I'm currently working with an Owners Corporation facing a substantial capital works project that can no longer be put off. For roughly a decade, the building has made do with bandaid repairs. Successive committees, understandably cautious about cost, chose short-term fixes over the full scope of repairs and maintenance the building needed.
That bill has now arrived. The estimated cost works out to an average of $125,000 per lot, and the final figure is still being determined. Adding pressure, the building's insurer has signalled a substantially higher premium at renewal, or possibly no cover at all. Most of us in strata have seen that story before.
The good news is that the owners are no longer debating whether to proceed. They all accept the works must happen. The question now is how they will pay for it.
And this looming decision has the potential to further delay what have already become urgent works!
This is a fairly typical building: mostly owner-occupiers, a share of investors, and a number of retirees. And I think we can all agree that very few households have $125,000 sitting idle.
The three funding options
Broadly, the Owners Corporation has three ways to fund the works:
- Special levy. The traditional choice since strata began in Australia. At $125,000 per lot, though, the timeframe owners need to raise the money can delay works considerably, and it remains a real struggle for many.
- Strata loan. A rational choice for many buildings. The Owners Corporation borrows, and owners repay through higher quarterly levies over time. The key question at this scale is whether those increased levies are manageable for every owner.
- Capital works fund. Buildings that have deferred major works often haven't built up their capital works fund either. And when costs climb this high, even owners who have contributed diligently may find the fund falls well short. Starting to save once the cost is known can stall the project, with costs almost certainly rising whilst owners wait. And it's not just the cost of works that grows, but the scope. Defects left untreated spread, so the longer the wait, the bigger the job.
Each of these deserves its own article. Today I want to focus on the first: what a special levy actually means for the owners who have to pay it.
What does a special levy really mean?
A special levy looks simple on paper: one figure, one due date. But the levy itself doesn't tell you what it will actually cost each owner. That depends entirely on where the money comes from. For most owners in this building, it will come from one of three places.
1. Adding it to the mortgage
For many owners, increasing their home loan is the most accessible option. Using an illustrative rate of 6.89% p.a.:
- Spread over 30 years, $125,000 adds about $822 a month in repayments, and roughly $171,000 in interest over the life of the loan.
- Over 25 years, it's about $875 a month, with roughly $137,000 in interest.
In other words, a $125,000 levy can end up costing well over double that amount. And that assumes the owner can borrow it at all. Lenders assess serviceability against a buffer above the actual rate, so owners on lower or fixed incomes may not qualify for the increase.
2. Drawing on savings or investments
Paying from savings or an investment portfolio avoids interest, which makes it feel like the "free" option. It isn't.
Money withdrawn today stops compounding. If that $125,000 would otherwise have earned 6% a year, the owner forgoes about $99,000 in growth over 10 years, or about $276,000 over 20 years.
Then there's the opportunity cost: the renovation, the business opportunity, the help for a child buying their first home, or simply the retirement buffer that money was meant to provide.
3. A reverse mortgage (generally for owners aged 60+)
For older owners, a reverse mortgage can seem like the perfect answer. There are no ongoing repayments, so it has no impact on day-to-day cost of living, which matters a great deal for retirees.
But the cost doesn't disappear. It moves to the owner's estate. Reverse mortgage rates are typically higher than standard home loans, currently in the high 8% range, and interest compounds on the full balance because nothing is being repaid. As an illustration, at 8.9% p.a.:
- After 10 years, $125,000 grows to roughly $303,000.
- After 15 years, roughly $473,000.
It's no surprise that this option is often not supported by family. The government's Home Equity Access Scheme charges a much lower rate, but it limits how much can be drawn as a lump sum, so on its own it rarely covers a levy of this size.
At a glance
| Funding source | What owners pay along the way | The real cost |
|---|---|---|
| Mortgage top-up | ~$822–$875/month | ~$137,000–$171,000 in interest |
| Savings or investments | Nothing ongoing | ~$99,000 in lost growth over 10 years |
| Reverse mortgage | Nothing ongoing | Balance of ~$303,000 after 10 years, paid from the estate |
Figures are illustrative only, based on a $125,000 levy and the rates stated above. Each owner's situation will differ.
Special levy: pros and cons
| Pros | Cons |
|---|---|
| Familiar to owners and strata managers, and simple to approve and administer | A large lump sum that many owners simply can't find |
| No borrowing by the Owners Corporation, so no interest cost at building level | The collection period can delay urgent works, while costs and insurance risk keep rising |
| Once collected, the works are fully funded upfront, giving contractors certainty | The financing cost doesn't disappear. It shifts to each owner, often at a higher rate |
| Each owner decides how to fund their own share | Owners who can't pay fall into arrears, and some may be forced to sell |
| No long-term increase to quarterly levies | Owners who sell soon after pay the full cost, while future owners get the benefit |
| No strata loan repayments are passed on to a buyer through the levies, so there's no concern, real or perceived, about the effect on a lot's sale price | Any amount an owner borrows stays on their personal balance sheet, and the impact can stay with them well beyond their ownership in the building |
Same levy, very different costs
This is the part that is easy to miss in an Owners Corporation meeting: every owner receives the same levy notice, but no two owners pay the same price. A working owner-occupier with equity, an investor with a portfolio, and a retiree on a fixed income are making three completely different financial decisions.
That's why the funding decision deserves the same care as the works themselves. The cheapest option for the building isn't always the most workable option for its owners. Understanding that is often what turns a stalled vote into a decision people can live with.
Where to from here
I'm genuinely encouraged to be working with a committee so clearly invested in understanding these options properly, so they can help the broader Owners Corporation make decisions that feel right for everyone.
In upcoming Insights, I'll look at the strata loan and capital works fund options in the same way.
Is your building facing a similar decision? Get in touch. I'm happy to help you understand your funding choices before you commit to one.
This article provides general information only and does not take into account your personal objectives, financial situation or needs. Interest rates and figures are illustrative and current as at October 2026. Owners should seek independent financial advice before making decisions about how to fund a levy.