Property Finance Questions

SahBriEd · Jan 16, 2025 2:52 pm

Hello,

I’m looking for some general information on the following scenarios.

How is serviceability assessed for the purchase of an investment property if the property is positively geared even after the rental income is factored in at the lender’s discounted rate and applied to the lender’s sensitised interest rate (i.e can a person with little or no income purchase that property)? How does the situation change if the property is purchased on a trust?

What is typically the minimum LVR for a property development loan?

Is it possible to obtain a loan with interest capitalisation and no continuous repayment obligations for a property renovation project with predicted profit?

Thanks

osumme007 · Feb 03, 2025 11:02 am

Hi , Great questions!

For a positively geared investment property, lenders still assess serviceability using shaded rental income (typically 70-80%) and require the borrower to show income. If the borrower has little or no income, approval is unlikely unless a guarantor, Lo Doc, or non-bank lender is used.

Purchasing via a trust means lenders assess serviceability based on trust beneficiaries or directors. Some allow negative gearing benefits, but policies vary depending on the trust structure. They can be a great tool as some banks don't factor in the liabilities related to the trust if the income earned from the property is paying all the expenses (an accountant letter is required for verification).

For property development loans, 60-70% LVR is typical, though non-bank lenders may offer up to 75-80% at higher rates. It depends on the location as well.

Loans with interest capitalisation and no continuous repayments are possible but usually through private lenders, requiring a strong exit strategy, feasibility study, and capital contribution.

BTW, I am a Broker and I am happy to discuss options based on your situation.
All the best!
Peter