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Good Vs. Bad – How Property Types Affect Your Mortgage Chances

Types of mortgageThe mortgage industry in Australia is huge. It’s worth over $78 billion, employs over 150,000 people, and helps budding property buyers get their feet firmly on the ladder. 

With so much money involved, however, it’s no surprise that many Australian lenders are incredibly careful about the properties they offer loans for.

As a new buyer, this can present a real challenge. Don’t worry, though – we’ve compiled a list of the property types lenders tend to favour, as well as the ones you’re better off completely avoiding. Read on to find out more.

Bad – Rural Properties or Those in Bad Neighbourhoods

When banks review your mortgage application, they’re always going to take the saleability of your chosen property into account. This is their get-out if you default on your mortgage.

As a result, rural properties and those in bad areas can be problematic, as there will be less buyers interested in them. What’s more, the bank will need to recover its investment quickly, so they might well end up losing money if they offer a mortgage for a property in a rural/bad area.

In fact, it’s not uncommon for lenders to have blacklisted areas where they won’t offer loans without a significant deposit from the buyer.

Good – Properties with Solid Structures in Top Condition

Your target property’s structure and condition will have an effect on its value, both now and down the line when the time comes to sell. When your lender asks for a valuation, both of these factors will be taken into account.

If the property has any issues, such as damp, subsidence or termites, the property might be pegged as being high-risk.

You can make getting a mortgage easier by only targeting newer properties in top condition. Although you might have to pay a bit more, there’s every chance you’ll be required to put down a smaller deposit, spreading the affordability.

Bad – Oversupplied Areas and Small Apartments

Property prices are soaring across Australia’s capital cities, meaning smaller apartments are far from in short supply. This abundance of small apartments limits their future saleability, especially if property prices drop. As a result, it’s smart to look for apartments that are larger than 40sqm in size.

Good – Properties with High Appeal and Great Presentation

First impressions count – and lenders know it. If your property will appeal to the emotional side of buyers, lenders will likely consider more than just size and sale price.

Banks aren’t going to let emotion affect their lending decision, but they will take demand into account. If the presentation and appearance of your target property is appealing to other buyers, they’ll take this into account when considering your mortgage request.

If buyers are likely to be attracted to the property because of a stunning view, large garden or great outdoor seating area, lenders will take this into account.