Like so many people of our generation, Kyle and I have realised that the traditional path to home ownership is far enough towards the higher end of what we can reach financially that we have no interest in pursuing it (who wants to commit themselves to a lifetime of excessive debt when they're not even 30 yet? Well, clearly not us). However we aren't in a sufficiently blessed financial position to be able to purchase our patch of paradise outright. We have needed to talk to banks about loans.
Originally we spoke to our own bank, almost a year ago now, who were less than encouraging regarding their lending policy on vacant rural properties. We felt as though every person we talked to gave us different information about the maximum property size that they'd be willing to deal with. Sometimes it was 50 acres, sometimes 11, sometimes 100. It was all very confusing and seemed like an impenetrable beaurocratic mess. I found very little useful information online about this process, so this post is my way of remedying that to some extent.
Since our initial contact with the bank we've explore the mortgage broker possibilities and ended up back with the bank (CBA). We think a lot of our confusion about property sizes stemmed from some people talking in acres and others talking in hectares, and not all of them were clear about which unit of measure they were talking about.
The eventual conclusion was as follows:
Originally we spoke to our own bank, almost a year ago now, who were less than encouraging regarding their lending policy on vacant rural properties. We felt as though every person we talked to gave us different information about the maximum property size that they'd be willing to deal with. Sometimes it was 50 acres, sometimes 11, sometimes 100. It was all very confusing and seemed like an impenetrable beaurocratic mess. I found very little useful information online about this process, so this post is my way of remedying that to some extent.
Since our initial contact with the bank we've explore the mortgage broker possibilities and ended up back with the bank (CBA). We think a lot of our confusion about property sizes stemmed from some people talking in acres and others talking in hectares, and not all of them were clear about which unit of measure they were talking about.
The eventual conclusion was as follows:
- For vacant properties under 11 hectares they will consider loans even if you don't have a full 20% deposit (similar to city houses where you often only need 5%)
- For vacant properties over 11 hectares you must have at least a 20% deposit, thus sidestepping mortgage insurance
- For properties that have houses on them already the rules are completely different
- All of this comes down to the property valuation, which can be more variable for rural properties (dependent on things like sealed road access, whether there's mains power, that kind of thing)
- Regarding rural properties, not all banks are made equal - CBA has the best (most crazy-buyer-friendly) policies
At this stage we've found a block we like that's just under 11 hectares and applied for pre-approval. Originally we'd been looking anywhere up to around 45 hectares (100 acres) but when we found a nice block for 25 acres what was possible changed
We're getting very close to the step in this process that will trigger a mad scramble to actually get the thing built. Things are getting a bit scary-real, but we're still game.
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