What are the Different Property Types for Home Loans?

When you're buying a home in Croydon, the type of property you choose significantly impacts your Home Loan options and the terms lenders will offer. Understanding these differences can help you make informed decisions and potentially save thousands on your home loan interest rate.

Houses and Standard Dwellings

Traditional houses on their own land are typically the most straightforward when applying for a home loan. Most lenders view these properties favourably, which often translates to:

• Lower interest rates
• Higher loan amounts (often up to 95% loan to value ratio)
• Reduced lenders mortgage insurance (LMI) premiums
• Access to the full range of variable and fixed interest rate options

For Croydon residents, houses represent the majority of the property market, making them an attractive option for those looking to get pre-approved quickly.

Units and Apartments

Units and apartments can be excellent choices for first home buyers due to their typically lower purchase prices, which means reduced stamp duty obligations. However, lenders may apply different criteria:

• Some lenders cap the loan to value ratio (LVR) at 90% instead of 95%
• Strata fees and body corporate costs are factored into your borrowing capacity calculations
• Interest rate discounts may vary depending on the building's age and construction type

When calculating home loan repayments for units, remember to include ongoing strata fees in your budget alongside your mortgage payments.

Townhouses and Villas

These property types often sit between houses and units in terms of lending criteria. Most lenders treat them similarly to houses, especially when they come with their own land title. Your financial situation and the specific property details will influence the final loan terms.

Investment Properties

If you're considering purchasing an investment property, different rules apply regardless of the property type:

• Higher interest rates compared to owner-occupied loans
• Maximum LVR typically capped at 90%
• Stricter application process requirements
• Different tax implications that can affect your overall borrowing capacity

The rental income potential can help with your loan amount calculations, but lenders typically only count 75-80% of expected rental income.

Vacant Land and Construction

Purchasing land to build requires specialised construction loans with unique features:

• Funds are released in stages as construction progresses
• Higher deposit requirements (usually 20-30%)
• Variable interest rate during construction, with options to fix once complete
• Banks statements and detailed building contracts required during the application process

Rural and Semi-Rural Properties

Properties on larger blocks or in rural areas may face additional lending restrictions:

• Some lenders have minimum and maximum land size requirements
• Valuation processes can take longer
• Limited access to certain Home Loan Rates and products
• Potential requirements for larger deposits

How Property Type Affects Your Application

When you apply for a home loan, lenders assess risk based on property type alongside your financial situation. This affects:

1. Interest Rates: Standard properties typically qualify for the lowest variable home loan rates and fixed interest rate home loan options

2. Deposit Requirements: Some property types require larger deposits to avoid LMI or access competitive rates

3. Loan Features: Access to offset accounts and other features may vary

4. Approval Timeframes: Unusual property types may require additional assessment time

Working with Lenders Across Australia

As a mortgage broker in Croydon, Craft Financial can access Home Loan options from banks and lenders across Australia. This means we can find lenders who specialise in your specific property type, potentially securing:

• More favourable interest rate terms
• Higher loan amounts for your circumstances
• A more streamlined application process
• Home Loan pre-approval tailored to your chosen property type

Different lenders have varying appetites for different property types. While one bank might offer excellent rates for apartments, another might specialise in rural properties or construction loans.

Making Your Decision

Your choice of property type should align with your lifestyle needs, budget, and long-term goals. Consider:

• Total cost of ownership including maintenance and fees
• Potential for capital growth in your chosen area
• How the property fits your current borrowing capacity
• Future plans and whether you might need to leverage home equity

Understanding how property types affect your mortgage options helps you make informed decisions throughout your property purchase journey. Whether you're looking at a family home in Croydon or considering an investment property, the right loan structure can make a significant difference to your financial outcomes.

Call one of our team or book an appointment at a time that works for you to discuss how different property types might affect your specific Home Loan application and find the most suitable options for your circumstances.