All Topics / Finance / <50M2 Rule on Lending

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  • Profile photo of ausi ski bumausi ski bum
    Participant
    @ausi-ski-bum
    Join Date: 2004
    Post Count: 18

    I came across this last week, I have a studio apartment that is 100% 0wned and giving returns of around 8 – 9% pa yet the Westpac bank will not allow me to use the equity as a deposit on another property because it is less than 50 M2 .

    Is this common and what is the basis of this.

    ASB Alpine

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi ASB,

    The point you raise is why holiday lets (and the like) are problematic as investments. Sure they may have ‘good’ cashflow but as you have found out some lenders see them as a risky proposition and will either lower the maximum LVR or restrict release of equity.

    You may find that a broker can assit and be abel to find you a more ‘friendly’ lender.

    The scenario you allude to does occur and I am aware of situations when lenders initally lent at 80% and then reviewed their risk rating on the property and reduced the LVR allowed.

    Derek
    [email protected]
    http://www.pis.theinvestorsclub.com.au
    0409 882 958

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Many lenders adopt this attitude however as long as the property is >25 Sq M then you should be able to obtain upto 80% LVR at standard interest rates.

    The inclusion of a lift is also important as to whether lenders wish to accept the security. Most prefer without.

    A client from the forum contacted me last week buying a 1 bed unit in Sydney which was 34 Sq M and we have organised 80% lend for him.

    This was a PPOR but a IP as long as it is not part of a letting pool should be acceptable security.

    Richard Taylor
    Residential & Commercial Finance Broker
    Ph: 07 3720 1888
    [email protected]

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    It depends how small it is!

    Many banks will look at sizes greater than 40sq m. St george is particularly good wth small apartments.

    Terryw
    Discover Home Loans
    Parramatta
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    Just send me a blank email, with “subscribe” in subject line.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of jjaausjjaaus
    Member
    @jjaaus
    Join Date: 2006
    Post Count: 49

    I use NAB and they are ok with >40m2

    Cheers

    Jeff Aquilina

    Need a holiday? http://www.coralsearesort.com email me [email protected] 20% DISCOUNT for PropertyInvesting.com members

    Profile photo of lbglenlbglen
    Participant
    @lbglen
    Join Date: 2004
    Post Count: 37

    Also keep in mind that often the size limitations do NOT include balcony/car parking areas – only “living” areas.

    Regars,
    LG

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