This is a very simple question, not looking for detail or promises at all.
We have just finished buying our house and want to buy another and rent it out.
Call that an investment property I think don’t you? We/I are totally ignorant of all aspects of this. We’re capitalists only nominally.
I’ve had some little experience of banks and lending. Because about a year ago or so there was much talk of banks and different interest rates and such and so I attempted to discover if we would be better off if our loan – our mortgage – was with a different bank.
So I visited three. Westpac, Commonwealth, Bank SA.
It was incredible. Kept me waiting. Crapped on endlessly with pure garbage talk. Probed into every little detail – telephone numbers, home address, blah, blah…
and then finished up expressing no interest, blanket denials, wouldn’t be in it, wouldn’t want to know.
Managed to make me feel ashamed of putting such a proposition to them as though I were trying to swindle them.
Even though our mortgage was 8/10 paid. And obviously some bank had in the last 5 years thought well enough to finance us.
And I’d gone in there in response to their pushing to ‘borrow from us’.
Pure crap. Hate it.
So if I can avoid a repeat of it I will.
Put the simple question to the excellent people of these forums.
Is it sensible to go to a bank and ask them to finance the purchase of a second house, for rental, when all you have is a fully owned house (of somewhat less value) – i.e. no cash deposit funds at this time?
Ok here is a couple of things straight up:
1. You have approach 3 lenders of which 1 has conservative servicing and the other 2 are so so. There are lenders that will give you more money.
2. You may be able to structure your loans in such way to increase your servicing
3. You can do an equity release against the house you currently own to fund for the deposit/purchase of the IP.
To clarify – what is the approx value of your property and the current loan against it?
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
You have approached some average /consecutive lending banks- hence their response ” you cant afford the loan”- not all lenders are the same.
Sit down with a broker ( as they will have access to multiple banks + no credit hits) and obtain a free quote an recommendation on your situation.
Cheers
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Apply online, much easier, no waiting in branches etc. Also the online only providers nearly always have better rates.
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This reply was modified 10 years, 6 months ago by
Jon.
Apply online, much easier, no waiting in branches etc. Also the online only providers nearly always have better rates.
Dangerous advice – in so many ways.
Rate is not the most important factor – structure is paramount. A poor structure with the lowest rate can end up costing you thousands.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Well guys I thank you very much for your responses but frankly they’re much like the banks…
Probably my fault for not putting the question correctly. It’d also be hard for you guys in the business to understand just what a newbie, how uninformed and naive I/we are.
Here’s another go:
Would you expect banks (i.e. conservative lenders) to lend in order to purchase a second property with the intention of leasing it out if there’s no cash to put up but there is 100% owned existing home available for mortgage. And the property to be bought is about 140% of the value of the existing place?
I suppose I could throw in: and the borrower’s income remains the same as it was throughout servicing the first loan, the mortgage on the existing place.
Okay? Just on the face of it, that’s a goer, yes or no?
Hi again abrogard
Yes that would not have any bearing on the deal as long as serviceability is evident.
Most investors borrow 105% + of the purchase price and don’t out any cash down.
Cheers
Yours in Finance
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This reply was modified 10 years, 6 months ago by Richard Taylor.
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This reply was modified 10 years, 6 months ago by Richard Taylor.
Richard Taylor | Australia's leading private lender
Would you expect banks (i.e. conservative lenders) to lend in order to purchase a second property with the intention of leasing it out if there’s no cash to put up but there is 100% owned existing home available for mortgage. And the property to be bought is about 140% of the value of the existing place?
Yes – it’s possible. You just need to be able to demonstrate that you can make the repayments.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
If your income fits that’s banks serviceability ( every banks serviceability is slightly different) than yep it’s doable.
You have the deposit.
Example:
Existing home worth $400,000- with loan of $100,000 against it ( called property 1)
Want to buy a new property valued at $800,000 ( called property 2)
– get the 20% deposit ( $160,000) + stamp duty ( ~$30,000) for the $800,000 purchase from Property 1
– New loan applied for the remaining 80% to purchase property 2As long as you can afford the loans, it’s a done deal.
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
It is all my fault. I’ve still not been putting it right.
What’s the definition of income? That’s the point.
Does it include the income to be obtained from renting the second property?
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This reply was modified 10 years, 6 months ago by abrogard.
What’s the definition of income? That’s the point.
It’s money you receive.
Rent from the investment property is included.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Yes both new potential income from the property to be purchased as well as an existing income from other rental properties and your own person exertion income.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Well thank you, guys. It should be a certainty then.
Tomorrow we will go to ANZ. That’s who we got our mortgage from before. As I said, turned out to be the only bank willing to give us a go if we infer from the change-mortgage disinterest of the others.
So we feel a little loyalty.
What’s loyalty worth to the rational investor?
What did that comment mean ‘fry your credit score before you start’ ? Something we should be aware of?
This seems such a simple, self-evident step, why isn’t everyone doing it? Or is everyone doing it?
What are the dangers? Suddenly there’s no tenants available?
What about other lenders? Don’t they all charge more than the banks for equal service? i.e., when they charge less they have something in the fine print that means in the end you get less?
Any drawbacks we’re not aware of? Like maybe vis-a-vis the govt? Suddenly we’re considered filthy plutocrats and lose any and all benefits we might have had before and get imposts instead? We still put in standard tax returns I think?
Hi
Why not get In touch with a broker?Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
What’s loyalty worth to the rational investor?
None. Banks are generally more concerned with attracting new business.
Shopping the banks might result in inadvertent hits to your credit file (they might be applying for credit without you being fully aware). A few of these hits to your file in a short space of time can be detrimental – you may find that no bank will be willing to take you on.
ANZ are one of the least generous banks when it comes to calculating borrowing capacity. If you can get it work with ANZ, you can get it work with heaps of other lenders too.
Sounds like you’d be better served using a high performing broker rather than going into this blind.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Why don’t we go to a broker?
Don’t know. Don’t know enough about anything. Have a feeling that brokers are for people finding their way through complicated deals sometimes difficult to finance – and for which they pay extra, often. Not to the broker. This thread has taught me, I think, that the broker costs the borrower nothing? But to the lender, pays more for the borrowings because a hard deal to finance or somesuch.
In short I’m thinking brokers aren’t appropriate for people such as us with this simple transaction. Is that wrong?
Just because someone checks your credit file your rating becomes suspect? Cripes.
What is a ‘high performing’ broker and how does one identify such?
Hey really good question…
There is no right or wrong…
But like anything there are good and bad operators.A good broker may look at a couple of things. 1) how to structure your loan to ensure you set up correctly from the start. Sure your situation might sound easy but allot of bankers still get this wrong.
2) brokers are a channel to source you good rates and a good structure…Brokers handle both challenging and simple loans. It’s like buying a mobile phone some people call Telstra to get. Deal but then end up using crazy Johns becUse of service!!
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
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Don’t know. Don’t know enough about anything. Have a feeling that brokers are for people finding their way through complicated deals sometimes difficult to finance – and for which they pay extra, often. Not to the broker. This thread has taught me, I think, that the broker costs the borrower nothing? But to the lender, pays more for the borrowings because a hard deal to finance or somesuch.Brokers can be used for deals of any complexity – easy and hard. Most don’t charge a free – and we can negotiate on rate, ect on your behalf. Using a broker doesn’t result in the cost being passed onto the borrower – that’s a myth.
All in all, do your own due diligence and find someone you feel comfortable in dealing with – whether that be your local banker or a broker.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Don’t be silly by going to the bank. Go through a broker! There are several good ones here- I’ve used Jamie and highly recommend him.
If you got a say 0.5 PA% discount through an online provider (my online provider charges 4.49%) over a bank like say National (NAB charges me 5% pa on PPR) over 30 years you would be saving approx $60,000 on a $400,000 property home loan. Online providers can have acceptable structures too, just do the due diligence.
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This reply was modified 10 years, 6 months ago by
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