It is not true to say that because you are co owners on an investment property with someone else, that you cannot then buy other property on your own. But, that doesn’t mean that it is going to be the easiest thing to do, because banks will assume the worst in order to protect themselves and their legal interest. For example, you may have a rental property in which you receive market rent for, but perhaps now you are looking to buy a holiday home for yourself. You aren’t going to want to purchase this with your friend, so the only option is to look at purchasing the next property on your own.
If you already have a loan, then the bank is going to look at the previous loan to determine whether they think you will be able to afford to take on more. Borrowing expenses are expensive on their own, but when you add more onto this, another property nonetheless, things can start to get very tricky.
If your repayments with your co owner is $4,000 per month, and the rental income was $2,000 per month, then you would assume the bank would use half of these figures in their assessment. This is not the way they will work it out though.
We mentioned above that banks are going to assume the worst, and this means that they will assess your loan as if you are making the full $4,000 in loan repayments. Only half of the rental income will be counted as relevant as well. This will lower your chances of being accepted for a second loan due to all of the other expenses that you are going to need to face such as property expenses, legal expenses, stamp duty, and so much more on top of your loan.
The good news here though, is that not all banks have this policy. Some lenders will consider how much you are actually paying of your current repayments, rather than assuming you pay the entire thing. As such, you are more likely to be approved as your total income won’t be as impacted by the huge deduction, and the rent received will further help you.