How do banks consider bed and breakfast loans?

Any general questions you might have in regards to loans and finance.
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kenryu
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Joined: Wed Jul 03, 2013 8:27 pm

How do banks consider bed and breakfast loans?

Post by kenryu »

Hello! I work for an organisation as a clerk. I earn $52,000 annually and I want to buy a bed and breakfast property. I don’t know what banks check before approving a home loan for a B&B property. Can anyone explain this to me along with the amount I may be able to borrow?

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Otto Dargan
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Re: How do banks consider bed and breakfast loans?

Post by Otto Dargan »

Hello kenryu.

Welcome to the forums.

Some lenders may not consider a bed and breakfast (B&B) as a residential property. For those lenders who do, you will be required to meet certain conditions to get such a home loan. These may include conditions such as:
  • The property is no more than 50 hectares if it is for residential purposes.
  • If the purchase is for commercial purposes, the lender may require you to show the business plan as well as income projections for the business you plan to run. This will also allow you to hire professional staff such as cleaners or cooks although traditional B&Bs are operated entirely by the owners.
  • For residential purposes, a bed and breakfast property zoned as a Category 1 or a Category 2 is generally preferred by lenders. Regional and Category 3 properties may be financed if you have a larger deposit.
The lender is ultimately looking at the viability of your new business and the saleability of the property. This means that your business plan may be assessed on a case by case basis. You may increase the chances of approval if you create a feasible and impressive business plan. A bigger deposit may also help your home loan get approved.

You may be able to borrow:
  • Up to 90% LVR, if you are currently employed and the property can be used as a standard residence.
  • Up to 80% LVR, if the property can only be used as a B&B and not a standard residence.
  • Up to 80% LVR, if the income from the B&B will be relied upon to pay the loan.
You may be allowed to borrow more than 90% LVR if you take out a guarantor loan. Although interest rate discounts are rare, you may find some lenders offering them on a case by case basis.

Cheers,
Otto
Otto Dargan
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P | 1300 889 743
Home Loan Experts

kenryu
Posts: 53
Joined: Wed Jul 03, 2013 8:27 pm

Re: How do banks consider bed and breakfast loans?

Post by kenryu »

I planned on borrowing more than 90% LVR, and it seems I can only do so with a guarantor home loan. Can you please tell me what other benefits this type of home loan offers?

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Otto Dargan
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Re: How do banks consider bed and breakfast loans?

Post by Otto Dargan »

Hi kenryu,

You may find a guarantor loan suitable to borrow the entire 100% of the property value.

Aside from the possibility of borrowing more than 90% LVR, the borrower may enjoy other benefits. Some of them are as follows:
  • As a deposit is not required, you may purchase a property immediately.
  • As the payment of an LMI premium may not be required, you may save a considerable amount of money.
  • You may receive discounted interest rates from some lenders.
  • When you buy the property, you may be able to consolidate some minor debts such as credit card debts.
  • The guarantee size may be limited to a certain amount.
You can go through our website for more information regarding B&B home loans as well as guarantor loans. If you want to talk to one of our experts then we can be reached on 1300 889 743 or you can enquire online.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

kenryu
Posts: 53
Joined: Wed Jul 03, 2013 8:27 pm

Re: How do banks consider bed and breakfast loans?

Post by kenryu »

Thanks a lot for replying so soon. I’m really excited about all this and I plan on calling you to help me out. Your website has helped me plenty and I’ve shared it with my friends as well.

Cheers :)

Bukowski86
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Joined: Thu Jun 27, 2013 5:04 pm

Re: How do banks consider bed and breakfast loans?

Post by Bukowski86 »

Hi, I want to take a home loan to purchase a hotel unit. I found that a hotel unit mortgage is available and that I can apply for it. How much can I borrow on this type of loan?

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Otto Dargan
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Re: How do banks consider bed and breakfast loans?

Post by Otto Dargan »

Hi Bukowski86,

Most lenders may restrict the amount you can borrow significantly while approving an application for a hotel unit mortgage.

You may still be able to borrow up to:
  • 85% of the property value, if you are a first home buyer.
  • 85% of the property value, if you are an investor.
  • 80% of the property value (on a case by case basis), if you apply for a low doc loan.
Depending on the nature of the property, you may be able to borrow up to 95% of the property value in some cases. If the lenders accept your hotel unit as security, you may also be able to receive some interest rate discounts.

You can check out our website for more details regarding hotel unit mortgages.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bukowski86
Posts: 49
Joined: Thu Jun 27, 2013 5:04 pm

Re: How do banks consider bed and breakfast loans?

Post by Bukowski86 »

I see. Thanks for the info, Otto.

I’ll make sure to surf through your website and call you if I want to learn more. Bye.

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