Lenders Wanted

NSW, $550K, Owner occupied, Purchase, Full-doc, 97% LVR

Posted on 12/08/2013 12:17:15 PM

Client is a first home owner & wishes to purchase a unit in Melbourne CBD. Unit size is only 25m2. No carpark or balcony to include.

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  • John S8/11/2013 3:16:39 PM

    Unfortunately you will have difficulty with this loan.
    a) You require a 97% loan, which although not impossible to get would be denied on other aspects of this loan. A 95% Loan with capitalised LMI is normal, but again difficult because of the risk with this property.
    b) That size property will always have difficultly in finding finance, therefore keep in mind, if you ever go to sell it, then the new buyer will have as much difficulty as you, and why banks do not lend against them as they dont want to have to sell the property in a default scenario. Catch 22. Quite often these type of properties are discounted in the market for that exact reason.
    c) To summarise - based on risk assessment, its very unlikely that you would get a loan at all. Why-
    i) The property size is really like Student accommodation, bedsitter, or a hotel room, and may be successful with a LVR of 60% if accepted at all. You are asking for 97% so there is one negative.
    ii) I would bet that the property has more than 35 units, which would take it further outside a lenders policy, adding another negative.
    iii) The property probably has more than 4 levels, which is again outside bank policy, adding another negative.
    iv) The property being in Melbourne CBD is probably in a high density postcode and so your requirements for a high LVR, again takes it outside bank policy, adding another negative.
    v) Your a First Home Buyer, so bank will be relying on the security,as you are a little bit of an unknown. From the scenario I am betting you do not have other property which could enhance your position.

    So although you may get past one obstacle, another will end up stopping you. For example I know a lender where you can borrow with capitalised LVR up to 99.9%, but the loan would not be granted based on its size of 25SQM.

    A family pledge of another security (Parents), may get you past all the problems, but then again that can have its own problems. Make sure if you jump that way, your broker fully explains it to your parents.
    Good luck

  • Tim J8/11/2013 2:30:17 PM

    - Is the 97% including or excluding capped LMI?
    - Where does the deposit come from and what other funds has the client got available?
    - What is the address of the property and the designated use of the property - student, serviced apartments etc?
    - How strong is the clients background, income etc and why such low deposit?
    - Does the client have the availability of a family pledge type scenario?
    - Are there assets the client may consider offloading to lower the LVR if required?
    How big is the square we can have a look outside of???

  • Brado20/08/2013 1:38:39 PM

    good luck! sounds like a hotel room....

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