Last Updated: 30th September, 2022

Not all Australian properties have access to town water or tank water, particularly those located in rural areas with heavy water restrictions.

Some homes only have access to bore water or groundwater which is not appealing to all buyers.

This can restrict your Loan to Value Ratio (LVR) or your ability to get home loan at all with most lenders.

How much can I borrow?

If you have a property that uses bore water, some lenders allow you to borrow up to:

  • 80% of the property value if the property only has access to bore water or groundwater.
  • 95% of the property value if the property also has access to tank water or town water.
  • 100% of the property value including the purchase costs if you can use a guarantor.

Please call us on 1300 889 743 or complete our free assessment form and one of our mortgage brokers will find the right lender and loan product for your situation.

Why are banks so conservative?

When it comes to accepting a property as security for a mortgage, banks are mainly concerned with how easily they could sell the property if you default.

Bore water properties tend to be located in rural locations like country Queensland, Victoria and, in particular, Perth, where bores or wells are a common source of water for 22% of households (Environmental Issues: Water use and Conservation Mar 2013, Australian Bureau of Statistics).

On its own, rural properties don’t appeal to a large market segment.

When you add to that the ongoing maintenance of the bore and the potential need to filter the water, these types of properties aren’t hot in the real estate market.

Banks are particularly concerned about groundwater contamination and will be relying heavily on the valuer’s report.

In some cases, such as properties located on or near industrial land, soil and water testing will be undertaken which can see costs quickly blow out.

In short, banks like to reduce their risk or exposure by restricting your LVR.

Common bore water properties

Vacant land

It’s common for vacant land to access bore water.

In order to qualify for a home lona, it’s a general requirement that the land be connected to the electricity grid or at least within range to be connected without excessive costs.

The property can either be zoned residential, rural residential or rural but there needs to be access via an all weather road.

If you’re in strong financial position, you may be able to borrow more than 80% Loan to Value Ratio (LVR) on a bore water property home loan!

Rural areas

A lot of rural areas tend to use bore water or tank water over town water.

If you want to borrow more than 80% on a rural property that uses bore water, you’ll need to meet strict lending criteria:

  • Land size: Must not exceed 50 hectares, although larger land sizes are acceptable if you can come up with a larger deposit.
  • Location: If your property is in a high risk location, you won’t be able to borrow more.
  • Access: The property will need to have easy access via an all weather road or a well-maintained dirt road.
  • Services: The property must be connected to the electricity grid or within close distance.
  • Zoning: Land that is zoned industrial, commercial or for agricultural use may mean the lender will only consider under a much more expensive commercial loan.
  • Land use: The land cannot be used for major commercial or agricultural purposes with the purpose of producing an income.

Eco-friendly property

Eco-friendly properties such as those with solar panels also primarily use bore water or tank water.

Lenders want “off the grid” properties like these to be close enough to main towns or regional centres so as to avoid excessive work and costs to get them connected.

This is a simple consideration to help make the property more saleable.

Even if you have access to town water and sewerage services, most lenders will restrict your borrowing to 80% of the property value.

How can I increase my borrowing power?

Your borrowing power depends on your income, employment status and current debts.

However, there can be massive differences between lenders in how they assess your character as a borrower.

You may be able to improve your borrowing power with some lenders through the following methods:

  • Cancel your credit cards: Banks assess your debts based on your credit card limit, not your balance so either cancel your card or reduce your limit.
  • Consider a fixed interest rate: If you choose a fixed rate, banks will use a much smaller serviceability buffer (applies with some lenders only).
  • Consolidate your debts: If you’re refinancing your bore water property home loan, you should consider consolidating your unsecured debts into your mortgage so you can repay your debts at a cheaper rate.
  • Choose the right lender: Each lender assesses your borrowing capacity differently so choose a lender that can accept 100% of your income such as overtime or bonus pay.
  • Save a deposit: If you have a 20% deposit, you can avoid paying Lenders Mortgage Insurance (LMI), which can amount to several thousands of dollars.

Our mortgage brokers have extensive knowledge of prime lenders as well as non-bank lenders.

Complete our free online assessment form and we’ll help you apply with the right lender.

How can bore water become contaminated?

Groundwater contamination exists in many places across Australia, especially in suburbs on or near former industrial land.

Recently, Australia’s Department of Defence identified 18 locations which may have been contimated by firefighting foams used on army and aviation bases.

It’s believed that this has been happening for the past 50 years, affecting the soil and leaking into bore water channels.

More generally though, the Environment Protection Agency (EPA) finds that common bore water contimants include:

  • Heavy metals
  • Volatile organic compounds (petroleum hydrocarbons, chlorinated hydrocarbons and other organic compounds)
  • Pesticides
  • Polycyclic aromatic hydrocarbons
  • Nitrates

Although it isn’t a legal requirement for residents to do so, groundwater should be tested to ensure its safe for irrigation as well as for drinking.

The Australian Water Quality Centre can test for the above chemicals for a fee.

What if contamination is found?

If contamination is discovered, you’re legally required to notify the EPA under the Environment Protection Act 1993.

The EPA will place your notification on its public register.

The local community may also be notified if a risk to public health is confirmed.

Tips for buying a property with bore water

Apart from your standard property inspection checks, you should undertake some due diligence when taking over an existing bore.

Speak to the previous owners, neighbours and local bore drillers.

In particular, you should ask for certifications of the construction by checking with the local Rural Water Corporation.

Next, get your hands dirty and measure the inside and outside diameter of the casing and take note of what the material used for the casing.

Finally, measure the depth of the bore by using a tape measure with a weight attached.

Be careful not to drop anything down the bore because a drilling contractor will be needed to clean out it out before it can be used again.

Generally speaking, shallow aquifers (10 metres or less) tend to have a higher chance of contimanation while water from deep aquifers (50 metres or more) is of higher quality.

You should factor this into your buying decision.

Bore water maintenance

Unlike accessing town water or rain water, bores take significant upfront investment and require ongoing maintenance.

The installation of associated equipment can range from anywhere between $5,000 and $50,000 depending on location and whether the water requires any further treatment before it can be used.

Going forward, the depth of the water level should be checked several times a year.

It’s recommended that you check the level before you start pumping (known as the start-up level) and immediately before your shut down (known as as the shut-off level).

Next, take a water sample once a year and measure its salinity.

Finally, keep a detailed record of your bore performance.

Do I qualify for a bore water property home loan?

Does your property access bore water? Your bank not willing to lend you the amount you need?

Our mortgage brokers specialise in specialised and unusual property types and know which lenders have more lenient lending requirements.

You can discuss your personal situation and what features you want on your bore water property home loan with one of our credit specialists by calling us on 1300 889 743 or by enquiring online.