A lender's view of a Sandringham apartment is different to their view of a freestanding house on the same street.
The property type you choose affects the interest rate you'll be offered, the deposit required, and sometimes whether your application is approved at all. Lenders use risk categories that go beyond location and price. A studio apartment in a high-rise building might attract a higher rate or require a larger deposit than a three-bedroom townhouse, even if both are in Sandringham and within the same price range. Understanding these categories before you commit to a purchase helps you structure your loan more effectively and avoid surprises at pre-approval.
How Lenders Categorise Property Types
Lenders divide properties into standard and non-standard categories based on construction, title type, size, and intended use. A standard property is typically a freestanding house or townhouse on a separate title, built with conventional materials, and larger than 50 square metres. Non-standard properties include apartments smaller than 50 square metres, properties on company title, or dwellings constructed with materials like mud brick or straw bale. A non-standard classification doesn't mean you can't borrow, but it often means fewer lenders will compete for your business, which can reduce your ability to negotiate on rate.
In our experience working with buyers in the Sandringham area, a two-bedroom apartment in one of the newer developments along Beach Road will generally be classified as standard, while a studio apartment in the same building might be classified as non-standard due to size. The smaller apartment might require a 20 per cent deposit to avoid Lenders Mortgage Insurance, even if the buyer could otherwise borrow at 90 per cent for a larger unit.
Why Apartment Size and Building Composition Matter
Apartments under 50 square metres are considered higher risk by most lenders because resale can be more difficult if the loan defaults. Some lenders will not lend on studio apartments at all. Others will lend but apply a higher interest rate or cap the loan-to-value ratio at 80 per cent, meaning you'll need a 20 per cent deposit. Building composition also matters. If more than 50 per cent of a building is commercial or industrial use, some lenders classify the residential units as non-standard.
Consider a buyer interested in a one-bedroom apartment in a mixed-use building near Sandringham Village. The unit is 48 square metres and sits above ground-floor retail. Two lenders decline the application outright. A third lender offers approval but requires a 25 per cent deposit and prices the loan 0.40 percentage points above their standard variable rate. A comparable apartment of 55 square metres in a purely residential block two streets away would have been approved at 90 per cent LVR with a standard variable rate.
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Townhouses and Strata Title Considerations
Townhouses on strata title are generally treated as standard properties, provided they meet minimum land area and construction requirements. Lenders prefer properties with a land component, even if that land is shared. A townhouse in Sandringham with a small private courtyard and a share of common property will typically be viewed more favourably than an apartment of the same price. Strata title itself is not a problem, but high strata fees or a history of special levies can raise concerns during the serviceability assessment.
Lenders review the strata report as part of the approval process. If the owners corporation has insufficient funds in the sinking fund or if major works are planned without adequate reserves, the lender may request a larger deposit or decline the application. We regularly see this with older townhouse complexes near the beach where ongoing maintenance costs are higher due to coastal exposure.
How Property Type Affects Your Loan Structure
The property type influences which home loan features you can access. A freestanding house in Sandringham will generally qualify for any loan product a lender offers, including fixed rate, variable, split, or interest-only structures. A non-standard property may be restricted to variable rate only, or the lender may not offer an offset account as part of the package. Some lenders will approve a non-standard property for owner-occupied purposes but decline the same property if you plan to rent it out as an investment.
If you're comparing a renovated Victorian cottage on a standard residential block with a modern apartment, the cottage will generally give you access to a wider range of loan products and more competitive pricing. The apartment might still be the right choice for your lifestyle and budget, but understanding the lending implications helps you plan the purchase with realistic expectations.
Specialized Property Types and Lending Restrictions
Company title properties, properties on leasehold land, and dwellings with non-standard construction are assessed individually. Lenders that do accept these property types often apply stricter criteria. A property on Crown land lease, for example, might be capped at 70 per cent LVR regardless of the buyer's financial position. Properties built with rammed earth, hempcrete, or shipping containers may require a specialist valuer, and some lenders will decline them entirely.
Sandringham has a small number of older properties on unusual titles or with non-standard construction. If you're considering one of these homes, speak with a mortgage broker in Sandringham before making an offer. Knowing which lenders will consider the property and under what terms allows you to negotiate the purchase price with confidence and avoid paying for a contract that can't be financed.
What This Means When You're Ready to Buy
Before you make an offer, confirm that the property type aligns with your borrowing strategy. If you're planning to use the Australian Government 5% Deposit Scheme, check that the property meets the scheme's requirements as well as the lender's internal policy. A property might fall within the scheme's price cap but still be declined by the participating lender due to size or title type. If you're comparing two properties and one is non-standard, factor in the potential difference in interest rate and deposit requirement when deciding which offer to make.
The property you choose shapes the loan you'll be offered. Matching your purchase to a property type that lenders view favourably gives you access to lower rates, more loan features, and stronger negotiating power. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What makes a property non-standard for lending purposes?
A property is usually classified as non-standard if it's smaller than 50 square metres, built with unconventional materials, on company title or leasehold land, or in a building where more than half the floor area is commercial. Non-standard properties can still be financed but often attract higher rates or require larger deposits.
Do lenders treat townhouses differently to apartments?
Townhouses on strata title are generally treated as standard properties if they meet minimum size and construction requirements. Lenders prefer properties with a land component, even if shared, which often gives townhouses more favourable lending terms than apartments of the same price.
Can I use a fixed rate loan on a non-standard property?
Some lenders restrict non-standard properties to variable rate loans only or limit the loan features available. A freestanding house will generally qualify for any loan product, while a non-standard property may not have access to fixed rates, offset accounts, or interest-only options.
Does property type affect my deposit requirement?
Yes. A studio apartment or non-standard property might require a 20 to 25 per cent deposit even if you would qualify for a 90 per cent loan on a standard property. The lender's risk category for the property type determines the maximum loan-to-value ratio they will offer.
What should I check before making an offer on an apartment?
Confirm the apartment size is above 50 square metres if possible, check the building composition to ensure it's majority residential, and review the strata report for sinking fund levels and planned special levies. These factors affect both loan approval and the terms you'll be offered.
