Heirtage Bank Investment Loan Experience

I applied for investment home loan via broker with Heritage Bank and it has been really bad experience. Initially they took 2 weeks to provide pre-approval and put condition that the rent shouldn’t be less than $390 per week and maximum property price should not more than $450,000.

I found an apartment in Sydney which is earning more than $400 per week for over $410k. I reached out to them for unconditional approval and they came back after 1 week saying that this property is in high dense area and therefore they will only consider 60% of rent instead of 80% rent. They have asked to contribute additional $20k as a deposit or they won’t proceed further.

I am quite unhappy with Heritage Bank approach here as they should have put high dense area condition on their pre-approval letter. I will lose approx. $1500 in 0.25% deposit, contract review and strata report fee if I don’t proceed. I can organise additional $20k deposit but it leaves me with very little money I put aside for an emergency.

Is it normal for banks to consider only 60% of rent? I am only left with 4 more business days before cooling off expires so not sure if I can approach another lender in such a short time. Very stressful situation.

 

Firstly I'll say that I don't think I've every had a smooth experience with Heritage Bank. As a result I rarely even consider using them (which could also be part of that problem).

The pre-approval would have included a clause stating something about the property being suitable. That covers their position with regards to your problem.

Lenders commonly only allow 60% of the rental income for certain types of properties. I know of one lender that publishes a list on their broker website of specific addresses of high density apartments that they will not lend to at all, but they don't write this into their pre-approvals.

Odds are your broker is aware of this, but isn't aware that you intended to purchase in a high density location. It's completely impractical to disclose everything that could derail a pre-approval and you wouldn't remember the conversation or read all the documentation required to do this.

If you can't meet Heritages conditions, then your options are to drop this deal and find another one that does meet their conditions, or to find a lender that is willing to lend against this apartment. The good news is that now your broker knows everything about the deal, it should be reasonably straight forward to verify all the quirks of a deal with a lender before submitting the application and they likely can do this in a day or two. Your existing broker is the best placed person to give you advice on this.

 

Thanks for the advice. My broker stated he didn't realise I was purchasing in high dense area as my unit number is 5.

Can you please share what kind of bad experience you had encountered with Heritage?

 

I haven't done business with them for several years, but overall they tend to ask for significantly more information that other lenders and they're often not clear on what they want to see. Another broker on this forum once described them as, "Asking what colour underwear you're wearing, collating that information and basing their loan approval conditions on the fact that it's Tuesday".

Essentially my previous experience with them has been that they don't have good consistent processes in place and they can be inconsistent in their requirements. They really don't ever seem to offer anything that stands out for most borrowers, other than they occasionally have cheap rates.

I could be wrong now, they may have changed. All my previous experiences with them have been difficult however, and it's not hard to find other lenders that can do a deal just as well without the headaches.


I really can't fault your broker. You can make a successful argument that they should have told you not to buy high density, but there's a million things they could tell you and most of them wouldn't be relevant to what you end up buying. If I told clients everything that goes through my head when making a recommendation they'd only get confused with information overload and wouldn't retain the important stuff. Unfortunately it's the unusual stuff that makes things go badly, but it doesn't happen that often.

Now that the difficult aspects of this deal are known, your broker will be able to match the right lender to the deal and your circumstances. This is a delay which is inconvenient and stressful, but at this point your broker is better positioned to get a good result for you than they were previously.

 

Excellent advice from Peter. It's always a good idea to run the security past your broker to be sure it's going to fly before you sign a contract. The good news is that having a pre-approval doesn't tie you to that one lender, and there may well be others that are willing to accept the security.

 

I haven't put a loan to heritage in a number of years. I think they still use typewriters there.

 

And an abacus...

 

Unfortunately there's no guarantees for pre-approval. Two weeks is a decent speed to get back to you about it if they are taking the time to do reasonable checks on your financial health (it's quite fast in my admin experience).
It might be better to lose the deposit than stretch yourself more than you planned. That's your decision to make. You can save that money up again and live to buy another day.

 

I have used Heritage. Never a great experience, but I went there for the lower rate. I must say I find many of the smaller regional banks to be the same. Low rates but....I also use another regional bank and their phone APP is probably 15 years behind the best of the big 4. I asked them for an out of cycle statement about 2 years ago, and got something sent to me printed on a dot matrix printer.

 

Thanks everyone for your advice. The formal approval came through yesterday