Help with purchasing second property - Chch

[edm]

Hi everyone,

I just wanted your opinion on purchasing a second property in Chch.

I recently purchased a rental property for $366k with a deposit of a $100k.

I am considering getting another property around the same price of ~$350k, however when I spoke to my bank manager I was given the following calculation;

Security
$292,000 being 80% of the first home value
$280,000 being 80% of a new investment costing $350,000
$572,800 Security value to lend to.

Funding:
$266,000 existing approval.
$350,000 possible new purchase
$42,200 minus cash required.
$572,800 possible new funding

I just wanted to find out why he has not valued the first home at a higher value, to enable me to leverage more, therefore reducing the amount of capital needed for the second home? Is this normal for bank managers, or would I need to obtain my own valuation of the home to prove to the bank that it is worth more?

Appreciate all thoughts.

Kind regards,

Ed.

[speights boy]

or would I need to obtain my own valuation of the home to prove to the bank that it is worth more?

Yes.
But make sure you use a valuer approved by the bank.
It is still at their discretion as to whether they use that valuation or stay with the 366k purchase price.

I just wanted to find out why he has not valued the first home at a higher value,

Because he is not a registered valuer, and he has to show proof to his credit risk department that the property is worth more than 366.

PS: Small point, but I make it 43.2k deposit required.

[edm]

Hi,

Thank you for you time in replying.

Ed.

Yes.
But make sure you use a valuer approved by the bank.
It is still at their discretion as to whether they use that valuation or stay with the 366k purchase price.


Because he is not a registered valuer, and he has to show proof to his credit risk department that the property is worth more than 366.

[Keys]

Probably valued it at RV

[reepr]

Sums are right ( almost... see speights boys post ) Just written confusingly. See below if it makes it clearer.

Security
$292,800 being 80% of the first home value
$280,000 being 80% of a new investment costing $350,000
$572,800 Security value to lend to.

Funding:
$292,800 ($266,000 existing approval. + $26800 to get LVR to 80%)
$280,000 (leveraging new purchase of $350,000 to LVR 80%)

$572,800 Total funding the bank will lend you at 80%

You already have used $266,000 of this maximum lending, leaving you $306,800 that the bank will lend you, i.e. a shortfall of $43,200 you need to 'find' for a deposit.

[Rosco]

Hi Ed,

Generally banks wait a certain period before allowing revaluations on a property. From my experience this is 6 months.

So if you have purchased your first property recently, this might be within their time period, so might not allow a revaluation.

Best thing to do is ask your bank manager why.

Ross