Arranging mortgage after purchase

Discussion in 'Loans & Mortgage Brokers' started by mojorising, 9th Feb, 2019.

Join Australia's most dynamic and respected property investment community
Tags:
  1. mojorising

    mojorising Well-Known Member

    Joined:
    1st Mar, 2017
    Posts:
    63
    Location:
    NSW
    Has anyone taken out a mortgage on a property that has already been purchased?

    Is it more complex than doing the mortgage before settlement on a purchase?

    The main hurdle I am thinking might be giving the lender a valid reason to lend since the purpose of the loan would not appear to be for purchasing property since it is already settled.

    I am aware of the tax implications for investment properties but this is a PPOR.

    The reality is that I would want to use the money to do development work on the property such as building a second residence on the land,

    I am not sure if that qualifies as mortgage lending.

    If not then would a lending organisation accept something along the lines of:- "Money was borrowed from a family member to enable the purchase but now the family member needs the money back so now I need a mortgage?"
     
    Perthguy likes this.
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    4,787
    Location:
    Melbourne, Nationwide
    There's no need to tell the lender some story that you've borrowed cash from family. Some sort of development is a perfectly good reason to borrow money. Some lenders even have a very simply policy that will allow you to do it with very few questions asked about the actual purpose.
     
  3. mojorising

    mojorising Well-Known Member

    Joined:
    1st Mar, 2017
    Posts:
    63
    Location:
    NSW
    ^Thanks Peter

    Are there any hurdles to be aware of when doing a mortgage post-purchase rather than the usual pre-purchase?

    If it is pre-purchase then the bank gets to value what it is lending the money for.

    If it is post-purchase then there is nothing to stop a borrower from borrowing the money to 'do development work' and then going and blowing it on a Ferrari

    I am genuinely wanting to do development work on the property but I can imagine that a lender might be suspicious of post-purchase borrowing.

    Are the very low rates still available to post-purchase borrowers or do you need to be pre-purchase to get the lowest rates?
     
    Last edited: 9th Feb, 2019
  4. andrew_de_a

    andrew_de_a Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    122
    Location:
    Melbourne
    Call a broker and find out
     
  5. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

    Joined:
    18th Jun, 2015
    Posts:
    21,762
    Location:
    Australia wide
    Yes you could potentially borrow to build.

    If you tell them you are refinancing a related party loan they will want evidence
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,557
    Location:
    Canberra, Brisbane and Sunshine Coast
    I’ve done for a client.

    He was under pressure to settle on a purchase and paid for it in cash.

    He came to me after it settled and explained the story. We applied to the bank and told them that he had to use cash (due to time pressures) but would’ve preferred to borrow.

    They didn’t mind - application was approved.
     
    Terry_w likes this.
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    4,787
    Location:
    Melbourne, Nationwide
    Different lenders have different policies around getting money out after settlement. The right lender for your situation will depend on having a bit more of the specifics on what you want to do, what your circumstances are and what evidence might be available to support all this.

    Regardless of what your answers are, it probably can be done, it's just a matter of finding the best way to do it.

    Rates are generally product based, the purpose of the money might lead to the best product, but the purpose doesn't define the rate, so that shouldn't be a concern.

    I guess ultimately there is nothing to stop you from blowing it all on a Ferrari. It wouldn't be the first equity release done to purchase a car (although I've never done one on that scale). If that's your purpose I actually wouldn't have a problem with it, as long as it is appropriate to your circumstances.
     
  8. mojorising

    mojorising Well-Known Member

    Joined:
    1st Mar, 2017
    Posts:
    63
    Location:
    NSW
    ^Thanks Peter.

    I am not actually a fan of Ferraris.

    I could be tempted by a reasonably well depreciated DB9/Vantage with full service history
     
  9. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    11,350
    Location:
    Perth
    I have done this. I told my broker the loan was for investment purposes. There were no issues getting the loan subject to meeting servicing. I was going to use the funds to build an ip but ended up buying an ip to renovate Then I used the renovated ip as security for a loan to complete the ip build.