Home Loan For Waterfront Properties
Awesome locations and a resort-like lifestyle make waterfront properties one of the best properties to buy in Australia.
You can’t normally buy a waterfront property as a freehold because they’re located on a body of water, not on land. This is why most waterfront units can only be bought as a leasehold.
These properties are often cheaper compared to similar freehold apartments, while some others can be worth millions of dollars.
What are waterfront properties?
Waterfront leasehold properties are land or dock areas located directly on a body of water such as a lake or ocean.
Buying a waterfront property isn’t the same as buying a property on land.
These types of properties are usually located on water because many of them are properties that have been renovated from old wharfs.
Why are these properties considered unique?
Most waterfront properties are old industrial wharfs that have been renovated and turned to residential units and offices. These properties often have marinas attached.
Waterfront properties are located on water, not on land. This is the reason why these properties are usually only available on leasehold.
Waterfront leasehold properties can be cheaper than a standard apartment on freehold, however, they can also be quite expensive depending on their location.
Keep in mind that the foreshore maritime structure, or marina, may not be included in the lease. Make sure that you check the existing leases or licences covering any maritime structures.
Consider seeking professional advice before you decide to buy waterfront properties.
Why should I buy a waterfront leasehold property?
Waterfront properties are some of the best properties in Australia!
You can usually find waterfront properties in awesome locations. These properties offer a great lifestyle for those looking lavish for a holiday-style lifestyle.
These properties are relatively cheaper to buy as a leasehold compared to buying a similar property that’s freehold. However, some properties can be very expensive and you’ll need to be in a significantly strong financial situation in order to apply.
How does the home loan process work?
Generally, buying a property as a leasehold is a cheaper option than buying a similar freehold property.
However, it’s important to understand that you don’t own the land. The land is owned by another person or company.
The homeowner signs a contract and pays regular rent to the landowner.
The amount you can borrow usually depends on the block you’re buying in and the area of the unit you’re looking to buy.
With the right lender, not only can you get a great home loan deal but you can also qualify for certain interest rate discounts.
How much can I borrow?
Generally, you can borrow up to 80% LVR (Loan to Value Ratio) for a minimum living area of 40m2. You’ll also require a full valuation of the property before you can get approval for a mortgage.
The amount you can borrow can vary depending on the block the property is located in.
Please contact the agent directly to get more information on the property before you decide to apply for a home loan.
Alternatively, our experienced mortgage brokers can take care of all the hassle for you.
It may actually be possible to borrow up to 100% of the property value with a guarantor loan.
Call us on 1300 889 743 or complete our free online assessment form to speak with one of them today.
What purpose can I use the property for?
Which properties can I buy?
Westpac has a list of acceptable properties, including waterfront properties on lease, that has likely been unchanged since 2013.
Some of the acceptable waterfront properties in the list include:
- King Street Wharf, Sydney: Department of Maritime Services. You can borrow a maximum of 80% LVR for units that are over 40m2 in size. Only residential apartments are available.
- Hickson Road or Pottinger St, Walsh Bay, Sydney: Waterways Authority. You can borrow up to 80% of the property value for units over 40m2. Only residential apartments are acceptable.
- Cowper Road, Woolloomooloo: Department of Maritime Services. You can borrow up to 90% for units that are less than 50m2. normal credit criteria apply.
Keep in mind that these properties can be bought as a leasehold and they require a full valuation as part of the application process.
What else do I need to consider?
ALthough buying a leasehold property is a much cheaper option, there are certain risks that you need to consider.
For example, rent can become rather expensive, almost without warning. If the rent is high then you’ll have a tougher time to sell the property.
Aside from the risks, you can qualify for interest rate discounts and more if you apply with the right lender. However, you’ll need to meet certain requirements.
Are there any rate discounts that I can qualify for?
You can qualify for certain interest rate discounts if you meet the required criteria set by lenders.
You can call us on 1300 889 743 or complete our free online assessment form to find out if you qualify for any discounts.
What are the risks involved?
Buying waterfront properties can be complicated. For example, there are cases when people overlook certain fees and end up paying more than what they had expected.
Other problems that you may face are:
- The lease may not be renewed.
- The value of the property may drop over time as the lease term approaches its end. However, if the lease term is extended, the value of the property will go up again.
- You can lose the property to the government if they decide to use the location to build something else. For example, if the government decides to build a casino on your property then you’ll probably lose out.
- You may make the mistake of overlooking certain fees and charges before you buy the property. This can make it difficult for you to afford the loan repayments and will affect your borrowing power.
Tips on buying waterfront properties
To get the best out of a mortgage for waterfront properties, you need to:
- Look out for strata fees: Waterfront properties are unique properties and are often redeveloped old wharfs. It’s also located in the ocean so maintenance can be very expensive.
- Discuss with existing owners: Speak with other owners in the block to find out if there are any ongoing problems in the block, or why it’s a great place to live.
- Check if there’s a lease for the foreshore maritime structures or moorings: Many blocks have certain foreshore structures, such as buoy moorings, which may or may not be included in the lease or may be a separate purchase. Some units even come with their own mooring. Check with the agent or do your own research before you decide to buy.
Waterfront properties FAQs
When does the loan term end?
As a general rule, the loan term must be five years less than the lease term. Leasehold properties are typically leased for 99 years.
Please check with a professional, such as a mortgage broker to get more information about how a home loan works for leasehold properties.
Do I need to pay Lenders Mortgage Insurance?
Lenders Mortgage Insurance (LMI) is a one-off fee that is charged to protect lenders from any unnecessary risk if the borrower isn’t able to repay the loan amount. It’s usually charged if you’re borrowing more than 80% of the purchase price.
LMI waivers aren’t available when you’re buying waterfront leasehold properties.
Can I get a guarantor to secure my loan?
Some lenders allow you to borrow 100% of the property price, plus other costs associated with the loan, with the help of a guarantor.
How does a guarantor home loan work?
A guarantor home loan is where the guarantor uses their property as security for a borrower’s loan. This allows the borrower to borrow up to 100% LVR, even up to 105% to cover additional costs such as stamp duty.
Some lenders even waive the requirement to pay LMI, if a guarantor guarantees your loan!
You can learn more about using a guarantor from our Guarantor Home Loans page.
Will I qualify for a loan even if I don't have sufficient documents?
Unfortunately, lenders don’t accept borrowers who can’t provide sufficient documents to prove their income. Normally, waterfront properties are rather expensive considering the high standard of living. These types of properties are usually compared to a domain for the rich.
You need to be in a strong financial position and should meet all requirements to be able to qualify for a mortgage.