Say you find an $800,000 apartment in Ashfield. You have saved the deposit and the bank has indicated you can borrow enough. Then someone asks about the unit’s floor area or how the building is titled. The apartment may still be financeable, but suddenly there are more questions than you expected.
It is a familiar problem in Sydney’s Inner West, where a compact studio in Marrickville, an older walk-up apartment in Ashfield and a newer unit in Burwood can come with very different lending considerations. Knowing your borrowing limit is a good start. Before making an offer, you also need to know whether the lender is comfortable with the property.
A Twenty Per Cent Deposit Is Not Always Necessary
Many first home buyers still believe they must save 20 per cent of a property’s value before approaching a bank. A larger deposit can lower repayments and usually avoids lenders mortgage insurance, but it is not a universal minimum.
Under the Australian Government 5% Deposit Scheme, eligible first home buyers can purchase with a minimum 5 per cent deposit without paying lenders mortgage insurance. The scheme was expanded in October 2025 to remove income caps and limits on available places. The current property price cap for Sydney is $1.5 million.
For an $800,000 apartment, a 20 per cent deposit is $160,000. A 5 per cent deposit is $40,000. That is a $120,000 difference in the amount saved towards the deposit, although the smaller deposit also means a larger loan and higher repayments.
The government guarantees part of the loan to a participating lender. It does not contribute the deposit or waive the lender’s assessment of income, expenses and the property. Buyers still need to meet the scheme rules and the lender’s credit requirements.
The Apartment Itself Can Affect Your Loan
Two apartments at the same purchase price may attract different lending conditions. Some lenders place restrictions on small internal floor areas. Others may require a larger deposit for particular types of security or have specific requirements for company title properties.
Consider a small studio that looks affordable on paper. One lender might accept it with the right deposit and valuation, while another may not offer the loan structure the buyer needs. A two-bedroom apartment with a conventional strata title could be easier to finance, even if the purchase prices are similar. The details matter more when a buyer has only a small deposit.
This matters in suburbs with a mixture of older walk-up blocks, converted buildings and newer apartment developments. A buyer might obtain conditional approval based on their salary and deposit, then find that the lender needs more information about the particular apartment.
A lender also arranges or relies on a valuation of the property. If the valuation is below the agreed purchase price, the buyer may need to contribute more cash or reconsider the purchase. Pre-approval based on the borrower alone does not remove this risk.
Read the Strata Report Before Deciding What Is Affordable
For an apartment buyer, the advertised price is only part of the financial commitment. A strata report can show whether the building has sufficient funds for future works, whether major repairs are planned and whether owners may face special levies.
Waterproofing defects, concrete repairs or a large maintenance project can be expensive. A building with low quarterly levies may look attractive until its capital works plan reveals substantial spending ahead. The report can also contain information about insurance, disputes and planned works.
New South Wales government guidance recommends obtaining a strata search report before buying. Buyers should have their conveyancer explain anything significant and consider an independent building inspection where appropriate.
Know the Full Cash Requirement
The deposit is not the same as the total cash needed to complete a purchase. Conveyancing, inspection reports, lender charges where applicable and moving expenses need to be considered. Apartment owners must also allow for ongoing strata contributions, council rates and maintenance.
Transfer duty can change the numbers considerably. Under the New South Wales First Home Buyers Assistance Scheme, eligible buyers purchasing a home valued at $800,000 or less may receive a full transfer duty exemption. Eligible purchases above $800,000 and below $1 million may receive a concession.
A buyer considering an $850,000 unit might therefore have a 5 per cent deposit of $42,500 but still need to budget for some transfer duty and other buying costs. The precise figure depends on eligibility and the property. Leaving a cash buffer after settlement is worth considering, particularly with an older apartment.
Family Help Can Change the Deposit but Adds Questions
Parents sometimes offer money towards a first home deposit, particularly when their children have enough income to manage repayments but have not saved the full amount. A lender may accept a genuine gift, although it will usually want to understand where the money came from and whether it must be repaid.
A family guarantee is different. Instead of giving cash, a parent may offer equity in their own property as additional loan security. This can reduce the buyer’s immediate deposit requirement, but it also exposes the guarantor to financial risk if the borrower cannot repay the loan.
These arrangements should be discussed before anyone transfers funds or signs documents. The borrower needs to understand the loan, and family members providing a guarantee should get independent legal and financial advice.
Pre Approval Does Not Make an Auction Risk Free
Pre-approval helps establish a likely borrowing limit, but it is usually conditional. The lender may still need to confirm the property valuation, its security requirements and any changes to the buyer’s finances. An approval based on a general price range is not a promise to lend against every apartment in that range.
This is particularly important at auction. In New South Wales there is no cooling-off period when a property is purchased at auction. Buyers should obtain legal advice on the contract and understand the consequences if finance cannot be completed.
Where possible, raise unusual property features with the lender or broker before auction day. It is easier to investigate a small apartment or unusual title structure before bidding than after signing an unconditional contract.
Different Lenders Can Give Different Answers
It is easy to hear a bank say no and assume the property cannot be financed. Sometimes that is the right answer. In other cases, it means the apartment or the borrower does not fit that particular lender’s policy. Another lender may assess employment income, gifted deposits or unusual property features differently. That does not guarantee an approval, but it is worth understanding the reason for the first decision.
Speaking with a Sydney mortgage broker before making an offer can help buyers understand which lenders may be suitable for their circumstances and the particular property. Charles Touma of Links Property Finance works with first home buyers across the area, comparing lender policies and helping them understand deposit options and the approval process.
Before making an offer, ask whether the proposed lender can accept the apartment, how much cash will be needed at settlement and whether any documents are outstanding. It is also worth testing the repayments against a higher interest rate. Those answers are more useful than a headline borrowing limit.
A Better Order for Buying Your First Home
Start with what you can comfortably afford each month. Work out the deposit options available to you and check whether any government schemes apply. Add the purchasing costs, including transfer duty where payable, so you know how much cash you actually need.
Then seek pre-approval and ask about any property restrictions before you spend every Saturday visiting apartments. Once a place catches your eye, send the floor plan and property details to your lender or broker early. Have the contract and relevant strata or building reports reviewed by qualified professionals before committing.
An older unit in Ashfield and a newer apartment in Burwood can look similar in a property search, yet create different lending questions. The buyer who checks those details before an auction is in a much stronger position than the one who discovers them after the hammer falls.
General information only. Government assistance, lender policy and property eligibility are subject to change. Buyers should seek advice relevant to their financial circumstances and legal advice before entering a property contract.
