Re finance when vacant and during settlement

[fabi_90]

Hi there,

I just bought an investment property B. Settlement will be in approx 40 days. My intention is to renovate this property and subdivide the land into 2. Then sell the renovated property.

I also have an existing investment property A, that because of personal issues I couldn't refinance before buying property B. Can I refinance property A now, within the settlement period of B? Or during the 1st month after settlement? Because of tax implications, I need to refinance it to a fixed rate, ideally in the next coming months. Same LVR as I have before, same Loan amount. Existing bank I use does not offer good deals, that is why I need to go to a new bank and justify my finances and start a new application.

My concerns:
1)when I bought property B I included expected rental as income, but I know I am not going to rent this property B. Do I have to say the bank that this property B is vacant and not trying to find tenants? Serviceability still work for me without renting B

2) If I refinance A during settlement of B, can I have problems with the settlement? Do I need to tell bank of property B that I will refinance A?

Thanks in advance,
Fabi

 

[Marty McDonald]

I have these types of scenarios often with my investor clients who are mid build on a few different properties at any one stage. I'm not sure if you're using a broker or not but this is just the type of scenario where we earn our money. So easy to paint yourself into a servicing corner if you don't know what the different lenders policies are and don't plan it out.

 

[jonmardell]

Hi there,

I just bought an investment property B. Settlement will be in approx 40 days. My intention is to renovate this property and subdivide the land into 2. Then sell the renovated property.

I also have an existing investment property A, that because of personal issues I couldn't refinance before buying property B. Can I refinance property A now, within the settlement period of B? Or during the 1st month after settlement? Because of tax implications, I need to refinance it to a fixed rate, ideally in the next coming months. Same LVR as I have before, same Loan amount. Existing bank I use does not offer good deals, that is why I need to go to a new bank and justify my finances and start a new application.

My concerns:
1)when I bought property B I included expected rental as income, but I know I am not going to rent this property B. Do I have to say the bank that this property B is vacant and not trying to find tenants? Serviceability still work for me without renting B

2) If I refinance A during settlement of B, can I have problems with the settlement? Do I need to tell bank of property B that I will refinance A?

Thanks in advance,
Fabi

Hi Fabi, regarding question 1 you could use a rental appraisal letter to verify income. Because you are not actively trying to find a tennant i would not see this as a problem as once the renovation is complete your intention is to sell it but if you cant get the price you are after you would rent it so that is when the rental income kicks in. For question 2 technically you are supposed to notify the bank of any changes to your circumstances prior to settlement but in this case same loan amount i would not see it as an issue as they have already used the debt in servicing.

 

[fabi_90]

Hi Jon,

Many thanks for your answer.
I decided to make 1 step at the time and will refinance my existing loan once I settle on the new property. Just for my peace of mind. It won't be any difference. Then, I can refinance the other one. I was explained that there is no problem if it is not rented at that specific time. But I might also reconsider renting the new property while I dealing with council.

Many thanks you all. I am just a bit nervous or anxious, even thought I have done it before