Dual-occupancy homes are fast becoming a popular alternative to single dwellings in areas where land is in short supply.
Many people are approaching the major banks to seek finance only to find that the lending criteria is different when compared to single dwellings.
How much can you borrow?
- First home buyer: 95% of the property value.
- Investor: 95% of the property value.
- Low doc: 80% of the property value.
- Construction: 95% of the total cost of the land and contract price to build the duplex.
- Guarantor loans: Borrow up to 100% with select lenders only.
- Discounts: Competitive professional package and basic loan discounts are available.
The majority of lenders restrict the loan amount for duplexes to below 80% of the property value, or 60% for low doc loans. We deal with banks that are willing to consider lending more, depending on the location and value of the duplex.
No matter the LVR restrictions, you may be able to borrow the full costs of the purchase by using a guarantor.
Please call us on 1300 889 743 or complete our free assessment form and one of our mortgage brokers can help you to get approved.
Why are the banks so conservative?
Duplexes and dual occupancy loans are considered to be a higher risk by most lenders because fewer people want to buy two houses on a single block of land.
This means that if you can’t repay your loan the bank will take longer to sell the property or may end up selling for a lower price.
Because of this, they tend to limit the percentage of the value of the property that you can borrow (known as the LVR) to protect themselves.
How do lenders view dual-occupancy properties?
Many lenders are very risk averse when it comes to the types of properties that they accept as security.
They may take a strict approach to dual occupancy homes and may prefer to decline good loans rather than take the chance that they may lose money on some of their mortgages.
These types of lenders are highly unlikely to allow you to borrow more than 80% of the property value.
Each lender has their own opinion about the risks associated with a duplex or dual occupancy. Generally, their policies are created using data from their previous loans.
If one lender has had trouble selling several duplex properties or has had a significant loss on several mortgages, then they may adjust their maximum LVR for all properties with more than one dwelling on a single title.
Are duplexes harder to value?
Yes. Bank valuers use comparable sales in the local area to determine the value of your property. If you’re buying the property then they will usually value the property at the contract price.
If you already own the property then they may be a little conservative because they will have trouble finding other dual occupancy properties that have sold in the area and do not have the contract of sale as additional evidence to support their valuation.
In capital cities, they may use a wider search area to compensate and, as a result, the valuer can normally find enough comparable sales of duplexes, dual occupancies, properties with granny flats and houses converted into two units.
In smaller towns, this can be difficult because there is almost certainly going to be a lack of comparable sales. As a result, the bank valuer may be more conservative.
If you’re looking to purchase a dual-occupancy dwelling and wish to apply for finance, please call us on 1300 889 743 or fill in our free assessment form today.
Duplex construction loans
If you own a large block of land with a wide frontage then you may be allowed to build a duplex and then subdivide into two torrens or strata titles.
However, there are a few common problems faced by investors who decide to build a duplex, these are:
- Banks typically value the property as one block not two even though your subdivision is approved.
- Many lenders would consider this to be a development loan and would therefore charge a higher interest rate.
- You can’t usually borrow based on the ‘on completion value’.
- Most lenders won’t lend you the funds to pay for the additional costs such as council approval and subdivision expenses.
The solution is to apply with a lender that can lend on the ‘on completion value’ of two separate titles as opposed to a valuation ‘in one line’, which is significantly lower.
If you need help to finance the construction of a duplex then please call us on 1300 889 743 or fill in our free assessment form today.
What are dual occupancy homes?
A dual occupancy is where there are two houses or dwellings on a single block of land.
Common examples of dual occupancies include granny flats, small dual townhouse developments or rural blocks with two separate houses on them.
What are duplexes?
Duplexes are a type of dual occupancy, often with two houses that share a common wall.
Duplexes can also be houses that have had extra walls and entrances installed in order to convert them into two separate units.
There can also be three or four units on a lot, known as a triplex and fourplex (or quadruplex), respectively.
The key difference between a duplex and a townhouse is that duplexes are separate units on one title while townhouses are separate dwellings on separate plots of land.
There are more slight differences between the two property types so check out the townhouse loan page for more information.
What are granny flats?
A granny flat, sometimes known as ‘secondary suites’ or ‘accessory apartments’, are a separate smaller dwelling, sitting on the same block as the larger primary property.
Some granny flats are just separate living spaces, either upstairs or downstairs from the main living quarters.
They are usually designed to house older relatives, provide separate guest accommodation, offer more privacy to a family or can be used as an additional general room for hobbies or work.
Apply for a mortgage
Our mortgage brokers specialise in helping people to finance properties that many lenders don’t accept. We can help you to find a lender that will accept your property as security and get you approved for the loan amount that you require.
Please call us on 1300 889 743 or fill in our free assessment form and one of our mortgage brokers will let you know your finance options.