Commercial lending available with Resi servicablity exhausted

Hello all,

Just looking into, if someone has reached their servicability limit with purchasing the next residential property, would it still be possible to purchase a commercial property as an investment, provided one could come up with the 30-40% deposit usually required?

Appreciated the insights

 

Hi Nath, yes it is. Commercial property can be assessed a bit differently so it does offer a few additional options once resi servicing has been exhausted.

 

There's a very broad spectrum of commercial lending. There are lenders that will lend a lot more than the residential equivalent and others whose policies are very similar to residential.

It follows that there's a catch. Commercial lending is unregulated, there's no 'responsible lending' requirements that must be met. What lenders are willing to do and what they charge for it is up to them.

You'll find that the lenders with reasonable rates and fees, as well as favourable policies tend to be conservative in their approach. Lenders that will give you lots of money either have very high rates and fees, or conditions in their loan contracts that I wouldn't ever want to agree too. Quite often they have both.

 

It's possible if doing the lend via 'lease doc' (assuming 30% deposit + costs are covered by the buyer)
The way banks assess this kind of deal is that the rental repayments form the existing lease will cover a certain multiple of the loan interest (usually 2 times the interest or more depending on the lender)
There are quite a few lenders in this space offering very reasonable rates and low fees.
Something else to consider is that Commercial Lenders require the borrower to pay for the valuations which can be a couple of thousand dollars depending on the property.

 

I got a rude awakening yesterday when I was speaking with my broker.. she said deposits are 30% (a small few will do 25%). Also the applicant pays the commercial valuation report... wow! Its different when you get paid a few thousand to do a comm val and another to pay for it! Also the cost of the comm application which again is a few thousand! O_O

 

Luckily the higher yield compensates us .. from now on

 

Great insights people really appreciate the comments. I thought this would be the case and is something I think I will consider in the near future. Thinking of acquiring a commercial property to my portfolio at some point for the yield benefit as like the title of my post says I'm pretty much at my limit with borrowing capacity atm.
Thanks people