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how much do you need to buy an apartment


Apartment Specialists Podcast No: 156

Summary:

How much do you need to deposit when buying an apartment? What are the restrictions and bank limitations when you are taking out a loan for an apartment purchase? Watch the video and read the article to get more information and insights about getting your financial needs in order when buying an apartment.

How Much Do You Need to Buy an Apartment

As an overview the basics on how much you need to buy an apartment are pretty straight forward and can be put into three different categories.

1) Owner occupiers apartments or apartments with the most capital gain opportunity.

These apartments are not your shoe boxes and so are of a descent size. To buy one of these apartments you will need at least a 20% deposit.

2) Investor Apartments or Income focused apartments.

These are your smaller apartments, income focused and to buy one of these apartments you will need at least a 50% deposit.

3) Lease hold apartments.

These are generally lifestyle purchasers or in some cases high return purchases. To buy a leasehold apartment you will need a deposit of at least 50%

Now, unfortunately it is not that simple. BANK CRITERIA makes it quite confusing as they are all different and cause a lot of buyers to waste a lot of time and energy.

For a buyer, there is nothing more frustrating than finding the perfect apartment only to find out that you can’t buy it because the bank won’t give you the money you need.

For example Banks have restrictions on:

  • Apartment size (i.e. if an apartment is under 40m2 or with another ban 50m2)
  • Apartments in hotel leases
  • Apartments that are in a building that once was used for something else (i.e. an office building that has been converted to an apartment)
  • Apartments that are leasehold
  • Specific Apartment buildings

And plenty more.

This is why I highly recommend seeing a broker who will, for free, match you with the best bank for your needs and at the lowest rate; and in most cases, get you a better deal than if you walked in off the street.

The important thing however is to use a top mortgage broker who knows apartments and has relationships high up in the banks.

What do you need to know about Apartment Buying in Auckland? How do you get the best deals? Download our Buyers Guide to get much sought after insights. You can also email andrew@apartmentspecialists.co.nz or call +6421 424 892 to get the best Auckland apartment expert to help you.

TRANSCRIPTION:

How much do you need to buy an apartment? Andrew Murray from Apartment Specialists here. I’ll be talking about how much money you need to by an apartment.

Everyone is talking about apartments. We all know that finance is different when coming to buy a house compared to buying an apartment. I’m going to first start off with the basics, and you can put apartments into three categories when talking about purchasing.

We’re talking about owner/occupier or capital gain purchases. Number two, being investor apartment purchases. These ones are more income-focused. Then three which is leasehold apartments and  lifestyle purchase or in some cases – very, very high return purchases. All this because of the negative stigma surrounding the leasor.

Number one, being an owner/occupier or a capital gain purchase. Now, your finance is generally restricted to give a blanket rule to about 80%. These are apartments of a decent size. If you’re going to buy an apartment that’s $400,000, you’re going to need an $80,000 deposit. If you’re going to buy an apartment that’s $500,000, you’re going to need $100,000 deposit and so on.

Number two, your investor apartments which are focused more on income. These are your small apartments. Because they’re restricted by bank criteria, that means the prices are lower and the rents are higher compared to the prices. This means you’ll get a higher return.

These apartments are restricted by the banks that’s why the finance is only 50%. If you’re going to buy an investor apartment, say as a smaller apartment, then that means you only need it financed for around about 50%. However, if you’re buying a $300,000 apartment, you’re going to need $150,000, which is quite restrictive. That’s why it’s generally an apartment you buy later in life when income’s more important than capital gain.

Number three, our leasehold apartments. This is your lifestyle purchase or your purchase with a view to high return, because it’s a smaller apartment. It’s leasehold but because of the stigma and the lack of people being able to purchase, less people purchase them. Leasehold across the board, generally speaking, is 50%. If you buy a leasehold apartment and they ask a million dollars, you’re going to have a $500,000 deposit. If you buy a leasehold apartment that’s $300,000, and you’re going to need $150,000 deposit.

Those are the basics and this is where it gets confusing. Every bank is different. One apartment that could be under the owner/occupier or capital gain purchase category in one bank, in another bank it could be an investor purchase. This is because of their size criteria. For example, ASB Bank will lend 80% on apartments 40 square metres or higher, where say Westpac will lend only 80% to apartments that are 50 square metres or higher. I’ll cover the actual current bank criteria in a different podcast, but that gives you an idea.

There’s nothing more frustrating than a purchaser coming to purchase an apartment to find out that their bank won’t give them the money they need. Put yourself in that situation. You’ve found that apartment and all of a sudden you can’t get finance. Now, on top of this, they also have restrictions on apartments and hotel leases.

Apartments that have been converted, for example, a used office blocks or used for something else, and it has been converted into apartments, it will often go for 65%, a common figure in most of the banks. And then they’ll also not lend on specific buildings if they’ve lent to too many people in that building. So, that’s another one you need to know from your banks – which apartments they won’t lend to.

Now that doesn’t mean that’s a bad apartment complex. It just means they’ve got too many clients that they’ve lent to in that building. I must agree, it does get confusing and there are plenty more rules when you get into finance. That’s why I do not advise going straight to a bank. I’d advise going to a broker, and make sure you go to one of the top brokers that specialise on apartments.

I can recommend you to some – just flick me an email. These are the ones that have relationships up high, and will get you better rates and better deals. You can get them free and what they do is they put them out to all the banks and see who will give you the best deal. They will also match the apartment you’re looking for, or what you’re looking for with the sizes.

I hope that helps. Andrew Murray talking about how much you need to purchase an apartment.

Cheers!

What do you need to know about Apartment Buying in Auckland? How do you get the best deals? Download our Buyers Guide to get much sought after insights. You can also email andrew@apartmentspecialists.co.nz or call +6421 424 892 to get the best Auckland apartment expert to help you.