Home Loan Experts:
My wife and I want to invest in some property since we already own a house and both of our kids are living independently. Both of us also earn more than $200,000 together so we have more than enough to make the monthly payments comfortably.
Anyway we were just wondering if the location of the property will make a difference when applying for a home loan. This is because my wife wants to buy a house far away from the city since our current house is in a crowded area while I’m thinking that we should get a place nearby which would be easier to maintain.
Thanks in advance!
Does the location of the property matter?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Does the location of the property matter?
Hi airgear,
Yes, lenders will definitely take the location of your property into consideration while assessing your home loan. In fact, most of them maintain a location guide or list of postcodes which are assigned specific maximum loan amounts and lending policies.
Typically there are five categories:
The reasoning behind this is that remote areas or smaller locations have a smaller real estate market and it will be harder to sell the property. In some cases they may even decline a property due to the lack of comparable sales (usually the lenders’ valuer will have to provide three comparable sales data as proof of your property’s valuation). Now if no other similar property has been sold within the last six months or if their sale price was not within 10% of your price then you could be in trouble.
Fortunately some lenders do accept properties with fewer comparable sales and one of our lenders will even accept any property under 50 hectares regardless of the town, suburb, location or postcode.
If you can mention the postcode of the property you want to buy, then we can help figure which category it falls under. Alternately you could try our Postcode Location Guide and get the results yourself.
Cheers,
Otto
Yes, lenders will definitely take the location of your property into consideration while assessing your home loan. In fact, most of them maintain a location guide or list of postcodes which are assigned specific maximum loan amounts and lending policies.
Typically there are five categories:
- Category 1 – Low risk
Metro areas, capital cities in each state or major regional centre with a large population. - Category 2 – Low to medium risk
Medium sized regional centre - Category 3 – Medium to high risk
Smaller towns with unstable property markets - No category / National locations – Very high risk
All post codes that do not fall in the above - High density – Very high risk
Inner city suburbs or areas with high rise residential buildings
The reasoning behind this is that remote areas or smaller locations have a smaller real estate market and it will be harder to sell the property. In some cases they may even decline a property due to the lack of comparable sales (usually the lenders’ valuer will have to provide three comparable sales data as proof of your property’s valuation). Now if no other similar property has been sold within the last six months or if their sale price was not within 10% of your price then you could be in trouble.
Fortunately some lenders do accept properties with fewer comparable sales and one of our lenders will even accept any property under 50 hectares regardless of the town, suburb, location or postcode.
If you can mention the postcode of the property you want to buy, then we can help figure which category it falls under. Alternately you could try our Postcode Location Guide and get the results yourself.
Cheers,
Otto
Re: Does the location of the property matter?
I tried it out with the postcode that I got from the website and it says that it is a Cat 3 with some figures listed at 80%, 90% and 95% LVR (I’m assuming that these are the capped amounts).
The tips also mention that I will have to pay an LMI premium if we are borrowing over 80% LVR - I think we will most likely be borrowing more than that. Do you have any ideas on how much LMI we would have to pay?
The tips also mention that I will have to pay an LMI premium if we are borrowing over 80% LVR - I think we will most likely be borrowing more than that. Do you have any ideas on how much LMI we would have to pay?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Does the location of the property matter?
Hi airgear,
Since you are buying in a category 3 location, some lenders may even ask you to reduce your loan to 90% or 80% to minimise their own risk. In any case we can only be certain of this if we know exactly which lender you want to with.
The same goes for your LMI fee – all the mortgage insurers have their own rates for calculating the amount. However even in this case you can try out our calculator to find the cheapest LMI available to you from our lenders.
Our calculator is superior to the others you may find on the Internet since it takes into account your specific requirements and provide you with a clear comparison of the different interest rates, fees and LMI premium all at once. It will also inform you if you are eligible for any discounts or can get the fee waived.
Cheers,
Otto
Since you are buying in a category 3 location, some lenders may even ask you to reduce your loan to 90% or 80% to minimise their own risk. In any case we can only be certain of this if we know exactly which lender you want to with.
The same goes for your LMI fee – all the mortgage insurers have their own rates for calculating the amount. However even in this case you can try out our calculator to find the cheapest LMI available to you from our lenders.
Our calculator is superior to the others you may find on the Internet since it takes into account your specific requirements and provide you with a clear comparison of the different interest rates, fees and LMI premium all at once. It will also inform you if you are eligible for any discounts or can get the fee waived.
Cheers,
Otto
Re: Does the location of the property matter?
Otto, I will try it out and post again if I have more questions.
Re: Does the location of the property matter?
Hey I was also wondering about the same thing as OP. But can you explain more about the LMI discounts / waivers? I have not come across any info regarding this before.
Just to let you know, I am a assistant manager at an electronics store and looking to buy my first home with my marketing executive wife.
Just to let you know, I am a assistant manager at an electronics store and looking to buy my first home with my marketing executive wife.
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Does the location of the property matter?
Hi and welcome to the discussion shazam666,
As you may already know, you will be required to pay an LMI fee if your loan is over 80% LVR. However LMI discounts and waivers are usually available for doctors and engineers borrowing up to 90% LVR. Having said that, we have a special agreement with one of our lenders who will waive the fee for loans up to 85% LVR for borrowers with a perfect credit history.
If you need to borrow, you may still be able to get a discounted LMI if:
Cheers,
Otto
As you may already know, you will be required to pay an LMI fee if your loan is over 80% LVR. However LMI discounts and waivers are usually available for doctors and engineers borrowing up to 90% LVR. Having said that, we have a special agreement with one of our lenders who will waive the fee for loans up to 85% LVR for borrowers with a perfect credit history.
If you need to borrow, you may still be able to get a discounted LMI if:
- You are buying a property
- You have 5% in genuine savings
- You are borrowing less than 95% LVR and / or less than $800,000
- One of you has been working in the same job for at least two years and the other for six months
- You have a perfect credit history
- You are buying a property located in a capital city or major regional centre
Cheers,
Otto
Re: Does the location of the property matter?
Oh yeah, I think we can make it. Will give you a call when we are free. Thanks!
BTW are there any discounts for first home buyers?
BTW are there any discounts for first home buyers?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Does the location of the property matter?
shazam666, yes you can get First Home Buyer discounts. Some mortgage insurers will allow you a 15% discount however your loan amount will usually have to be less than $600,000 and you need to have genuine savings.
Cheers,
Otto
Cheers,
Otto