When purchasing a property greater than $5,000,000 in value, the amount a bank will lend against that property will be different from traditional lending guidelines. Rather than being able to access 90% or even higher as a loan to valuation ratio, the banks prefer to reduce the % loan to valuation ratio down to 60% (but there are still lenders in the marketplace who will lend up to an 80% loan to valuation ratio under certain circumstances).
Some things to consider when attempting to borrow for a prestige property at higher loan to valuation ratios are;
– Using equity within another property to subsidise the reduction in borrowing against the purchase property (without cross-collateralisation | refer here for more).
– We negotiate with the bank to allow a higher loan to value ratio on the basis that it is paid down to a pre-agreed point within a certain period. (For example, 80% loan down to 70% within 5 years).
– Providing evidence of liquid assets (ASX listed shares / cash / etc), which provide comfort to a bank that if needed (although not contractually obliged), you could reduce the loan amount at any time.
If you have had challenges accessing a higher loan to value ratio on a prestige property, please reach out. Tom.
Written by Tom Morison