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Will Banks Finance Such As This?

Discussion in 'Real Estate' started by abrogard, 17th May, 2014.

  1. abrogard

    abrogard New Member

    25th Jun, 2009
    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?
  2. GregR

    GregR Well-Known Member

    13th Jul, 2009
    Berwick Vic
    First you need to be clear on what your goals are, all else follows after that.
    If you are looking to buy a property which you will rent out, it is commonly described as an investment property, the rental coming in needs to be declared as income for tax purposes, the costs associated with maintaining the property are deductible including the interest on the loan.

    You will only be able to borrow money from a lender if you can show you can repay or service the loan. That may be a combination of rental income and wages or other income.

    As to having no cash deposit, on the basis you have equity in your home, you can use that as the basis for the settlement funds for the investment property. There are two ways to do this, use the same lender and cross securitise the two properties or get you home revalued and refinanced by establishing a second loan facility on it and use those funds as settlement funds using another lender for the investment property.

    As to dealing with banks, use a good broker and let them do the work and find the best deal and structure for you.
    Good luck with it.