Home Loans for a Duplex

2011 September 20
by admin

Dual-occupancy dwellings such as duplexes and granny flats are common with smaller families, couples and those with extended relatives. Although they are houses just like single dwellings, the lending policy for this property type differs from bank to bank. Read on to find out some important information before applying for a loan to purchase a duplex.

What is a duplex?

Just like other forms of dual-occupancy dwellings, a duplex is two properties on one block of land. Commonly, the properties are separate by a common wall and sometimes they can be two distinct dwellings.

These are to be distinguished from granny flats which are simply a smaller self-contained unit annexed to the back of a dwelling or detached.

Granny flats are more commonly used when large families have teenagers that need a private living space, older parents who need looking after or as a guest house for visitors.

However, duplexes are usually purchased by small families, couples, or singles that don’t need much living space, as duplexes by their very nature are smaller.

How do lenders view dual-occupancy dwellings?

Banks take a very traditional and strict approach to lending for those wishing to buy a duplex. Most lenders form the view that duplexes are not in high demand and that the more popular property type are single dwellings. Accordingly, in the event that they had to sell your property it would make it difficult to recoup their funds.

Because of this, in order to get approval for a loan it is essential that you have employment stability, good savings and a clear credit history.

Why do lenders take this view?

Generally any lending policy is based on experience. It could be that the banks have experienced difficulty in the past with those buying a duplex and borrowing funds. As such, they profile you and your application into a category of risk.

The fact that you are buying a dual-occupancy dwelling and not a more common single dwelling means that the banks automatically believe that there is a high risk in lending to you because of your property type.
However, there are some banks that will lend and still offer a great loan package.

How much can I borrow?

If you were to approach the major banks, you may only be entitled to borrow 80% LVR or 60% LVR if you are applying for a low doc loan. However, there are some lenders who will allow you to borrow more.

All lenders require a minimum 5% deposit when applying for a loan. If your parents are willing to become guarantee the loan using their property as security you may be able to borrow 100% of the purchase price.

  • If you are a first home buyer or investor, you can borrow up to 95% LVR.
  • If you are applying for a low doc loan you may be able to borrow up to 80% LVR.
  • Where you are undertaking a construction project it may be possible to borrow 95% of the total land and contract price.

Why buy a duplex?

If you don’t need a large living space a duplex is ideal. In many inner city and suburban areas duplexes are becoming quite common.

This is primarily due to an increased demand in housing across Australia. Accordingly, although the banks may view duplexes as an unpopular property type, there are still many people who are interested in buying a duplex.

What you need to know

It is important to approach the right lender when applying for a loan that will be used to purchase a duplex. This is because most lenders have strict policy and only a select few are lenient.

Where you have genuine savings and a good credit history, getting approval should be a breeze. If you think you meet this criteria then it may be time to start shopping around for that duplex!

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