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Will vacant IP impact on serviceability?

Discussion in 'Property Finance' started by Allgood, 3rd Feb, 2016.

  1. Allgood

    Allgood Well-Known Member

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    NSW
    Hi all,

    We have an IP that's currently vacant and will hopefully be tenanted in the next few weeks. However Ive stumbled across a place going to auction and want to get preapproval. In the past when Ive sought pre-approval I've normally given tenancy agreements as proof of income but rental appraisals are sufficient if you plan to include the income of the property you are purchasing. For the vacant IP will the bank/broker accept a rental appraisal of the vacant property as income or will it not be counted at all? In which case serviceability will take a big hit.

    If, further down the track the existing property was to remain vacant, what impact would that have on serviceability?

    I hope that makes sense?
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    This will depend on the lender, most will take a rental appraisal but some won't. Who are you getting the pre-approval through?
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    A friendly PM will do up a rental appraisal for finance purposes if needed. Most banks accept this.
     
  4. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Generally a rental appraisal is sufficient, but there are a few lenders which are pedantic and won't accept this.

    Generally the acceptable income verification types for rentals that lenders may consider are:

    • Active fixed term lease agreements
    • latest rental statement from property manager for the property
    • rental appraisal for vacant property
    • tax return for entity/individual holding the property
     
  5. Redom

    Redom Mortgage Broker Business Member

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    Sydney (West) and Canberra
    For many lenders an appraisal will do when the property is vacant.

    However for some like Homeloans, who are one of the limited higher serviceability lenders in the current marketplace, wont accept a vacant IP's rental income (regardless of how its verified i believe). It can be a frustrating policy, especially given the funder (Pepper) of the loan doesn't have the same policy but charge a higher rate if you go directly via them.
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi @Allgood

    Quite a few lenders will just accept a rental appraisal for the vacant IP - literally just submitted a deal similar to you've outlined.

    Cheers

    Jamie
     
  7. jpcashflow

    jpcashflow Well-Known Member Business Member

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    I had a client who had the same experience last week. A rental appraisal on a letter head was fine.
     
  8. Allgood

    Allgood Well-Known Member

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    Location:
    NSW
    Thanks guys. That's good news. Hopefully it wont be vacant for long though!
    @Jess Peletier we'll be going through a broker so Im not sure who we'll be seeking finance through.

    Thanks again for your responses.
     
    Jess Peletier likes this.