Mining Town Mortgage
Why invest in a mining town?
Property investors who buy in the right mining town can make big short-term capital gains and receive outstanding rental returns. The only question is which town to invest in?
The commodities boom has in turn caused many housing booms all through regional Queensland as well as coastal areas of Western Australia such as Bunbury, Geraldton and Karratha.
How much can you borrow?
How much you can borrow will depend on your situation.
First home buyer: 95% of the property value (restrictions apply).
Investor: 95% of the property value.
Low documentation: 80% of the property value.
For some people, there are competitive professional packages and basic loan discounts available which can impact how much you can borrow.
Be aware that some lenders have location restrictions. These location restrictions are particularly conservative for mining towns that have populations fewer than 10,000 people. Many lenders will restrict your loan to 80% of the property value.
We work with banks with no location restrictions, and an open minded view of investment loans used to buy in a mining town.
If you want to purchase a property in a mining town then call us on 1300 889 743 or enquire online and one of our mortgages will be in contact to help you find which banks can approve your home loan.
Why are the banks so conservative?
Banks tend to be very conservative when assessing a loan with a property in a mining town as security. They think in very long time frames, and worry about the possible risk of the boom ending and the town being deserted.
Remember that although the price may be skyrocketing now, banks do not share your profit from these capital gains, but they do share your risk if the property decreases in value!
Please be careful to properly research the area you are buying in to ensure that the mining is ongoing or that the town is economically viable without the mine. If need be, seek independent financial advice before proceeding with your investment.
Will they accept my rent income?
Many lenders have official or unofficial policies which restrict the usage of rental income from “single industry towns” when they calculate your ability to repay the debt.
Some banks will only use 60% of the rent income instead of the standard 80% of rent income that is normally used if the property is in a large town or capital city. As a result you may find yourself unable to borrow more and buy more properties.
In particular, during the construction phase of a mine there are often very high rent returns in the nearby towns; which may or may not continue in the long term. The lender can’t do the same amount of research that you have done and so takes a conservative approach.
The good news is that some lenders will look at using a higher percentage of the rental income you receive on a case by case basis, allowing you to borrow more and grow your portfolio.
For more information about income from renting you can check out our article on rental income.
Which mining towns can be financed?
As a general rule we can finance houses in any town in Australia as long as there is demand for housing.
Some common mining areas we finance are:
- Hunter Valley NSW
- Bowen Basin QLD
- La Trobe Valley VIC
- Goldfields WA
- Pilbara WA
- The West Coast of TAS
Some specific mining towns we receive applications to finance are:
- Singleton NSW (Coal)
- Muswellbrook NSW (Coal)
- Hay Point QLD (Coal)
- Gladstone QLD (Coal, Alumina, Aluminium, Cement products & Liquid ammonia)
- Mount Isa QLD (Copper, Silver, Lead & Zinc)
- Moranbah QLD (Coal)
- Dysart QLD (Coal)
- Middlemount QLD (Coal)
- Blackwater QLD (Coal)
- Emerald QLD (Coal)
- Capella QLD (Coal)
- Clermont QLD (Coal)
- Biloela QLD (Coal)
- Moura QLD (Coal)
- Baralaba QLD (Coal)
- Karratha WA (Iron ore, Sea salt mining, Ammonia exports, Petroleum & Natural Gas)
- Geraldton WA (Iron ore, Nickel, Gold, Oil, Gas, Mineral sands, Copper, Zinc, Lead concentrate, Talc & Garnet)
- Port Hedland WA (Iron ore, Offshore natural gas & Manganese)
- Dundas TAS (Silver, Lead & Minerals)
- Zeehan TAS (Silver, Lead & Minerals)
Please remember that we can finance almost all areas in Australia. Please contact us if you are not sure about your location.
Applying for a mining town mortgage
Some banks will have restrictions depending on the location of the property your wish to purchase. Many of our lenders have no location restrictions, and an open minded view of investment loans used to buy in a mining town.
If you are interested in investing in a property in a mining town then call us on 1300 889 743 or enquire online and our mortgage brokers will find the best home loan for you.