When does it become a commercial loan?

[jmillar]

I've seen two properties advertised recently which have got me thinking:

1) Townhouse at front of complex with a room which was previously used as a commercial premises. Could be rented to a hairdresser or small office and has separate entrance etc from the residence.

2) Corner block with 4 bedroom house previously used as an office by financial planning firm. Advertised as investment/house/commercial premises but I am yet to confirm zoning.

Just wondering if you could purchase these properties with a standard resi loan with say 80-90% LVR and then rent them partially/wholly as commercial premises?

Does the loan depend on what you are going to be using the premises for? Or the zoning? Also, what if the zoning is residential but there is an existing DA for a financial planning office and you could technically lease it to another financial planner?

Thanks

 

[Shahin_Afarin]

It depends on a number of things such as zoning. Even if the property is residential - a lender may deem that it falls under commercial loan policy.

For example if you are doing (whether it be purchasing an established or constructing) more than 2 dwellings on a single title which has resi zoning then some lenders will view this as a commercial loan and for some it will still fall under their resi terms and hence its a resi deal.

Regards

Shahin

 

[Rolf Latham]

both those places would have to be mixed use zoning.

If the valuers picks it up, you are toast,

Might be able to be done with a no val scenario, though at 90 it would be a little more difficult

ta
rolf

 

[jmillar]

Right, so anything mixed use/commercial/in1/in2/b5 business development etc is a commercial loan?

What if it's a resi zoning but previous DA approval for, say, a medical consultant. You buy it as a house on a resi loan. You then lease it to a dentist/doctor/physio etc.

Would this only get caught out by banks if you try re-value/draw equity etc? And would they then immediately want you to reduce your LVR to ~60% in accordance with standard commercial loan terms?

Thanks

 

[Rolf Latham]

depends on the lender

just doing a rural res 5 acres which has 12 doggie kennels and an oval larp pool for doggie hydrotherapy, used by previous owners as a business, now defunct, but zoning still allows

WBC didnt want to go above 65 %, cba look like 90

ta

rolf

 

[Shahin_Afarin]

Each lender has a completely different policy its not funny. You just need to pick the right lender for what you are doing (ie the security).

Regards

Shahin

 

[Aaron_C]

It depends on the zoning but also how the property is configured. If the zoning allows resi use, and the configuration of the house is such that people can live there then it should be fine. Upfront valuations are essential for this.

 

[mystery]

We recently bought an old shop/residence that had been used as a photographic Studio for 30 years, ... it was zoned as multi use.

We managed to get a resi loan no probs (Lender Westpac), but I'm not sure if they did a valuation. At no time did we mention to them that it has been several commercial business's since 1930 when it was built. We borrowed 80%.

If they don't ask, don't volunteer.

Mystery

 

[jmillar]

OK, that's interesting. Will certainly have to confirm zoning and existing DAs on each property.

What happens if you get a resi loan and then the lender finds out it's being used for commercial? Will most of them want to reduce the LVR?

Thanks

 

[Aaron_C]

What happens if you get a resi loan and then the lender finds out it's being used for commercial? Will most of them want to reduce the LVR?

Well that's the great thing about residential loans - after approval they don't bother you for 30 years unless you refi so they will never know.