Luxury residential

What are luxury properties?

Australian banks consider properties that are worth more than $3,000,000 to be a luxury residential property ($2,000,000 in some states). Typically these properties are located in the capital cities and are owned by high net worth individuals.

When applying for a loan for one of these properties there is far more to take into consideration than when applying for a normal home loan.

How much can you borrow?

First home buyer: 80% of the property value for loans over $1,000,000 and 75% of the property value for loans over $2,000,000.

Investor: 80% of the property value for loans over $1,000,000 and 75% of the property value for loans over $2,000,000.

Low doc: 60% of the property value for loans over $1,000,000 (no maximum).

Discounts: Competitive professional package and basic loan discounts are available. We usually negotiate with several lenders to find the best possible offer.

Note: Most lenders restrict the amount you can borrow to 70% or less of the property value. Several lenders specialise in lending for these properties and can lend up to 80% of the value on a case by case basis. Some lenders refer to these types of loans as “jumbo loans” or “high value loans”.

Negotiating the best rate discount

Different banks are willing to negotiate different rate discounts depending on their funding position and their targets for new lending. Lenders that are already too busy with applications to process are less likely to give larger discounts.

So how do you find the cheapest lender? You can either call every lender yourself of use a specialist mortgage broker that can negotiate on your behalf directly with the pricing department of the major banks and other lenders.

Please remember that the rate isn’t all there is to choosing a home loan! Often larger loans have restrictive terms and conditions, hidden costs or high exit fees. Please check the loan offer you are issued to make sure there are no hidden surprises.

Why are the banks so conservative?

Banks are in an unusual position when dealing with customers applying for large home loans greater than $1,000,000. Larger loans, particularly loans over $2,000,000, represent a much higher risk than a loan of say $300,000.

Not just that but because they often give a special rate discount, their margins are much smaller. They are eager to do business with you because they make more money from larger loans however they are also hesitant because of the larger potential loss!

The rule of thumb is that lenders will give special rate discounts, but are also more likely to decline the loan. For this reason it is important to not just look at the potential discount but also to look at how comfortable that particular lender will be with your personal situation.