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Why Do Banks Turn Down Loans

Posted by Paul Wilson

It is not always easy to understand why a loan may be refused. A Lender may turn down a loan application even if the financial side of the loan may stack up.

 The reason could well be because various aspects of the property may not be to the banks liking.

 What are Lenders looking for when they first receive a loan application for an investment property?

• banks want buyers to kick in a greater amount of cash against the property or have a larger share of equity in another, so that the risk to the bank is not so great

• the ability to meet repayments from the rental and if necessary, from the owner’s income

 • the area in which the property is located – in Australia at the moment banks are opposed to lending in certain regional locations and even certain postcodes

 • also multiple blocks of units, duplex or triplex or greater amounts all under one title are not desired by the lending institutions

 Along with the above facts, borrowers need to have all their financial information tidy and up to date.

Asking for a loan these days is like going for a job. Presentation counts. Provide a financial folder of copies of all your financial material in a bound folder along with your business plan for investing in property, how you will go about building your wealth and your projections for the next 3 -5 years.

Show the bank that you have given a lot of thought into purchasing investment property and how you intend to manage it.

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