Property Types and How They Affect Your Home Loan

Not all properties are treated the same way by lenders.

The type of property you're buying affects everything from your deposit requirements to whether certain lenders will even consider your application. A unit in a high-rise development carries different risk assessments than a freehold house on acreage, and those differences show up in loan terms, interest rates, and how much you can borrow.

How Lenders Assess Different Property Types

Lenders categorise properties based on perceived risk, and that risk profile changes your loan conditions. A standard residential house on its own title typically qualifies for the broadest range of home loan products with the most favourable terms. Units and apartments require lenders to assess not just the property itself but the entire strata scheme, including how many units are in the complex, whether any single entity owns more than a certain percentage, and the financial health of the owners corporation.

Consider a buyer looking at a two-bedroom apartment in one of the larger developments near Chatswood station. The building has 150 units, and the developer still owns 40 of them. Most lenders won't approve a loan when the developer concentration exceeds 20-30%, which means this buyer needs to either find a specialist lender or choose a different property. That's not about the apartment's quality or value, it's about how lenders structure their risk when one party controls too much of a building. The same buyer looking at a unit in a smaller block of eight would face no such restrictions.

Strata properties also require lenders to review strata reports, which reveal whether the owners corporation has adequate funds for repairs, any upcoming special levies, or structural issues. A property with a pending $50,000 special levy might still be viable, but you'll need to demonstrate you can service both your mortgage and your share of that levy, which directly affects your borrowing capacity.

Houses on Large Blocks and Rural Properties

A house on acreage or semi-rural land attracts different lending criteria than suburban properties. Lenders typically classify land over two hectares as rural, and that shifts you into a different lending category with tighter loan to value ratios and sometimes higher interest rates. A property in Dural sitting on five hectares might require a 20% deposit where a similar-value house in Castle Hill on a standard suburban block only needs 10% plus Lenders Mortgage Insurance.

Some lenders also restrict loans on properties they consider too remote or with limited resale markets. A home on a bushland block with limited road access or no reticulated water can be difficult to finance through mainstream lenders, even if the property value is well established. This doesn't mean you can't get finance, but it does mean your lender options narrow and you'll likely need to work with someone who understands which lenders accept these property types.

Townhouses and Dual Occupancy Properties

Townhouses sit somewhere between units and freehold houses in terms of how lenders view them. If the townhouse is on its own individual title (often called a torrens title townhouse), it's generally treated the same as a standard house. If it's part of a strata plan, the same strata-related criteria apply as with apartments, though typically with less scrutiny than high-density developments.

Dual occupancy properties, where two dwellings share one title, present a different issue. Many lenders won't lend against dual occupancy on a single title because if you default, they can't sell one dwelling separately to recover their loan. If you're looking at a dual occupancy property in suburbs like Baulkham Hills, where these configurations are increasingly common, you'll need to confirm the title structure before assuming standard home loan options apply. Properties that have been subdivided so each dwelling sits on its own title don't have this problem.

Units in Small Blocks and Company Title

Units in blocks of four to six are often more straightforward to finance than larger developments. Lenders view them as lower risk because there's less complexity in the strata scheme and fewer variables that could affect the building's management or financial health. However, older blocks sometimes come with outdated strata structures or minimal sinking funds, and lenders will want to see evidence that the building is properly maintained.

Company title properties, more common in older areas closer to the city but occasionally found in established pockets around the North Shore, operate under a completely different ownership model. You don't own the property itself, you own shares in a company that owns the building, and those shares entitle you to occupy a specific unit. Many mainstream lenders won't touch company title properties, and those that do often require larger deposits and charge higher rates. If you're considering a company title unit, expect to put down at least 20% and limit yourself to a handful of lenders.

Properties with Commercial or Mixed Use

A property with any commercial component, even if it's primarily residential, usually can't be financed with a standard owner occupied home loan. A house in Hornsby with a home office is fine, but a property where the ground floor is zoned for retail or operates as a business premises requires a commercial loan or a specialised residential product. The same applies to properties in mixed-use developments where residential and commercial uses coexist in the same building.

These properties aren't necessarily harder to finance, but they do require different loan structures, often with higher deposits and shorter loan terms. If you're looking at a live-work property or something with dual zoning, speak to a broker before you make an offer so you understand what financing will actually look like.

How Property Type Affects Your Rate and Deposit

The property type influences both the interest rate you're offered and the minimum deposit required. Standard residential houses typically attract the lowest variable interest rate and the most flexible loan features. Units in larger developments might see a rate loading of 0.10% to 0.25%, while rural properties or those requiring specialist assessment can add another 0.25% to 0.50% depending on the lender.

Deposit requirements shift in the same direction. A unit in a building with known issues or high investor concentration might require 15% instead of 10%, and properties classified as non-standard securities often need 20% minimum. That changes the entire financial equation, particularly for buyers relying on equity from an existing property or those planning to use government schemes tied to lower deposits.

Different lenders have different appetites for different property types, and that's where access to multiple lenders matters. What one lender classifies as high-risk, another might handle as standard lending. If you're buying something outside the typical three-bedroom house on a quarter-acre block, your loan options depend heavily on who's comparing rates on your behalf and how well they understand each lender's property criteria.

If you're weighing up property types or you've already found something and want to confirm your loan options match the property, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions