Is your property "too hot" for the banks?
With climate change affecting weather patterns and new developments steamrolling ahead into former rural areas across the country, coming across a bushfire prone property is becoming more of a reality.
The problem is that lending policy with most banks has failed to keep base so your borrowing power can vary significantly depending on how they assess the risk of your property.
How much can I borrow?
Depending on the lender and the nature of the property, bushfire prone properties are generally assessed in the following ways:
- Low risk properties: You may be able to borrow up to 95% of the value of a property up to BAL-29.
- Medium risk properties: You may be able to borrow up to 90% of the value of a BAL-40 zoned property.
- High risk properties: You may be able to borrow up to 80% of the value of a flame zone property.
- Construction loans: You can borrow based on the the cost of the land and the building or the on completion valuation, whichever is less.
- Guarantor loans: Borrow up to 100% with select lenders only.
Other than going down the guarantor route, we may be able to order multiple valuations with different lenders and then proceed with a lender that won’t give the property a high risk rating.
Call 1300 889 743 or complete our free assessment form to find out if you qualify for a bushfire prone property loan.
Can I get approved?
Getting approved for a mortgage really depends on the zoning of the property.
The potential for attack is broken up into six Bushfire Attack Levels (BAL), each explaining the threat and the appropriate prevention measures to implement for property protection.
If your property is in the Flame Zone then you’re unlikely to be able to obtain finance.
We know how the banks will assess your property so please call us on 1300 889 743 or fill in our free assessment form to discuss your situation with one of our mortgage brokers.
What is a bushfire affected property?
A bushfire prone area is an area of land that can support a bushfire or is likely to be subject to bush fire attack.
So this includes properties surrounded by bushland or located within dense hinterland.
Your property doesn’t necessarily need to be located in a rural location either.
Some coastal towns are surrounded by dense shrubland so this makes them a high-risk as well.
Bushfire prone land maps, which can be found at your state’s equivalent planning portal, identify hazard zones and associated buffer zones.
It’s actually a really easy way to find out the potential risks of buying the property.
That’s not only in relation to bushfires, but flood risks, future development plans and zoning changes.
Each state has its own criteria for mapping bushfire prone areas, which have been developed and are regularly reviewed in conjunction with the relevant states’ rural fire service authority:
- ACT Rural Fire Service
- Country Fire Authority Victoria
- Fire and Emergency Service Authority WA
- NSW Rural Fire Service
- NT Fire & Rescue Service
- QLD Fire & Rescue Service (Rural Fires)
- SA Country Fire Service
- Tasmania Fire Service
New development on areas identified as bushfire risk are subject to the development and planning controls of Planning for Bush Fire Protection 2006.
What are BAL levels?
There are six BAL levels recognised Australia-wide.
These levels are based on the region where you live, the vegetation type around your property, the distance from your home to buffer zones, and the slope of the property:
Minimal attack from radiant heat and flame due to the distance of the site from the vegetation as well as from burning debris.
There is insufficient threat to warrant specific construction requirements but residents should still do basic property preparation.
Attack by burning debris is significant with low levels of radiant heat.
Radiant heat is unlikely to threaten building elements. Specific construction requirements for ember protection and accumulation of debris are required.
Attack by burning debris is significant with an increased radiant heat levels threatening some building elements.
Specific construction requirements for protection against embers and radiant heat are required.
Attack by burning debris is significant and radiant heat levels can threaten building integrity.
Specific construction requirements for protection against embers and higher radiant heat are required because some flame contact is possible.
Increased attack from burning debris with significant radiant heat and the potential for flame contact.
The extreme radiant heat and potential flame contact could threaten building integrity.
Buildings must be designed and constructed in a manner that can withstand the extreme heat and potential flame contact.
Radiant heat levels (exceeding 40kW/m²) and flame contact are likely to significantly threaten building integrity and result in significant risk to residents who are not adequately protected.
The Flame Zone is outside the scope of the Building Code of Australia.
As a result, the NSW Rural Fire Service may recommend protection measures where the applicant does not provide an adequate performance solution, such as drenching systems and radiant heat shields.
To meet the complying development criteria under State Environmental Planning Policy (Exempt and Complying Development Codes) 2008, the property must be assessed as below BAL-40.
Why are the banks so conservative?
Apart from injury and the tragic loss of life, the economic costs of bushfires are significant.
In fact, according to estimates from the Australian Institute of Criminology, an average year will see insurable losses of $80-$100 million.
Despite these sobering statistics, the likelihood of your home loan application getting approved comes down to the bank’s valuation.
Valuers themselves may take into account the BAL level of the property when they assess it but what they actually return to the bank in their report is a risk rating on a sliding scale from 1 to 5.
Some of the factors they consider are location, land and environmental issues.
If the property rates either 4 or 5 on this scale, the valuer will provide specific comments in their report that the property falls within a high risk bushfire zone.
Lenders themselves don’t have location restrictions for bushfire prone property.
That said, most lenders do apply postcode restrictions that relate to the property’s proximity for metro and major regional centres.
As with any security being assessed, the bank’s risk team will carefully consider their existing exposure to a particular area.
For example, if they’ve financed 17 bushfire prone properties in a particular location, they’ll be very conservative in their assessment of future home loan applications for that location.
If there isn’t much existing exposure, the lender may be more flexible in accepting the property.
Do I need bushfire insurance?
You’ll be required to take out building insurance no matter what type of property you purchase (other than strata property) but the coverage required will need to be specific to bushfires.
The property will need to meet all relevant safety and preventative requirements in order to get sufficient cover.
If it’s an existing property within a known bushfire affected area, it is likely that it has had at least some kind of damage to it in the past which means it’ll likely have the required preventative features to be covered for insurance.
- An adequate asset protection zone
- Specialial building set backs
- Overall landscaping and construction requirements include the use of flame-resistant building material
If it’s missing basic measures, such as roof sprinklers or a water tank, we may still be able to get you approved as long as you can provide an assurance that you’ll be making the required changes within a 3-month period.
Please call us on 1300 889 743 or fill in our free assessment form to find out if we can get you approved for a home loan.
Can I construct in a bushfire affected zone?
The Environmental Planning and Assessment Act 1979 establishes a system for requiring bushfire protection measures on bushfire prone land at development application (DA) stage.
In order to meet the requirements of Planning for Bush Fire Protection 2006, applications must consider the following six bushfire protection measures:
- Asset Protection Zones (fuel reduced areas)
- Access arrangements
- Building construction and design
- Water supply and utilities
- Emergency Management Arrangements
Is it expensive to build in a bushfire zone?
The additional cost for building in a bushfire prone area depends on the zone and the measures that need to be implemented.
Flame Zone properties, for instance, are quite expensive to build and most lenders won’t accept these properties.
Windows may need to be fitted with bushfire shutters or metal frames but timber and door frames may still be permitted as long as they have been bushfire tested.
Water tanks, sprinkler systems, metal fly-screens, rooves and fascias are also mainstays on new homes in high risk bushfire prone properties.
Buying a house in a bushfire prone area
There is always a level of risk when investing in property no matter where you buy.
WBP Property Group has found that properties subject to bushfires, flooding and other natural disasters often experience a decline in value immediately following the event.
However, values typically bounce back within six months, notwithstanding the impact of damage to the property.
In saying that, there can be notable upfront costs to ensure that the building is up to standard, including speaking with consultants and builders.
When looking for an investment property, do a quick search on your state’s planning portal to get an idea of what you may be in store for.
Some properties are local at the very bottom of vegetation buffer requirements.
Best of all, the portal is free to use!
Ordering a 149 certificate from your local council can cost around $50 and it tells you the same thing.
Apply for a bushfire prone property loan
Unlike other mortgage brokers, we understand what the bank’s credit policy guidelines are and we are able to mitigate the risk of the bushfire prone property based on what the credit assessors are looking for.
Want to buy a property that happens to be in a bushfire affected area?
We can present a strong case and find a lender that has a flexible lending policy in relation to bushfire prone properties.
Call us today on 1300 889 743 or fill in our free assessment form and discover why we’re the experts in getting finance for bushfire affected properties.