I applied for an investment loan and there was some drama from bank. I ended up getting pre-approval from two different banks.
I have secured a property and it is due to be settled in next few weeks. At the same time, my father has sold some of his assets and given handsome amount to me.
I was wondering if I use amount provided by my father to purchase 2nd investment property using 2nd lender, do I see any issues(final approval, ATO etc) down the path?
Are the pre approvals based on the bank thinking you're only buying one property?
Yes
Afaik, once you go ahead when the property contract, the bank will do final evaluations on your finance and the property. If the second bank for the second property finds out that your financial circumstances have changed (since you now have a bigger debt), you might have settlement issues. Messy and kinda deceptive behaviour imo.
This is messy. Are both banks aware of the preapproval.
Are the pre approvals based on the bank thinking you're only buying one property?
Yes
Its abit iffy, when you got preapproval you technically provided all the correct info that was correct till that point, but your circumstances changed after the fact, you could still go ahead with both loans with 2 different properties, but if i was you i would be 100% sure you can service both loans.
With the 2nd property you cannot buy at auction, if the 2nd loan preapproval fails to go through then you will lose the deposit, so you need to buy privately with a subject to finance approval clause, then you should be fine even if the 2nd loan falls through.
When I got 2nd pre-approval they knew that I had applied for another loan previously based on credit report. However I was still waiting for 1st pre-approval so I told them I wasnt going ahead with them which was true at that point of time.
The first loan is now sitting as unconditional and 2nd loan is pre-approval. Also if there are no issues with servicevility, I am Keen to know whether there could be any issue raised by ATO during expense claim?
ATO don't care how many investments you have. As long as you declare them and don't make false deductions then you are good. Will you be subject to land tax though?
Won't be subject to land tax.
Also if there are no issues with servicevility,
This is up to the bank to determine not you, having 2 investment properties to service can change a bank's decision…
given handsome amount to me
How much is a handsome amount?
A good looking amount
Enough to pay the deposit
The first loan will be fine but the second loan would not be based on untrue information about your personal situation. All the banks now check your serviceability which is the ability to repay the loan. The current preapprovals from both banks would be based on the banks and/or your broker doing these calculations based on the fact that you don't have any investment properties. So for the first purchase formalising the preapprovals will be fine but for your second investment property the bank needs to check your serviceability(which is checked at @7.5%rate) after accounting for your first investment property loan. If I were you, I would get my broker to check this for me.
I would not be buying a 2nd property in Sydney at the moment. The values are heading south.
Both loans were based on you purchasing 1 property, lenders are not aware one of them will end up being a 2nd loan. 2nd loan would be reassessed based on potentially higher costs associated from 1st loan etc. As long as everything checks out it's fine, but don't go in assuming you have both loans for 2 different properties.
Pre approvals aren't looked into in detail, it's a prima faci approval subject to everything U giving them to be true….
You applied for the loan and gave them details that were correct at the time. They pre-approved your loan based on assuming your details provided are true. Of they r not try, U don't have a pre-approval.
It would have been easier to go though 1 lender or broker rather than 2 different lenders.
Again U will have issues only if Ur 1st loan affects Ur ability to service the 2nd loan.
I'd also like to add:
If your first property isn't currently rented out, you're unlikely to be able to show any rental income when the bank is assessing you for your 2nd loan, even if you do get a tenant in on day 1. On paper this looks like very negative cash flow. Unless you're on a large income, that'll wreck your serviceability. In this case you're probably best to get a couple of months of rental income before apply for your second loan.
Why are you asking us?
We are not the lenders.
For a definitive answer go and ask the banks.
But its widely publicised that banks have tightened their lending criteria, particularly for investors.
And you said you have already experienced this…
"there was some drama from bank"
So whilst the first investment loan might have been approved the second might be much more difficult!!!!
But perhaps the question you should be asking is…..
Is it a good time to be buying 2 investment properties??????
Two ip sounds great. Go ahead and lock them in so that we may grab a bargain in two years time when the rba increases the cash rates.
No, your 2nd pre-approval (whichever one you don't use for the first purchase) would be null & void because your circumstances have drastically changed.
You would need to re-apply again for pre-approval with the new asset, rental income & loans in your name, otherwise you are not disclosing one of your mortgages with the 2nd lender
Are the pre approvals based on the bank thinking you're only buying one property?
"Pre approvals" are not a guaranty that you'll be approved once it gets serious.