Just as a lender will not take all borrowers, they also will not take all properties as security for a home loan.
This often surprises many people. It is also one of the reasons that pre-approvals are never 100% certain. While the bank might be happy with you as applicants, the property that you choose to buy may not.
Different banks have different rules in regards to what properties are acceptable to them. Just because one type of property is unacceptable to Bank A, it may be acceptable to Bank B.
Properties such as 3×2 or 4×2 within a metropolitan area are considered standard. You are less likely to have any problems finding a lender that will accept it as security. When you start looking at non-standard properties it may prove more difficult.
Below we’ve listed a few examples of properties that may be considered non-standard:
Lenders want apartments to be at least 50 square metres in size. Some lenders will accept smaller apartments, others need larger areas.
It is important to note that this only includes the living space. Be careful of advertisements including the car bay in the square metreage. This will not be counted by the lender in determining its size.
If you are looking at an apartment in a high density complex you may find it more difficult to find a lender.
A high density development could include an apartment complex that has more than three stories. For some lenders it may be that there are more than 30 apartments in the complex.
Many lenders have lists of acceptable post codes for properties. They can also have list of post codes that are in an exclusion list, that they are not willing to finance.
If you are looking within the metropolitan area or major regional centres you are less likely to have a problem. But if you are looking at smaller country towns, you may have a more limited selection of lenders.
If you are thinking of purchasing a property in a rural area that is larger than 2 hectares, your choice of lenders will diminish. In many instances you may also need a large deposit.
While it is possible to finance commercial properties, most lenders will not take them for a residential loan. You would then have to look at Business or Commercial Finance arrangement. Which may attract higher interest rates and different lending criteria.
If you are looking at a non-standard property, it doesn’t mean that you will not be able to get finance. It does mean that you may be more limited with your choice of lender. Or you may need to have a larger than normal deposit.
If you have any questions about financing a specific property we would be happy to answer them!