Using pre-approval issued for PPOR towards an IP?

I have been in the market to buy my first PPOR in Brisbane. Currently renting.

A couple of days ago a very good investment opportunity came up in Gold Coast. The price is very reasonable, to the point I am considering putting off buying PPOR and buy the IP instead.

I wonder if I can use the pre-approval issued for a PPOR towards buying the IP. I understand the interest rates are different for investment properties, but aside from that, can it be done?

The price on the IP is almost 60 percent of the pre-approval amount.

Thanks

 

The pre-approval won't help as buying an IP completely changes the calculations. Are you renting or living with parents? What LVR are you looking at?
There is a good chance you will be able to get finance for the IP, but you should get the numbers checked. If you are dealing with a broker, they can help without you needing to get a new pre-approval or have another credit enquiry.

 

You can't 'use the pre-approval' but you can probably safely afford to borrow for the IP if the price is 60% of the pre-approval amount.
Pre-approvals are pretty meaningless, they give you certainty around borrowing capacity only if they are a credit assessed pre-approval, most are not assessed.

You do not need a pre-approval to buy a property, recommended if buying at auction.

 

It's actually credit assessed.

 

Currently renting. I am looking at %80 leverage for the IP.

 

Great, however it's irrelevant if you're changing from PPOR purchase to IP as it's new different credit assessment however my point was you don't need it to purchase the property.
If you've found a property you like you would be best to put an offer in subject to finance rather than converting the existing pre-approval then making an offer.
If serviceability worked for a PPOR worth 40% more than the IP then serviceability should be fine, unless your current rental expense is astronomical, if you want clarity, run it past your broker/banker to check serviceability works and then go for it

 

Sorry, I missed the mention of 'renting'.

The lender will include your current rent in your expenses and the rental income for the property you want to buy. They will include 100% of the rental expense but depending on the lender, they will only include 70-80% of the rental income.

e.g. If you are paying rent of $2,200 per month and the IP is going to achieve $2,000 per month (which gets reduced to $1,400), then your servicing capacity could be a lot lower than you think. You may also want to make other changes to the loan (I/O or P&I, Fixed or Variable and the servicing buffer has recently increased to 3%), so it's definitely worth checking before you commit to anything.