Home loan postcode restrictions are essentially a way for lenders to manage risk. A lender will place a post code restriction on an area that has or is expected to sustain poor or negative property value growth. This restriction seeks to ensure that the value of the property securing the borrower’s loan is not eroded by falling market prices.
Within Australia these restrictions often apply to rural or remote locations like mining towns. These areas are often subject to small population and therefore small demand which can make the property more difficult to sell.
In some circumstances a post code restriction may be placed on properties within metro areas, particularly high density apartments with a small square metre area. Many banks will not provide loans on properties that are less than 50 square metres in total area. These properties considered high risk due to limited demand.
While these restrictions do not always mean that borrowing will be impossible, it is important to consult your broker when dealing with properties that are subject to post code restrictions.
The major issue that often impacts borrowers in restricted post code areas is that they are required to provide a greater deposit. In most circumstances, a lender will loan up to 95% of the value of a property. In post-code restricted areas, this is often reduced to 90% or less, meaning a much larger deposit is required. This can often be problematic for first time buyers or those looking to invest.
If you are struggling due to postcode restrictions or would like to know more about finance in high-risk areas, get in touch with us today. We are here to help you secure the most suitable loan for your property and with our extensive network of lenders we are ideally placed to find a lender to accommodate your circumstances.