Hi, I just purchased my first investment property, and have a few questions about the financial side of it. In the contract I have specified a lender. I am pre-approved with that lender, but have recently noticed a different lender has far better rates. Am I able to go with that other lender, if I get approved? I'm assuming it wouldn't matter as they're getting my money either way. Also in the contract I didn't specify I wanted to have a building and pest done. This is because the property was under contract before, but it fell through, and the real estate agent provided me with the report (only about 1 week old). If I'm satisfied with the report, is there any need to get another done? I've also made an offer on another property, and signed the contract (timing didn't allow me to weigh up both options). My offer for the second property hasn't been accepted yet, but if it is I won't follow through with the purchase of the first. I haven't paid any deposits yet (due in 3 days). Would I still be required to forego the 0.25% of the purchase price even when I haven't paid the deposit? Last question is about LVR. I believe I purchased the property for under market value. Is LVR calculated when the lender evaluates the property. And to avoid LMI, is it the purchase price or the valuation that determines if you're over/under the 80% LVR? Thanks
what state are you buying in? Were either offers subject to anything e.g finance or building and pest?
The valuation which usually mirrors the purchase price is what the LVR will be calculated on. using the right lender may allow a later pull of equity on that same property ta rolf
Yes you can use any form of lender u want if u get approval If you dont get approval from the new lender, then youd need to seek an approval with the old lender, or a decline letter Rate is one thing which may be less important than many other things if you are looking to build a portfolio its like choosing a car on price vs the actual required need......... Also if the Lvr is > 80 %,be wary of frying your credit file with too many loan enquiries ta rolf
if the purchase price is say 300, but u know you can get a val with lender X at 380, then subject to serviceability and a few other rules, you can get an equity loan to 80 % of the 80 k "increase" Dont try this at home ta rolf
You have signed "subject to finance" ONLY meaning the only acceptable way out of this contract is failure to secure finance. This is really going to be dependent on the vendor and what they will accept. Some vendors may just accept a verbal "finance was not approved". Others may ask for the actual decline letter from the lender. Dependent on the interest in that property I know personally for wasting my time and delaying the sale process I would want a letter saying NO and wouldn't accept a broker letter. I would want to see an actual application got declined by the bank. Given your already pre-approved I would say you have little chance outside of your banker/broker lying on your submission so that it gets declined. So the answer may be get the one you want approved first and then that should change the outcome of the original application. I think you need to tread carefully with your offers. Or at the very least change your "subject to" clauses to allow more exits.
Regarding the LVR you can almost guarantee it will come in at contract price. You are the market and you paid a value meaning market value. Regarding the pest and termite then really that's someone else's property. It doesn't help you if there are in fact termites that were missed on that report. It doesn't allow you to exit the contract under those terms. Who even did it?? The REA could have used an old copy and just changed the address. I would personally never rely on someone's else's report
Today is only day 1 of the 5 day cooling off period for the first property, and I haven't even entered it for the second one yet.
If you have entered two contracts for day $500 000, and throw one away. You have cost yourself $1250 already. Just re-reading your original question about lvr and want to make clear an error in your thinking (at least what I think you are thinking) If you purchase a place for say 450k, but you think it is worth 500k, that 50k won't help your lvr/lmi In my experience, if you purchase a place under value, when it comes time to the valuation, most valuers will value the place at the contract price
Yes I realise I'd lose my 0.25%, however I've reduced my offer on the second property to cover this. And yes that was my thinking for how lvr is calculated. Would that be the same if I was to get someone to value the property not working for my lender a few months later to access potential equity? Or would they still mainly base it off the recent sale price
You can't get a valuer, not linked to your lender, to value the place - the lender won't care what they think. It is possible that you could have the place revalued in say 12 months time, or sooner if you do a bit of a Reno - you may be able to unlock that equity then. This is a useful strategy to provide the deposit for the next place!
Lender policy is that they take the lower of the valuation or contract price. If the valuer thinks it's worth more than the contract price, well done, but it won't make any difference to how much the lender is willing to fund against the property. You could wait about 3-6 months and then apply to release the equity, but this would probably require a new valuation. At that point your purchase price has influenced the local sales and most valuers would use this as a baseline. In essence, a valuation higher than the purchase price doesn't actually do much for you. Getting a valuation prior to an auction or negotiation doesn't really help you, even if it is with a valuer used by the lender. If you pay less than the valuation, as described above it doesn't really help you much. If you pay more than the valuation, then the lender will likely recognise the lower valuation instead of the purchase price, and you've got to put extra funds into the property to maintain the LVR. Even if you don't show them the valuation, it's quite possible that the lender will get a copy anyway. In essence a valuation prior to purchase doesn't have any lending related benefit, but does carry some risk.
