Apartment Lending Calculator NZ

Updated  Floor area minimums and apartment LVR limits are individual bank credit policy, not regulation. Ask your lender.
Quick answer A 48 sqm apartment at $550,000.00 falls 2 sqm short of a 50 sqm minimum, so many lenders will not lend on it at all. If one will, at 70% rather than the 80% a house would get, the deposit is $165,000.00, which is $55,000.00 more. The $6,500.00 annual levy consumes about $85,698.05 of borrowing capacity on top of that.

Apartments look like the affordable way into a market that has priced houses out of reach, and the asking price is the least reliable guide to whether that is true. Banks do not treat an apartment as a smaller house. They treat it as weaker security, and they respond in three ways at once: a floor area below which they will not lend at all, a lower loan to value limit that demands a larger deposit on a cheaper property, and a body corporate levy counted against your income before they work out what you can service. Each of those is set by individual credit policy rather than by any rule, so none of them can be looked up, and all of them can turn a purchase that works on paper into one no lender will fund. The time to find that out is before the offer.

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The apartment
Lending
Ongoing obligations
At 48 sqm this apartment is 2 sqm below the 50 sqm minimum, so many lenders will decline it outright.
Deposit required
$165,000.00
$55,000.00 more than a house at the same price
Levy in borrowing capacity
$85,698.05
what the ongoing costs consume
True monthly cost
$2,975.13
mortgage plus body corporate levy

The three hurdles

HurdleThis apartmentEffect
Minimum floor area48 sqm against a 50 sqm minimumFails
Loan to value limit70% rather than 80%$55,000.00 more deposit
Ongoing obligations counted against income$6,500.00 a year$85,698.05 less you can borrow

A unit title is the ordinary form of apartment ownership in New Zealand and is lent on most readily of the three.

Deposit and loan

Purchase price$550,000.00
Loan at the apartment LVR$385,000.00
Deposit required$165,000.00
Loan a house at this price would get$440,000.00
Deposit a house would need$110,000.00
Extra deposit the apartment demands$55,000.00

What the levy really costs

Body corporate levy$6,500.00 a year
Ground rent$0.00 a year
Total ongoing obligations$6,500.00 a year, $541.67 a month
A mortgage with the same monthly payment$85,698.05

Paying $541.67 a month in levies is the same commitment as servicing another $85,698.05 of mortgage. That is borrowing capacity the levy takes away before you start, and it is the reason a cheap apartment with a high levy can be harder to finance than a dearer one without.

Monthly cost of ownership

Mortgage repayment$2,433.46
Body corporate levy$541.67
Ground rent$0.00
Total each month$2,975.13
Floor area minimums and apartment LVR limits are bank credit policy, not law. They differ between lenders, are not published, and change without notice, which is why this page asks you for them rather than supplying figures that would be wrong for someone. Get the position confirmed for the specific apartment before you offer, since an approval in principle for a house tells you nothing about whether the same lender will fund this. Body corporate levies rise, and a special levy for remediation can run to tens of thousands of dollars per unit without appearing anywhere in the asking price, so read the long term maintenance plan and the minutes. On a leasehold apartment the ground rent is periodically reviewed and can increase sharply, and the remaining term of the lease affects both value and lendability.

A cheaper property that needs a bigger deposit

The counterintuitive part of apartment lending is that the deposit can be larger in dollars than for a more expensive house. A lower loan to value limit applied to a smaller price still often produces a bigger number, and buyers who have saved carefully towards a house deposit find the apartment they thought was the affordable option is further out of reach. Worse, the reason for the lower limit is the lender's view that the asset is harder to sell in a downturn, which is a view worth taking seriously rather than treating as an obstacle. They are pricing a risk that falls on you too.

The levy is a mortgage you did not apply for

Converting the body corporate levy into an equivalent loan is the single most useful thing this page does, because it puts an ongoing cost into the units people actually think in. A levy of a few thousand a year does not feel like a large commitment when set against a purchase price in the hundreds of thousands. Expressed as the mortgage it displaces, it is obviously enormous, and it explains why two apartments at the same price can be completely different propositions. It also means a rising levy is not an annoyance but a direct reduction in what the property is worth to any future buyer, since it consumes their capacity in the same way.

Ask about the building before you fall for the apartment

The costs that ruin apartment purchases are not in the price and not in this calculator. They are in the condition of the building and the state of the body corporate's long term maintenance fund. A building with a known weathertightness or structural problem and no money set aside for it will levy its owners for the remedy, and the amounts run well into the tens of thousands per unit. That information is available before you offer, in the long term maintenance plan, the fund balance and the minutes of recent meetings, and it is worth more attention than anything on this page.

Worked example

An apartment of 48 sqm is priced at $550,000.00. The buyer's lender applies a minimum floor area of 50 sqm, so it is 2 sqm short and would be declined by that lender outright.

Assuming another lender will fund it at 70% rather than the 80% a house would attract, the loan is $385,000.00 and the deposit $165,000.00. A house at the same price would need $110,000.00, so the apartment demands $55,000.00 more.

The body corporate levy of $6,500.00 a year is $541.67 a month. At 6.50% over 30 years, a mortgage with that same monthly payment would be $85,698.05, which is the borrowing capacity the levy consumes. The mortgage repayment itself is $2,433.46 a month, so the true monthly cost of ownership is $2,975.13.

How this is calculated

The floor area test is a straight comparison against the minimum you enter. The loan at each LVR is the purchase price multiplied by that limit, and the deposit is the price less the loan, so the extra deposit is the difference between the two deposits. The monthly repayment uses the standard amortising formula on the apartment loan at the rate and term given. The equivalent borrowing capacity of the ongoing obligations reverses that formula: the levy and ground rent are converted to a monthly figure and treated as a repayment, and the loan amount that would produce exactly that repayment at the same rate and term is the capacity consumed. The true monthly cost adds the repayment, the levy and the ground rent together.

Official sources

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Frequently asked questions

Why do banks lend differently on apartments?

Because a small apartment is a harder asset to sell in a downturn and therefore weaker security. Lenders respond with a minimum floor area below which they will not lend at all, a lower loan to value limit than they apply to a house, and closer scrutiny of the body corporate. None of these are legal rules, they are individual bank credit policies, which is why the answer differs between lenders and why the question has to be asked directly.

What is the minimum apartment size banks will lend on?

There is no single figure, and any page quoting one is describing one bank at one moment. Minimums differ between lenders, are set by internal credit policy rather than regulation, and change without announcement. Some lenders will consider a smaller apartment with a larger deposit. This calculator asks you for the threshold rather than supplying one, because the only reliable number is the one your lender gives you for the specific property.

Does the body corporate levy affect how much I can borrow?

Yes, and this is the part buyers consistently underestimate. A lender treats the levy as a fixed ongoing commitment in the same way as any other outgoing, so it directly reduces the income available to service a mortgage. A levy of a few thousand dollars a year can consume tens of thousands of dollars of borrowing capacity, which this calculator converts into an equivalent loan amount so the size of the effect is visible.

Is leasehold treated differently again?

Considerably. On a leasehold apartment you own the building interest but not the land, and you pay ground rent to the landowner which is periodically reviewed and can rise sharply. Many lenders apply a lower LVR again, some will not lend at all, and the remaining term of the lease matters as much as the price. Ground rent belongs in this calculation alongside the body corporate levy, because it has exactly the same effect on servicing.

What should I ask about the body corporate before offering?

Ask for the long term maintenance plan, the current levy and its history, the balance of the long term maintenance fund, the minutes of recent meetings, and whether any special levy has been discussed or resolved. A building with a known remediation problem and no fund to pay for it is where the large unexpected costs come from, and none of it appears in the asking price.