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Borrowing capacity - the property you purchase

Not all properties are treated equally by lenders. There are some properties that lenders like, some which they will have restrictions around, and some which they just won't touch at all. What does this mean for you. It means you may not be able to fund a particluar property purchase of they you may have to tip in additional cash to get the deal across the line

Below are some the the property types where lenders may have restrictions or may not fund at all.

  • Inner city units and developments particularly studio apartments
  • Student accommodation
  • Retirement villages
  • Rural properties
  • Remote regional properties with low population levels
  • Unusual properties eg unusual building designs
  • Multiple properties on one title
  • Company title properties
  • Properties under the NRAS scheme

Units less than 50m2
Lenders prefer units with a liveable floor space of 50m2 and above. Some may consider units down to 40m2.

Number of units in one complex
Most lenders will put a cap on the number of units a borrower can hold in one complex. The guidelines for this will vary on the size of the complex. Usually around 4 is the maximum but this may be reduced is it accounts for more than 25% of all units.

Lenders may also choose to restrict their exposure to certain apartment blocks. If they have already financed a number of purchases in a particular complex they may not support any further transactions.

Inner city units and hi-rises
Some lenders have an aversion to inner-city apartments and high rise developments. They may still lend against this type of property but at a reduced LVR.

Serviced apartments/Student accomodation
The majority of lenders are not very keen on serviced apartments. Generally it is not possible to obtain lending where mortgage insurance is required. Most lenders who will consider this type of property will restrict the lending to 60% to 70%, however some will go to 80%.

Lenders may need to see additional detail to determine the level of acceptable lending. In particular they will want to see the current letting agreement and if there are any restrictions associated with having the property released from the letting pool.

Commercial property
In terms of home lending generally commercial property can not be accepted on a stand alone basis. Some lenders may accept it as supporting security at a reduced LVR.

Company title
This will vary from lender to lender. Some are an absolute no while some will consider on a case by case. It is definitely worth making investigations before proceeding with this type of property.

Heritage listed
Generally considered on a case by case situation.

Warehouse conversions
Only considered by a handful of lenders. Again assessed on a case by case basis

Multiple units on one title
This situation may particularly apply where someone want to purchase a block of units that have not been strata-titled. Some lenders will consider up to 4. Above this would probably see the deal considered on a commercial basis.

Rural property
Will vary from lender to lender. Some will only consider a few acres. Other will look at up to 50 hectares. Property can not be income producing, hobby farms are acceptable.

Aged care security and retirement villages
No

Vacant land
Accepted by almost all lenders if the intention is to build on the block. Usually will be part of a construction loan. A number of lenders will not accept land only as security. Some will accept as supporting. Some will accept as a stand alone.