Banks – can’t live with them, can’t live without them!
Did you know that lenders limit the amount they will lend against certain properties and they reject some outright as security for a mortgage? Do you know which ones and why?
In episode 15, the Property Planner, Buyer and Professor dissect “Why you must keep clear of properties banks don’t like!”
If we all accept that banks want to make money – we can understand that there is method to their madness.
Listen as David Johnston, Cate Bakos and Peter Koulizos, take you through what property locations and dwelling types the banks turn down and why the banks put restrictions on certain properties in the first place. It may just save you from making a big mistake. The last thing you want is to be left high and dry without finance and a dud asset.
As if purchasing a property wasn’t stressful enough!
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Resources:
- Your borrowing capacity has increased – do you know by how much?
- The Property Rebound has begun!
- High rise towers – yet another reason to stay away!
- Why the land-to-asset ratio of a property can determine its future price growth
- Why short-term investing has long-term consequences
- NSW crackdown on Airbnb hosts
- The future of rental properties
- Melbourne suburbs set to transform in the next few years
- I don’t like properties which the banks don’t like
- Zoning and bank policy
- Zoning absolutely matters
- Is this the final straw for the property market?
- How to succeed with Property and Create your Ideal Lifestyle
- Mortgage Strategy 101 – YouTube video series.
- www.landchecker.com.au
Show notes
- The banks and lenders are the boss – if you’re borrowing money to purchase a property, you have to play by their rules.
- Stifling property value growth – lenders placing restrictions on certain suburbs, locations and dwelling types.
- Get your measuring tape out! Knowing the ins and outs of your apartment – the internal floor plan must be 50 square metres. No, that does not include your car park or balcony.
- We’ll say it once, we’ll say it again – if you’re being sold off the plan, be very careful! A common clause of the contract of sale allows the developer room to move to change the size – if it comes in under 50 square metres, you may be knocking out one third of lenders from the picture.
- Lender policy on square metreage may loosen up over the time with population growth.
- Common dwelling types lenders don’t want to poke a stick at, the 3 S’s- serviced apartments, studio apartments and student accommodation. Did someone say apartments?
- No go post codes and towns – look for a proliferation of medium to high density apartments, too many new house and land packages or ‘one trick pony’ towns – did anyone say mining!
- Capital appreciation – if the bank is worried about it, why are you buying it?
- Renovators delight – if you’re into flipping or think you have an awesome cousin who’ll do you a solid and fix up the kitchen for you, think again. The bank may restrict it’s exposure based on the condition of the property – where the kitchen or bathroom is incomplete, there’s fire or flood damage.
- Half-finished construction or renovation – It’s not worth it. Even if the property is sold with work and permits, good luck trying to find a tradie who is happy to complete half completed work.
- Commercial zoning – a different game with different rules. If the property you are interested in is in a commercial zone, the chances are you will need to look into a commercial loan – complete with lower LVR, shorter loan term and higher interest rates.
- Strata title v stratum title – owning shares instead of owning land.
- Unusual dwellings – is it special or just weird? Think twice before signing on the dotted line for that mudbrick house or converted warehouse.
- Hitting the quota – a bank may manage the exposure in an apartment block or new estate by limiting the number of properties it will take as security in that area or building.
- Development – not every lenders cup of tea. Ensure that you have spoken with your strategic mortgage broker to determine which lenders are the most accommodating for your development projects.
- Have a Plan B – choosing a longer settlement to give yourself a buffer and deal with any bank issues.
- Purchasing subject to the lender accepting your security – protecting your interests.
- Warning signs! If the vendor is delaying producing the contract of sale and the real estate agent is not returning your calls, there’s probably something the vendor is trying to hide. Always get the contract of sale reviewed by your solicitor.
- Airbnb and old-school bed and breakfasts – be sure to cross the t’s and dot the I’s.
- New entrants beware! First time buyers, those new to Australia and first-time investors are more likely to make these mistakes. Be weary of the asset that you’re looking to buy.
David Johnston – The Property Planner’s Golden nugget: The simple message is if you want to get a positive financial return out of property,but the banks don’t like the asset type or location you are looking to purchase, don’t buy it.
Cate Bakos – The Property Buyer’s Golden nugget: you can find out zoning by having a look into the contract and get onto a site called land checker. If it’s a commercial zone, proceed with caution! If it’s not zoned residential, ask more questions.
