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Boarding House Loan

Posted: Mon Sep 23, 2019 1:10 pm
by LiamC
Hi there,

I am interested in understanding the current lending appetite for a Boarding House Development. I currently own an Investment Property and would like to knock this down an complete a 7 to 12 units Boarding House. I am a Licenced Builder.

What are the current LVRs for this type of development. Does this fall under Commercial lending?

Generally with these types of properties the rental yield is quite high, therefore I don't think serviceability will be an issue. Do the lenders account for 80% of rental income when assessing serviceability? Would a rental appraisal from a Real Estate agent be required to determine serviceability?



Re: Boarding House Loan

Posted: Mon Sep 23, 2019 10:13 pm
by Otto Dargan
Hi Liam C, welcome to the forum.

There aren’t a lot of lenders that accept boarding houses as security. We have a couple of lenders on our panel of lenders that can lend against these properties on a case by case basis. And that's who we're working with.

Yes, boarding houses with 6 or more units/ bedrooms will fall under commercial loans. It also means the loan to value ratio will be limited to 60%-70% of the property value. The property must also be located centrally in a major capital city.

Yes, typically lenders will only use 80% of the rental income for serviceability to account for property repairs, taxes and maintenance costs.

Yes, a rental appraisal will be required from a licensed real estate agent. The banks will also have their own valuer do an appraisal as well and use the lower of the two figure.

Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our online enquiry form to discuss your options.