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How do banks view old investors?

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  • How do banks view old investors?


    A question from me Mum. 70yrs old & on the pension.

    She has $ 350k equity in 4 properties ( all in the family trust). All properties are paid for. She wants to increase her portfolio for the benefit of the kids. She hasn't rung the bank yet so I thought I'd post .

    How would the banks look at this situation? How far could this 350k equity go towards more property at her age? Would the banks look at trust beneficiaries servicing loans?

    Appreciate any comments.


    The Jaberwoky.

    The only silly question is the one you didn't ask.

    The Jaberwoky.

    The only silly question is the one you didn't ask.

  • #2
    Hi Jaberwoky's Mum,

    Welcome to Pt, by proxy!

    I guess the bank will look at your Mum's ability to service a loan, the same as anyone elses, so that means her Pension + 75% of rent (including new purchase) less expenses has to be enough.

    I don't know if they make allowances for the older investor's (usually) lower cost of living or potentially higher cost of medical bills?

    May be worth checking with a broker first, before approaching the bank.

    Forwarned is forarmed!



    • #3
      Yep .. thats what I would have said.

      Except it has been my experience that the bank takes 30% of your gross income and 70% of your rental income into account when determining the amount of the loan and its serviceability.

      If you have four properties each being rented out that can equal a sizable income.

      I agree with the broker stance up to a point. If anyone can make it happen they can. The question is does Mum care where she gets the loan from. It may not be from the bank that she has been with for the last 30 years.

      Go Jaberwoky's Mum....
      Counter cyclic means always swimming against the tide

      Manawatu Property Investors' Association


      • #4
        Wow - that was quick. Thanks.

        As A beneficiery myself , would the banks take some kind of wkly pledge from the other beneficiaries to stack up the numbers up in her favor?

        Does this ever happen?

        The Jaberwoky.

        The only silly question is the one you didn't ask.


        • #5
          Your mum

          Hi Jaberwoky,
          Yes lenders will consider your mother as a borrower. As the properties are "rental properties" separate from "own dwelling", if anything went wrong, they would not have to force your mother out of her property.
          The properties offer good security and good income. Be careful which lender/bank you use as there are some who will look on this more favorably than others. Also, you only need to offer sufficient security as is needed, i.e. not all the properties.
          As far as trust is concerned, the Trustees will be the borrowers. The Beneficiaries will not unless they are trustees. The lenders may also require statement of position from them if they are not professional trustees. E.g. solicitor.
          I would need to know what rents are being received and I could then give you a borrowing strategy.