sell the property, the lender wants confidence that the property can be sold within a reasonable timeframe.

A very small apartment may have a smaller buyer pool than a standard house or larger unit.

A lender may look more closely at:

• the internal living area
• whether the apartment has a separate bedroom
• whether the property is a studio
• whether balconies and car spaces are included in the size
• whether the property is in a high-density building
• whether the location has strong resale demand
• whether the property is owner-occupied or investment
• whether lenders mortgage insurance is required
• whether the property is a serviced apartment or student accommodation

The size alone is not always the whole issue. The lender also looks at the type of apartment, location and overall security quality.

What counts as a small apartment?

There is no single definition across all lenders.

In practice, small apartments often include:

• studio apartments
• one-bedroom apartments under 50 square metres
• units under 40 square metres internally
• high-density apartments
• apartments where the stated size includes balcony or car space
• older inner-city units with compact floorplans
• student-style accommodation
• serviced apartment-style properties

Some lenders focus on internal living area. Others may refer to total area including balcony or car parking. This difference matters.

A property advertised as 50 square metres may not satisfy a lender if the internal living area is only 38 square metres and the rest is balcony or car space.

Can you get a home loan for an apartment under 50 square metres?

Yes, it may be possible.

Some lenders may accept apartments under 50 square metres, especially if the internal living area meets their minimum threshold and the property has strong market appeal.

Other lenders may be more conservative and require a larger minimum living area.

Based on the policy research, some lender approaches include:

• minimum living area of 50 square metres excluding balcony and car space
• minimum living area of 40 square metres excluding balcony and car space
• minimum total area of 50 square metres including balcony and car space
• minimum living area above 30 square metres for some units
• higher minimum size rules for high-density properties
• at least one separate bedroom required for some lenders
• lower maximum LVR for very small apartments

This is why a small apartment can be acceptable to one lender and unacceptable to another.

Can you get a home loan for a studio apartment?

A studio apartment may be possible, but it is often harder than financing a standard one-bedroom apartment.

The main issue is that some lenders want the property to have at least one separate bedroom. A studio usually combines the bedroom, living and kitchen area in one room.

A lender may also look closely at:

• internal floor area
• building type
• location
• owner-occupier or investment purpose
• marketability
• rental demand
• zoning
• whether the property is student accommodation
• whether the property is serviced accommodation
• whether short-stay letting is involved

A studio in a strong inner-city location may still be considered by some lenders, but the lender choice becomes more important.

Why the “internal living area” matters

When lenders assess apartment size, they may focus on internal living area.

Internal living area usually excludes:

• balconies
• courtyards
• car spaces
• storage cages
• common property
• external areas

This can create confusion because property advertisements may show a larger total area.

For example, an apartment might be advertised as 52 square metres, but that could include:

• 39 square metres internal living area
• 8 square metres balcony
• 5 square metres storage or car space allocation

A lender that requires 40 square metres of internal living area may not accept that property if the internal area is only 39 square metres.

Before making an offer, it is worth checking the contract, floorplan, strata plan or valuation details so the size is clear.

What is the minimum apartment size for a home loan?

The minimum size depends on the lender.

The policy research shows that lender rules can sit around several common thresholds.

Common minimum apartment size rules include:

• 30 square metres internal living area
• more than 30 square metres internal living area
• 40 square metres internal living area
• 50 square metres total area including balcony and car space
• 50 square metres excluding balcony and car space

Some lenders may also apply different rules depending on whether the property is in a high-density development or a standard residential apartment building.

That means the same apartment can be assessed differently depending on the lender’s policy wording.

Does the balcony count toward the minimum size?

Sometimes, but often it does not.

Many lenders prefer to assess the living area without including balconies or car spaces. Others may refer to total area in certain contexts.

This matters because small apartments are often marketed using total lot size rather than internal living area.

Before relying on the advertised size, check:

• the internal living area
• the balcony size
• whether the car space is included in the total
• whether the storage cage is included
• the strata plan measurements
• the valuation report size
• the lender’s minimum-size rule

If the property is close to a lender’s minimum size threshold, one or two square metres can matter.

Can you borrow 90% or 95% for a small apartment?

It may be possible with some lenders, but smaller apartments often face stricter limits.

When you borrow a high percentage of the property value, the lender and mortgage insurer both need to be comfortable with the property. A small apartment may trigger extra restrictions.

A lender may reduce the maximum LVR because of:

• small internal floor area
• studio layout
• high-density building
• restricted resale market
• investment purpose
• location risk
• valuation concerns
• lenders mortgage insurance requirements
• non-standard property type

For example, a lender may accept the property at 80% LVR but not at 90% or 95% LVR.

This is why small-apartment buyers should check finance before signing an unconditional contract.

Are one-bedroom apartments easier than studios?

Usually, yes.

A one-bedroom apartment may be easier to finance than a studio because it has a separate bedroom and may appeal to a broader buyer pool.

A one-bedroom apartment may still need to satisfy the lender’s minimum size rule.

The lender may ask:

• is there a separate bedroom?
• what is the internal living area?
• is the property standard residential security?
• is it in a high-density building?
• is it acceptable for owner-occupied lending?
• is it acceptable for investment lending?
• is the LVR within policy?

A compact one-bedroom apartment can still be a good security property if it meets the lender’s requirements.

Are small apartments harder for investors?

They can be.

Investment lending adds another layer because the lender may consider both resale demand and rental demand.

A small apartment may be acceptable if it has strong rental demand, a good location and a standard residential use. But the lender may be cautious if the property looks like student accommodation, serviced accommodation or short-stay accommodation.

For investment purchases, the lender may consider:

• rental income
• vacancy risk
• property type
• location
• building concentration
• valuation comments
• lease restrictions
• short-stay or serviced apartment use
• strata issues
• resale market

If the property is marketed mainly to investors rather than owner-occupiers, the lender may look at it more carefully.

What if the apartment is in a high-density building?

High-density apartments can trigger extra lender rules.

A high-density building may include a large apartment complex with many units, especially in inner-city postcodes.

Some lenders may apply additional requirements for high-density properties, such as:

• larger minimum internal living area
• lower maximum LVR
• postcode restrictions
• valuation review
• concentration limits
• closer review of marketability
• mortgage insurer approval

The lender may be more comfortable if the apartment is in a well-located building with strong resale demand and a normal residential use.

What if the property is student accommodation?

Student accommodation is often treated differently from a standard apartment.

Some lenders may not accept it at all. Others may consider it under stricter conditions or lower LVR limits.

Student accommodation can be harder to finance because:

• the buyer market may be limited
• the use may be restricted
• the rental market may be narrow
• the property may be managed under special arrangements
• owner-occupier use may not be practical
• resale may be harder

A property that looks like a normal studio apartment may still be treated as student accommodation if the zoning, building use or management arrangement is restricted.

Related research: Can You Get a Home Loan for Student Accommodation?

What if the property is a serviced apartment?

Serviced apartments can also be difficult to finance.

A serviced apartment may have hotel-style features, short-stay letting, management agreements or commercial-style use.

Some lenders prefer standard residential property and may not accept serviced apartments as security.

A lender may ask:

• can the property be used as a normal residence?
• is there a management agreement?
• is short-stay letting required?
• is the property commercially operated?
• can the borrower occupy it?
• can it be sold as a standard residential property?
• does the valuation support normal residential security?

If the answer is unclear, the lender may decline the property or restrict the loan.

Related research: Can You Get a Home Loan for a Serviced Apartment?

What documents can help with a small apartment loan?

A small apartment application may need more property evidence than a standard purchase.

Useful documents can include:

• contract of sale
• floorplan
• strata plan
• valuation report
• sales listing
• rental appraisal
• body corporate or owners corporation details
• zoning information
• lease or management agreement, if applicable
• evidence of internal living area
• evidence of balcony and car space size
• confirmation of whether the property is student accommodation or serviced accommodation

Your broker may also need to check the lender’s property policy before the valuation is ordered.

10 common mistakes buyers make with small apartments

1. Do not assume the advertised property size is the size the lender will use.
2. Do not include the balcony or car space unless the lender allows it.
3. Do not assume every lender accepts studio apartments.
4. Do not sign an unconditional contract before checking lender policy.
5. Do not assume a pre-approval guarantees the property will be accepted.
6. Do not ignore high-density building rules.
7. Do not assume a serviced apartment is treated like a normal apartment.
8. Do not rely only on the selling agent’s view of financeability.
9. Do not assume 95% LVR is available just because your income is strong.
10. Do not use one lender decline as proof the property cannot be financed.

How to improve your chances before buying

Before buying a small apartment, it helps to check the property against lender policy.

Useful steps include:

• confirm the internal living area
• check whether the size excludes balcony and car space
• get the floorplan early
• review the strata plan where available
• confirm whether the property has a separate bedroom
• check whether the building is high density
• confirm whether the property is standard residential use
• avoid serviced apartments unless finance has been checked carefully
• avoid student accommodation unless the lender accepts it
• check the maximum LVR before making an offer
• include a finance clause if appropriate
• compare lender policy before submitting the application

A small apartment can be financeable, but the details matter.

Should you buy a small apartment as a first home?

A small apartment can be a good first home for the right buyer.

It may offer:

• a lower purchase price
• a better location
• lower maintenance than a house
• access to inner-city areas
• a simpler lifestyle
• potential rental appeal in some markets

But you should also think about:

• lender restrictions
• future resale demand
• strata fees
• building quality
• internal living space
• noise and privacy
• natural light
• owner-occupier appeal
• future family needs
• whether the property may be harder to refinance

The property should suit both your lifestyle and your finance options.

Example scenarios

Scenario 1: One-bedroom apartment over 40 square metres

You are buying a one-bedroom apartment with 43 square metres of internal living area.

The apartment has a separate bedroom and is standard residential property.

This may fit lenders that accept apartments from 40 square metres, depending on LVR and location.

Scenario 2: Studio apartment under 40 square metres

You are buying a 35 square metre studio apartment.

The property has no separate bedroom.

Some lenders may not accept it, while others may consider it at a lower LVR or under stricter conditions.

Scenario 3: Advertised as 50 square metres, but includes balcony

The listing says the apartment is 50 square metres.

The floorplan shows 38 square metres internal and 12 square metres balcony.

A lender that requires 40 square metres of internal living area may not accept the property.

Scenario 4: Small apartment in a high-density building

You are buying a compact one-bedroom apartment in a large inner-city tower.

The lender may review building density, location, internal size and LVR before approving the property.

So, can you get a home loan for a small apartment?

Yes, you may be able to get a home loan for a small apartment under 50 square metres.

The strongest applications usually have:

• a standard residential apartment
• a separate bedroom
• acceptable internal living area
• clear floorplan or strata plan evidence
• strong location
• good resale appeal
• suitable LVR
• clean valuation comments
• a lender whose policy accepts the property type

Small apartments are not automatically unacceptable. The key is matching the property to the right lender before you commit.

Need help buying a small apartment?

A mortgage broker can help compare lenders that may accept small apartments, studio units, compact one-bedroom properties and high-density apartments.

We can review the property size, floorplan, LVR, loan purpose and lender policy before you apply.

If you are buying an apartment under 50 square metres, speak with a mortgage broker before signing an unconditional contract.