How home loan postcode restrictions can shatter your retirement dreams

your postcode can impact your loan

If your retirement plans involve a home loan to build your dream retirement getaway in some tucked-away corner of the country, the postcode could be the difference between a lender offering or denying you a loan.

How do postcode restrictions affect your ability to borrow?

Specific sets of criteria must be satisfied by banks and financial institutions before they agree to lend money. Having the right postcode is an important part of that criteria.

Across Australia, each lender and Lenders Mortgage Insurance (LMI) provider is informed by a guide that assigns a category for every postcode in the nation.

They are divided into the following categories:

Metro Plus: Established properties in sought-after metropolitan locations are considered very low risk.

Category 1: Metropolitan areas, as well as capital cities and major regional centres with large populations in each state are in this low risk category.

Category 2: Medium-sized regional centres that are classified as low to medium risk.

Category 3: In smaller towns, with fluctuating property markets, this category is medium to high risk.

No Category / National Locations: This is a very high risk category that includes all the Australian postcodes that aren’t included in any of the other categories outlined above.

High-density: Despite their central location, high-rise residential buildings in inner-city suburbs are also considered high risk. 

Where retirement renovation dreams may not come true

Cash buyers who can buy a block of land outright in a hidden location will also need the cash to pay for the new build or renovation in postcode areas that have lending restrictions applied. If you don’t check before you buy, and are reliant on finance that you may never be able to get, it could mean the end to your retirement escape plans.

Have you ever been refused a home loan or construction loan based on postcode restrictions? What was your solution? Do you have plans to retire to a rural or remote location? Share your stories in the comments section below.

Go deeper: Big jump in older Australians retiring with a mortgage

Financial disclaimer

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.

Written by Claire Halliday

Claire is an accomplished journalist who has written for leading magazines and newspapers, such as The Sunday Age and Sydney Morning Herald, Australian Women's Weekly, Marie Claire, Rolling Stone, Australian House & Garden, GQ, The Australian, Herald Sun, The Weekly Review, Kidspot.com.au and The Independent on Sunday (UK).

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