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#1 | ||
Regular Member
Join Date: Sep 2007
Location: Sydney,
Posts: 402
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Hey Guys
Hoping somebody can chime in with some advice. Looking at buying our first property. Our current broker said, the banks won't lend any extra for renovations which has shocked us since sometimes the homes we inspected needed floors to be re-done, painted new walls , doors repaired etc. Does anybody have any experience with this or are all banks just going to say that they will only finance the home and not any renovations? I thought we could buy a home thats cheaper and renovate it. Any advice would be great or for people that have gone down this track Cheers |
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#2 | ||
black xb
![]() Join Date: Jan 2006
Posts: 1,252
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I think the bank will loan you a sum based on what the value of the property is. Usually lower than real value. This way if you default on payment they sell the asset and recover their money.
If you want extra they would not see that as being financially viable as the property is not actually worth that investment (yet). Maybe (?) you would need another loan, not a home loan, in order to finance the improvements. obviously at higher rates, etc. |
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#3 | ||
FF.Com.Au Hardcore
Join Date: Apr 2005
Location: Canberra
Posts: 13,393
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You would probably have to get a different type loan. My experience as a FHB is that they approve you for up to a certain amount but what you get is based on the valuation on the house.
Then at settlement they pay the difference to the seller between the sale and deposit. You could potentially put a lower deposit down and use cash for the renos but bigger deposit will often get you a better rate and avoid mortgage insurance which doesn't protect you but the lender. It would be rather difficult to assess that risk and reward of potential renos I would think even if you're approved for the upper limit. |
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#4 | ||
Regular Member
Join Date: Sep 2007
Location: Sydney,
Posts: 402
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Yes i understand that,
For estimates sake, lets say your approved for say $500,000 Couldn't you buy a home say in the country for about 350k or less which you plan to renovate. Wouldn't they still think with the 2 incomes they can of course part away the risk since they approved for a higher amount yet not using that much? I just feel its like the banks give you always the short end of the stick ! |
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#5 | |||
FF.Com.Au Hardcore
Join Date: Apr 2005
Location: Canberra
Posts: 13,393
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Quote:
The mortgage is secured against the property so it would not make sense to have a home loan worth more than the valuation. The only real exception I can imagine it being worth it for them is if you were able to pick up a house substantially below valuation but realistically how often does that happen ![]() |
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#6 | ||
0o\==^==/o0
![]() Join Date: Oct 2008
Location: North Brisbane
Posts: 4,317
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You could be approved of even double what you are looking to buy, however the value of the property always comes into play. The banks are looking at what they can sell for IF you default on your loan.
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Honorary Tony Oldest to youngest 1971 ZD Fairlane 1978 W123 Mercedes Benz 280e 2004 BA XR8 2007 W211 E63 ////AMG 2008 Fiat Ritmo -for the kids to take ownership of while I pay for running costs 2009 SYii Territory Ts now the kids swapped with below 2011 W212 Mercedes Benz E350 now the wife’s swapped with above |
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#7 | ||
FF.Com.Au Hardcore
Join Date: Apr 2005
Location: Canberra
Posts: 13,393
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Not to mention they are legally obligated to assess your financial situation.
I can't recommend a mortgage broker enough. The rates my bank were offering were crap and they only noticed once I was withdrawing all my cash. The lenders pay them commission but they have to disclose this to you so you can make a choice about it. They will pay an upfront commission and a trailing commission over the life of the loan. What this means is if you are not happy, you tell them to sort it out. Email them and say I don't think this rate is fair and get them to do the leg work. Like insurance, lenders depend on the 'lazy tax' but every time I have asked, I have always got a discount. I pay about $300 a year but I also get 100% offset, redraw and up to 10 loan splits with the option to switch between principal and principal and interest. I have saved many thousands of dollars even on variable rate where fixed looks attractive. The fees might seem to be not worth it on face value but you have to consider the whole package and conditions which a broker will help you out with. Last edited by MITCHAY; 29-01-2021 at 09:13 PM. |
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#8 | |||
PURSUIT 250
![]() Join Date: Mar 2009
Location: sydney
Posts: 5,786
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Quote:
The bank doesn’t want to give you 500k for you to buy a 350k house. They do not trust that you will use that 150 on the house and they don’t care if you think the house will be worth 500k once done. |
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#9 | ||
FF.Com.Au Hardcore
Join Date: Apr 2005
Location: Canberra
Posts: 13,393
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#10 | ||
Guest
Join Date: Aug 2018
Posts: 1,892
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#11 | |||
FF.Com.Au Hardcore
Join Date: Nov 2005
Location: perth
Posts: 4,355
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Quote:
they will assess the assets worth your buying they will offer the less of the two then you either get another loan to do renos or live in it the way it is till you have capital in the house to refinance for renos or purchase a new house with no renos at price completed and banks offer
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yes still (as money n time permit) doing the rebuilding the zh fairlane with a clevo 400m 4v heads injected whipple blown with aode 4 speed trans to a 9" ....... we'll get there eventually just remember don't be afraid to try something new. Remember, amateurs built the Ark...Professionals built the Titanic! I have taken up meditation... at least it's better than sitting around doing nothing !! |
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#12 | |||
FF.Com.Au Hardcore
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Location: Riff
Posts: 12,362
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Quote:
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#13 | |||
Where to next??
Join Date: Oct 2006
Location: Sydney
Posts: 8,893
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Quote:
If you buy the place on 10% deposit you will pay mortgage insurance but you will then still have 42-45k up your sleeve for renovations. Buying the place for 350k means you will have even more to play with. Sent from my SM-G973F using Tapatalk
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#14 | ||
praek tih kl jo kr
Join Date: Mar 2011
Location: Atwell W.A.
Posts: 1,657
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Banks are only interested in the money and protecting that money, if the house has a market value of $350,000 you had a deposit of $50,000 and you croaked tomorrow, your wife cant afford the mortgage and it goes into default, even if the house jumped to $400,000 market value overnight, they will sell the house at $300,000 to recoup what is owed to them as thats all they care about, a quick sale and money back in the bank.
So if you borrowed $400,000 with your $50,000 deposit on a house and paid market value of $350,000 done all the restorations overnight and croaked tomorrow the bank could not recoup their money in a hurry like they want as the house is still only worth what you paid for it. You might be surprised to know that your mortgage gets sold once the bank does the loan sometimes before you make the first payment, the bank still services the loan and make a small percentage, but someone else owns it and makes a percentage of the money the bank charges in interest, its a very common practice and if you loan does not look good they cant sell it. If you think about it, it is smart for the banks to do this as they can have hundreds of thousands if not millions of loans that they can make a small percentage off but not have the debt of the money being out for 30 years . |
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#15 | ||
Regular Member
Join Date: May 2010
Posts: 325
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Offer the seller extra, for a delayed settlement. But with access and approval to do a small renovation. Let’s say Bathroom, Kitchen and repaint.
You will have to release the deposit to the seller, and forfeit all money spent if you don’t get the finance. But if you pull it off, you’ll have a property valued higher. There are a few sellers out there, who have been in your position, and want to give first time buyers a chance. The extra money offered is a win for them, if they are not pressured to sell. Agents won’t like this sort of deal. So a couple of grand their way, could satisfy them, to delay their commission. And even talk the seller into accepting. Slippery buggers! If you’re not a tradie, you will need some quotes to back up your plans. No one wants a first time renovator tearing their house apart. No matter how many shows they’ve watched featuring Scotty Cam. Also rural purchases are zoned B or C by the banks. Not as easy to sell as Zone A city locations. So lending LVR’s vary with different locations. Good luck with your purchase. |
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#16 | |||
FF.Com.Au Hardcore
Join Date: Sep 2005
Posts: 1,374
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#17 | ||
Kicking back
Join Date: Dec 2013
Location: Western sydney
Posts: 8,576
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I am a dead set broken record. Internet advice on mortgages, that means nothing. Speak to a broker. You cant twist their arms. They can only do what they can do. My old man before he retired, sold out, then passed away was a director for a large mortgage brokerage. They span all states, exept tassie. And in wa, they did a hostile takeover of the largest brokerage in that state, but didnt rebrand it. The company has been sold since. But, speak to an expert, they know their business. If they didnt they wouldnt have a job. And if you arent convinced by the first broker, go elsewhere. You can get advice from tom, dick and harry, but at the end of the day, a loan comes from the bank, and if they say no, the answer is no. So speak to the persons who have the systems, if you do not like it, go elsewhere.
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#18 | |||
DIY Tragic
Join Date: Apr 2018
Location: Sydney, more than not. I hate it.
Posts: 21,974
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#19 | |||
FF.Com.Au Hardcore
Join Date: Sep 2005
Posts: 1,374
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