Key Takeaways
- There is no universal minimum size. If the LVR is below 80 per cent and you know where to look for your finance, you might be surprised by what is possible. Where LVR exceeds 80 per cent the size limit is more often at 40 or 50 square metres, and some lenders exclude studio apartments altogether. Matching the right lender with what you want to is key to obtaining finance approval.
- Get two figures from the strata plan: the internal living area, and the total area including balcony and car space. Most lenders use the first figure and at least one will use the second.
- The stamp duty concessions/exemptions and the First Home Guarantee have no minimum size, and most studios and one-bedders sit well under their price caps.
A studio or a small one-bedder is often the first rung on the ladder for many people. It is the cheapest strata-titled home in most cities and suburbs, and for a first home buyer it may not be their ideal home but often makes the difference between buying now and continuing to rent indefinitely. The frustration is that lenders are more cautious with small apartments than with almost anything else in the residential market. The rules are different with every lender, and none of them are published publicly where a buyer can find them. "The bank won't lend on anything under 50 square metres" gets repeated as if it were a law. That may be true for some lenders' policies, but it is possible to get finance with no minimum size limit at all if you know where to look. Here is how it actually works, and why your objectives need to be matched to the lender before making any application.
Why do lenders care how big an apartment is?
Resale opportunity is key. A lender's main concern about any property is whether it is probable that they can sell and recover their losses within a reasonable timeframe if they had to. Small apartments have a narrower pool of buyers and can take longer to sell in a soft market, so most lenders draw a line by stating a minimum floor area below which they are not comfortable. That line has nothing to do with whether the apartment is a good place to live or not. Plenty of 32 square metre studios are better homes than a badly laid out 55 square metre one-bedder. The lender is simply judging how easily it could be sold to someone else, nothing more.
What is the minimum acceptable size for a studio or small apartment home loan?
There is no single number, and this is my point. Across the market, 50 square metres is the most common threshold, 40 is reasonably common, and the policies that matter most for small units look like this:
| Lender policy | What it means for a small unit |
|---|---|
| One lender on the Mondo panel: no minimum internal area at 80% LVR or below; 30 square metres internal where the loan is above 80% | With a 20% deposit, the size of the unit is simply not a question. With a smaller deposit, the unit needs 30 square metres inside the walls, and the loan can go to 95% including LMI for an owner-occupier, 90% for an investor |
| Another lender on the panel: 50 square metres including balconies and car parking, OR 40 square metres excluding them | A 38 square metre unit with a 10 square metre balcony and a car space passes. A 36 square metre unit with no balcony does not |
| Most other lenders: 40 to 50 square metres internal, balconies excluded | A genuine studio usually fails; a one-bedder over 50 usually passes |
| Lenders with an explicit 'no studios or bedsitters' rule | Excluded regardless of size. A small one-bedder with a separate bedroom can pass where a studio of exactly the same area does not |
There is one more hurdle to avoid. A number of lenders will accept studio apartments, but many others explicitly exclude them by definition, requiring that the unit must have ‘a separate bedroom area’. So the difference between a studio and a small one-bedder with a separate bedroom can be the difference between a ‘yes’ or a ‘no’ with the same lender.
For context, the NSW Apartment Design Guide, which governs new apartment buildings in this state, sets 35 square metres as the minimum for a new studio and 50 for a new one-bedroom apartment. So a lender that accepts 30 square metres, or sets no minimum at all, is prepared to finance units smaller than anything built in New South Wales in the last decade. Those units exist, usually in older apartment blocks from the 60's and 70's, and they are exactly what a first home buyer tends to be looking at.
This is a perfect example of why you need to get expert advice from a broker who knows and understands the policies of each lender and how they apply to the property that you are trying to buy.
What counts as 'internal living area'?
The floor area inside the external walls of the unit itself: living space, kitchen, bathroom and any bedroom or sleeping alcove. Balconies, courtyards, car spaces and storage cages are excluded by most lenders. As the table shows, at least one lender does include balconies and parking as an optional test, which is why obtaining accurate measurement details can be critical.
Pro tip: Get specific figures for each area from a reliable source. Don’t rely upon the information in the agent's listing. The lender may require the internal area to be verified by a valuer.
It is not only the floor area
Size gets the attention, but three other things decide whether a small apartment can be financed by any specific lender.
| What the lender looks at | Usually fine | Usually a problem |
|---|---|---|
| Internal living area | From 30 square metres with some lenders, or no minimum at 80% LVR; 40 to 50 with most | Under 30 square metres with any lender above 80% LVR |
| Self-contained | Own kitchen and bathroom inside the unit | Shared facilities, boarding-house style rooms |
| Title | Strata title | Company title and some stratum or leasehold arrangements |
| Building use | Ordinary residential block | Serviced apartments, student accommodation, buildings with holiday-letting or management agreements |
| Location and resale | Suburbs where small units sell regularly | Areas with few comparable sales, which makes the valuation harder |
One more thing to check is the building itself. If the unit sits in a block of six or more storeys, or a complex of more than 50 units, many lenders treat it as 'high density' and a separate set of rules apply in addition to size limitations. A lower maximum loan-to-value ratio, a full valuation with comparable sales from outside the building, a cap on how many units the lender will finance in any one development, and often a requirement for a bedroom that is separate from the living area, which can rule out a studio altogether, may all apply.
What the first home buyer schemes do and do not do
None of the various state stamp duty concessions, 5 per cent Guarantee or other Government schemes rule out small apartments or studios from being eligible, only the price caps apply.
What the schemes cannot do is override the lender's own policy. So the order of operations is: work out which lenders will finance the unit and match that to those who participate in the relevant scheme. Our guide to first home buyer schemes and grants covers the schemes in detail, and because a smaller deposit outside the guarantee usually means lenders mortgage insurance (LMI), it is also worth understanding what LMI is before you start.
What you can do before you make an offer
It’s often possible to get finance approved on smaller apartments and studios, where people have previously tried with the wrong lender, and failed. With the correct information at hand we can search for a solution.
- Confirm via strata plan or contract: internal living area, and total including balcony and parking.
- Check the number of storeys and units, because six or more storeys or more than 50 units brings in the high-density rules.
- Confirm the postcode, or postcodes, you will be looking in. Many lenders keep lists of postcodes where high-density rules tighten further or the maximum loan-to-value ratio is reduced, so the postcode can matter as much as the unit.
Pro tip: If you’re looking to buy a studio or smaller-sized apartment speak to an expert and get finance pre-approved with the right lender - not the wrong one!
Where to start
If you have found a studio or a small one-bedder, or you are about to start looking at them, the useful first step is a short conversation about the specific unit: its two areas, its title, its building, and which of the 80+ lenders I have to choose from would be comfortable with it at the deposit you have. That is the part you cannot find out for yourself without applying, and applying is the one thing you do not want to do until we know the answer. That tells you whether to make the offer and with how much, before you spend money on inspections. Book a chat and bring the strata plan if you have it. Small apartments are entirely financeable. They just need to go to the right lender, once.
Mondo Mortgages
Frequently asked questions
Four questions that come up with every small apartment.
Can I get a home loan on a 30 square metre studio or less?
Yes, with the right lender. One lender on the Mondo panel has no minimum size at all if you have a 20 per cent deposit, and accepts 30 square metres of internal area with a smaller deposit, up to 95 per cent including LMI for an owner-occupier. Most other lenders want 40 or 50 square metres, so matching the unit to the lender is the key to success.
Does the balcony count towards the apartment size?
With most lenders, no - they work from internal living area, the floor space inside the walls. One lender on the Mondo panel does count balconies and car parking in its 50 square metre test, so a 42 square metre unit with a balcony and a car space can pass there and fail elsewhere. Get both figures from the strata plan.
Can I use the First Home Guarantee or the stamp duty exemption to buy a studio?
Yes. Neither scheme sets a minimum apartment size, and most studios and small one-bedders sit well under the price caps. But the lender still applies its own policy on size, title and building use, so the unit has to pass both tests. If you are going to be applying for the 5 per cent Deposit Guarantee scheme then we need to match policy to a lender who is participating in the scheme, as not all lenders do.
Are studios harder to finance than one-bedroom apartments?
Yes, this is true with a number of lenders. Some apply the same size rule to both, so a one-bedder under 40 square metres faces exactly the same questions as a studio. But many lenders exclude studios all together. A one-bedder over 50 square metres is accepted almost everywhere.
Sources
- NSW Department of Planning, Apartment Design Guide - minimum internal area of 35 square metres for a studio, 50 for a one-bedroom apartment. https://www.planning.nsw.gov.au/policy-and-legislation/housing/apartment-design-guide
- NSW Government, First Home Buyers Assistance Scheme (the NSW example - every state and territory has its own concession scheme) - full transfer duty exemption to $800,000, concession to $1,000,000. https://www.nsw.gov.au/housing-and-construction/buying-and-selling-property/home-buying-assistance/first-home-buyers-assistance-scheme
- Housing Australia, First Home Guarantee - 5 per cent deposit, guarantee of up to 15 per cent, income caps removed from 1 October 2025; price caps for every state and region are listed on this page. https://www.housingaustralia.gov.au/support-buy-home/first-home-guarantee
- ASIC Moneysmart, Lenders mortgage insurance (LMI). https://moneysmart.gov.au/glossary/lenders-mortgage-insurance-lmi
