There are two investments a bank is making when they decide to provide you with a mortgage: You and the Property. So, if you’re being turned down for a mortgage it could be the property that is the issue, not you. Here are some properties to avoid:
- An apartment smaller than 40 square meters – Because they are so tiny, they could be harder to market should the bank have to take possession. Banks may not believe there is enough demand for a small apartment, so they will have a hard time getting their investment back.
- A property in a ‘bad’ or ‘risky’ neighbourhood – Tried and true rule is to buy the worst house in the best neighbourhood you can afford. Setting up in a bad neighbourhood with a lot of crime or unemployment could be a red flag to financial institutions. Deterioration of the value of the property due to crime or negligence could be an issue here, so avoid it if you can.
- Cookie cutter apartments in the suburbs with continuous buildup – The concern here is that people may find themselves vulnerable if the property market collapses. To a bank it’s a diversification issue: having money in too many properties of the same type could be very risky if the market goes sideways and they can’t sell them.
- Properties that aren’t structurally sound – Never purchase a property without looking at it yourself and getting it surveyed. If a property doesn’t comply with a building code or it contains something hazardous such as lead paint or asbestos, this could affect the future saleability and cost the owner more money down the road.
- Properties with geological issues – This has become an increasing concern with the risks of flooding skyrocketing and global warming in the forefront of everyone’s mind. Areas on the water or built on marshland hold a much higher risk than they once did and one flood could leave a property uninhabitable.
These issues may seem extreme, but they could save you money down the road. Talk to a mortgage specialist today to get further assistance with finding the right property for you and your bank.