Our offer on a property has been declined by the bank's 3rd party insurance company, the reason being it is a Serviced Apartment and LMI cannot be considered. The reason the bank has gone for the 3rd party insurance company is because our total borrowings has gone over $1M. Our intention of buying this property is to live in not to rent out. Even though the apartment is in a letting pool, we can rent the apartment ourself if we decide to move out. Can anyone please advice why they would decline our loan because it is a serviced apartment? If I can get a letter from the building management to say we can rent it ourself if we decide to move out, will the 3rd party insurance company consider this? We will not have time to go with another bank, as we have already extended finance and settlement by 1 week. Any input will be much appreciated...
Loan Declined..Help please.
- Thread starter iinvestor
- Start date
Adelaide bank
Hi i just read on the homeloan expert web site that Adelaide bank lend for service apartments, perhaps worth looking at.
Hi i just read on the homeloan expert web site that Adelaide bank lend for service apartments, perhaps worth looking at.
Hi
IIV
Ouch, serviced apptms arent easy to finance at the best of times
sounds to me like you are with CBA or NAB and their Delegated Authority has run out ( anything beyond a mill gets sent to the insurer).
There may be OTHER reasons aside from the "serviced apptment" issue, but its hard to say on the limited data we have here at this time
How much is the loan ?
What is the value of the apptment
What is the interior size of the apptment
Postcode ?
How many other units in the same building / complex ?
ta
rolf
IIV
Ouch, serviced apptms arent easy to finance at the best of times
sounds to me like you are with CBA or NAB and their Delegated Authority has run out ( anything beyond a mill gets sent to the insurer).
There may be OTHER reasons aside from the "serviced apptment" issue, but its hard to say on the limited data we have here at this time
How much is the loan ?
What is the value of the apptment
What is the interior size of the apptment
Postcode ?
How many other units in the same building / complex ?
ta
rolf
There's a range of reason why your loan got rejected ( you can alwasy as them..and i suggest you do)- but the most common reason if it went to the LMI is over exposure...meaning that LMI provider has already reached their max capacity of the same type of units in that building.
Who is the funder + LMI provider?
Whats the location + building name?
Also note yes ABL ( Adelaide bank) does service apartment, like a lot of another banks...but that doesn't mean they will accept your loan ...as you found it out from the hard way...they say yes but it still comes down to the deal itself...
I highly recommend you speak to a good broker who deals with service apartment on a regular basis, as you do NOT have time to shop around given settlement is 1 week away- Drop Rolf an email
Regards
Michael
Who is the funder + LMI provider?
Whats the location + building name?
Also note yes ABL ( Adelaide bank) does service apartment, like a lot of another banks...but that doesn't mean they will accept your loan ...as you found it out from the hard way...they say yes but it still comes down to the deal itself...
I highly recommend you speak to a good broker who deals with service apartment on a regular basis, as you do NOT have time to shop around given settlement is 1 week away- Drop Rolf an email
Regards
Michael
Good luck with it II, I bought a serviced apartment in brisbane city 4 years ago and lived in it for 3 years, 52sqm isnt much but city living was quite enjoyable for awhile 
So you shouldn't have a problem getting finance but could be asked to lower the LVR?
Unfortunatley I believe LMI is mostly not available for serviced appartments even if theoritically possible regardless of the CBA's delegated lending authority.
Even if you had less than $1 mil in borrowings the only way your loan would have been approved is if the lender was not aware that the property was a serviced appartment and didn't do a full valuation (as the valuer would have noted this in their report to the bank who would have then been oblidged to refer to Genworth under their agreement).
I think your only chance is to get something in the contract / in writting which says your property is being removed from the letting pool upon settlement. Then perhaps Genworth will reconsider although not to be too pesemistic but I have yet to see them change their mind on a decline.
From CBA website:
Adverse Issues and risks identified in an External Valuation Report:
The Bank is unable to accept an External Valuation Report under the DUA where the following risks are identified:
-Security with an extended marketing period identified as greater than 6 months
-Security with living area of less than 40 square metres.
- The individual property size of the security provided exceeds 50 hectares
- The individual unit size of the security provided is less than 40 square metres.
- The individual property is unacceptable to Genworth (Company Title units, SEPP Seniors Living, serviced apartments, retirement homes)
- Dual key access properties
- Income producing rural properties
- Limited title (any defects)
- Mobile or temporary homes
- Land/improvements contaminated
- Properties with 'lease of life' covenants on titles
- Properties affected bt floods, landslip, subsidence, mine subsidence or tidal inundation and costal erosion
- Non arms length transactions. This relates to the sale of a property where a registered Real Estate Agent is not acting for the vendor. This also includes advantageous/favourable purchases to a family member at a discounted price or where a vendor is selling the property at a discounted price to a person to whim he/she is indebted.
Notes:
Valuations which identify these risks will be referred to Genworth for acceptance.
Where any Unacceptable security is identified the application is outside CBA policy and will be declined without further consideration.
Even if you had less than $1 mil in borrowings the only way your loan would have been approved is if the lender was not aware that the property was a serviced appartment and didn't do a full valuation (as the valuer would have noted this in their report to the bank who would have then been oblidged to refer to Genworth under their agreement).
I think your only chance is to get something in the contract / in writting which says your property is being removed from the letting pool upon settlement. Then perhaps Genworth will reconsider although not to be too pesemistic but I have yet to see them change their mind on a decline.
From CBA website:
Adverse Issues and risks identified in an External Valuation Report:
The Bank is unable to accept an External Valuation Report under the DUA where the following risks are identified:
-Security with an extended marketing period identified as greater than 6 months
-Security with living area of less than 40 square metres.
- The individual property size of the security provided exceeds 50 hectares
- The individual unit size of the security provided is less than 40 square metres.
- The individual property is unacceptable to Genworth (Company Title units, SEPP Seniors Living, serviced apartments, retirement homes)
- Dual key access properties
- Income producing rural properties
- Limited title (any defects)
- Mobile or temporary homes
- Land/improvements contaminated
- Properties with 'lease of life' covenants on titles
- Properties affected bt floods, landslip, subsidence, mine subsidence or tidal inundation and costal erosion
- Non arms length transactions. This relates to the sale of a property where a registered Real Estate Agent is not acting for the vendor. This also includes advantageous/favourable purchases to a family member at a discounted price or where a vendor is selling the property at a discounted price to a person to whim he/she is indebted.
Notes:
Valuations which identify these risks will be referred to Genworth for acceptance.
Where any Unacceptable security is identified the application is outside CBA policy and will be declined without further consideration.
That only relates to CBA DUA in house authority for 80%+ LVR on service apartment....that means the LMI provider genworth will not allow CBA's DUA to approve it ...but genworth themselves can.
http://www.genworth.com.au/underwriting-policy/underwriting-policy/security/
I have a NZ resident going on a 90% LVR with CBA on a service apartment settled in April....
it's not a written policy for LMI to accept service apartments but it's done case by case;
From exp the following are what genworth looks for in a client:
1. Less then $300,000 exposure with Genworth
2. More then $600,000 in asset ( after all liabilities paid out)
3. The service apartment can not be in a time share arrangement ( ie Star City)
4. The building's overexposure limit with Genworth must be less then 5% ( for postcode 4000,2000,3000 etc...)
5. High serviceability, can service the loan without potential rent from this service apartment(IP)
6. Genuine savings ( not including FHOG)
7. Stable employment
8. have past dealing with simliar type of investment/apartment...ie experienced investor etc...
also reading your post further, how did you get a discounted stamp duty??? is this part of the QLD $10,0000 Boost? ie is it off the plan/ brand new???
Regards
Michael
http://www.genworth.com.au/underwriting-policy/underwriting-policy/security/
I have a NZ resident going on a 90% LVR with CBA on a service apartment settled in April....
it's not a written policy for LMI to accept service apartments but it's done case by case;
From exp the following are what genworth looks for in a client:
1. Less then $300,000 exposure with Genworth
2. More then $600,000 in asset ( after all liabilities paid out)
3. The service apartment can not be in a time share arrangement ( ie Star City)
4. The building's overexposure limit with Genworth must be less then 5% ( for postcode 4000,2000,3000 etc...)
5. High serviceability, can service the loan without potential rent from this service apartment(IP)
6. Genuine savings ( not including FHOG)
7. Stable employment
8. have past dealing with simliar type of investment/apartment...ie experienced investor etc...
also reading your post further, how did you get a discounted stamp duty??? is this part of the QLD $10,0000 Boost? ie is it off the plan/ brand new???
Regards
Michael
some very interesting points. The broker will be having a word with the bank tomorrow to get the real story. All we got on Friday was that the insurance company declined as it is a service apartment. And I'm sure I can get a letter from the building management to say upon settlement we can be out of letting pool. Will keep you all posted..
Aaron
I don't think it helps their application with this lender but if they still want it they can approach a different lender and put down a >20% deposit.
I asked the question because I came across one of those apartments before and I wasn't sure if I could get finance. The agent was telling me that finance is no problem but I wasn't convinced.
They can still stay with CBA if they can cough out a 20% deposit...
The LMI rejected them.. it wasn't the bank; im sure the bank is fine with it...
Agent alwasy say EVERYTHING is easy; that's the only way they can get you to sign your life away ahahh
But generally service apartments are not to hard, it only gets hard when you have a unit that's under 30 squ meters....then it gets tricky!!
Regards
Michael
Why is that ??
Because they're not true residential nor are they true commercial properies. Limits your potential buyer pool and therefore has increased risk. But I think you already know that.
