When you apply for a home loan, the lender is assessing more than your income, expenses and deposit. The property you want to buy also forms part of the lending decision.
Some properties are more straightforward for lenders to accept as security than others. Apartments, leasehold properties, lifestyle blocks, mixed-use properties and homes with unusual features can all raise different considerations. That does not necessarily mean finance is unavailable, but it can affect the options, deposit or information a lender may require.
Why does the property matter to the lender?
A home loan is usually secured against the property being purchased. Because of that, a lender will consider the property itself as well as your ability to repay the loan.
One consideration is how readily the property could be valued and sold if that ever became necessary. A standard residential home in an established area may be relatively straightforward to assess. A property with unusual ownership arrangements, limited market demand or features that make it harder to compare with other sales may need closer consideration.
Different property types can come with different requirements
Lending criteria vary between lenders and can also change over time. For example, BNZ notes that lending is available on property types including apartments, properties under construction, leasehold and lifestyle properties, with conditions applying.
An apartment purchase may involve looking at matters such as the unit title, body corporate information, size and characteristics of the building and the apartment itself. A leasehold property has a different ownership structure from freehold land. Lifestyle or rural properties may also be assessed differently from a standard suburban home.
The important point is that two properties with the same purchase price do not necessarily present the same lending scenario.
Your deposit may not work the same way for every property
The amount a lender is prepared to lend against a property can vary depending on the property and the application. This means having a deposit that appears sufficient for one type of home does not automatically mean the same lending position will apply to another.
A lender may also ask for additional information, such as a registered valuation, body corporate documents or other property-specific details before confirming finance.
Check the property before you commit
If you are considering a property that is different from a typical residential home, it can be useful to discuss it with your mortgage adviser before making an unconditional commitment.
A mortgage adviser can help you understand how different lenders may view the property, what information may be required and how the property choice could affect your home loan options. Your lawyer or conveyancer can provide advice on the legal aspects of the property and ownership structure.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.