The High Life: Apartment lending 'a minefield'
More and more Kiwis are choosing apartment over houses. In this High Life series, Homed explores what that means for the way we live.
Apartments are often suggested as an easier way for first-home buyers to get a foothold in the property market.
But buyers hoping to purchase a cheap, small apartment are being warned it is still tough to get finance.
"Small apartments are definitely not banks' favourite things," mortgage broker Kris Pedersen said.
BNZ recently tightened its rules and will not lend to people buying apartments smaller than 65 sq m in most cases.
TSB likes apartments to be bigger than 60 sq m and other banks are most comfortable over 40 sq m or 50 sq m.
Sometimes apartment loans require more equity, too - Westpac said it would look for a deposit of 40 per cent or more even for a 50 sq m apartment.
People who apply for a Welcome Home Loan must also buy properties no smaller than 50 sq m.
It has been hard to get a loan on a very small apartment since 2007 but banks have been adjusting their lending criteria and enforcing their rules more stringently over recent months.
City fringe and suburban apartments are sometimes looked upon more favourably by banks and they are traditionally reluctant to lend as much on leasehold properties. Buildings with fewer units are sometimes regarded as more appealing.
In some cases, if a bank has a lot of customers with properties in one building, it might be reluctant to lend to anyone else wanting to buy there. Most shy away from buildings with identified weathertightness issues.
"We've found if you don't have secondary security the banks haven't wanted to go there [with small apartments] for a while," Pedersen said. "Banks have tightened overall. What might have got across the line 12 months ago might not anymore."
Mortgage broker Bruce Patten said buyers sometimes hit trouble when they wanted to purchase apartments off the plan, too. Banks were reluctant to promise funding on properties that might not be available for many months.
"ANZ won't lend on anything that will be finished beyond six months out. It's a real minefield for people."
But Patten said it was worth trying other lenders if one turned an application down. "Just because your bank says no, it doesn't mean it's necessarily going to be no from someone else."
People with more than a 20 per cent deposit and buying an apartment that was bigger than 50 sq m should have no more trouble getting a loan than any other buyer, he said.