Is Your Property Choice Stopping You from Getting a Home Loan?

Most homebuyers know what they look for in a property, but few consider what a lender might like. To avoid disappointment when applying for a home loan, discover the property features lenders prefer.

Picking your next home or investment property is the most fun part of the homebuying journey, but no matter your intention for the new property, there’s lots to consider before making the choice.

Most buyers will have a good idea of what they want and need before they start looking - things like location, distance from schools, transport and shopping hubs, and essential property features like off-street parking or a yard for the family pet are usually top of mind.

But fewer people, especially first-time buyers, will stop to consider what their mortgage lender may look for in a property. That can lead to a rude awakening when their loan application gets declined due to their choice of property. Find out below how to pick a property that won’t slow you down when applying for finance.

What to avoid

Because your property acts as a security for your loan - meaning that if you don’t meet your repayments, the property could be sold to cover any losses for the bank - your lender will want to be reasonably sure that its value will continue to be higher than the value of your loan.

Features that mean your property could devalue before the end of your loan term include:

- Locations that are tipped to see an oversupply in new properties in the coming years
- Locations that are heavily tied to a particular industry, like mining towns
- Areas prone to natural disasters like flooding or bush fires
- Units in high-density complexes or buildings over 10 storeys
- Properties with serious structural issues
- Properties close to highways or railway lines
- Properties on reclaimed land
- “Off the plan” properties and those still under construction

Another factor lenders will consider is how difficult it would be to resell a property down the line, so unusual properties that might stay on the market for a while before finding the right buyer may also be more difficult to obtain finance for. These types of properties include:

- Studios and very small apartments
- Serviced apartments and student accommodation
- Rural properties with large acreage
- Properties with a dual commercial/residential title
- Exotic, purpose-built properties with likely lack of mass appeal
- Mobile Homes

Of course, depending on your needs it’s not always possible to avoid all of these factors. But by keeping in mind how lenders will assess your property choice, you might be able to offset less desirable features with particular benefits that put lenders at ease.

What to look for

In general, lenders like properties that are likely to grow in value and that appeal to a broad market. Thankfully that means chances are pretty good you’ll be on the lookout for some of the same features, so it shouldn’t be too hard finding something both you and the banks will love.

Features of stable properties more likely set for growth and mass appeal include:

- Unit sizes of at least 50 sqm, with at least 1 bedroom
- Locations close to sought-after locations like schools, parks, public transport, city centres and shops
- Structurally sound and in fair or better condition
- Units in smaller tower blocks and apartment complexes (less than 10 storeys)

By making sure your choice of property ticks most of these boxes, you should have an easier time finding a lender willing to help make it yours.

Find out about your loan options

Even if a desired property fits the bill with lenders, it can still be tricky to get a home loan for many borrowers. This is especially true if you’re self-employed with alternative income documentation, or if you’ve had a few credit hiccups in your past.

If you would like to learn more about obtaining a home loan with Bluestone, one of our specialists would be glad to help. You can reach out by calling 1300 608 658 or by requesting a quote here.


The information provided in this article is general in nature and should not be taken as constituting professional advice.  Because we do not know your individual financial circumstances it’s a good idea to talk to an accountant or financial adviser before taking out a loan.