Forum Replies Created
There’s no pattern – the only thing to remember is that it’s not a standard variable based product so they can offer enticing rates to new borrowers, whilst letting their back book (existing clients) rates float up to balance their costs.
The only way you can avoid this is via a SVR product, but then they might not be discounted as heavily but will be more consistent in cost.
I’d note that this doesn’t mean all non-SVR based loans are bad – there are a lot of great lenders which don’t structure their loans as SVR products but still have consistent good pricing.
Best thing is to speak to your broker – you should have a trusting relationship with them. If you feel you cannot trust their advice then this may be a symptom of other issues and you’ll need to work out whether this is for a genuine reason and need to look elsewhere, or just fear of the unknown.
BTW – the product has been sitting around the same pricing for near on 6 months so they have been consistent in the near term – whether this remains over the next 29.5 years of a loan term remains to be seen.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
If you’re living in the property switch your loan to the owner occupied coding – this will reduce your rate significantly.
As per if you move out in the future – the lender will generally not require you to notify them/reassess your debt/make any new application – heck if you call up they will probably not have a clue what to do and just hang up.
When you move out, just make sure you have the appropriate insurance setup for it being an investment property and no longer an principal place of residence.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Logan is OK – net yields aren’t amazing (if existent at all!)
My concern with the council area in general is the council has actively noted that their development plan is to keep increasing land release from their extensive undeveloped areas to try stifle property value growth over the longer term – to try to keep the council region as affordable to low-middle incomes.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hey David,
You’ll find those days are over – lenders require any loans that you’re guaranteeing/structures you are a director of be loaded into the liabilities of applications so there isn’t a magic bullet in this regard.
fxdaemon – you still need to provide personal guarantees for commercial lending, hence why its generally best to start with exhausting your traditional residential borrowing, then move into commercial property. Be careful not to exhaust it before releasing any available equity however, otherwise you might have no borrowing capacity to release the deposit funds, leaving you in a catch 22 situation.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Unless you have substantial income elsewhere it is doubtful. Lenders are required by law to look at your overall financial situation and stress test any debts etc. This means that before even considering what your existing IP mortgage is – they will plonk living expenses of $24,000+ p.a they will want to see covered, only take 80% or less of the rent you receive, stress test the mortgage repayments of your mortgage by more than double etc.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
They play in a few spaces with white labels and the like.
I’d note that they don’t work on a standard variable with discount basis – so their rates can change depending on the customer – with cheap rates offered in for new customers, and then floated up with time whilst cheaper rates are offered again to gain more business and not existing. With interest only rates continually rising at this time, this may mean you might be taking a ‘cheap’ rate – and then find it rises shortly after leaving you back at square one. Whereas a SVR backed product means they can’t play the same games in terms of bait and switch/new customer only rate offers which entice people in, but don’t necessarily stay for the life of a loan.
I’d say if you want to stay IO – consider whether a fixed rate might be right for you – otherwise you’re going to risk further rises which will erode any savings. Alternatively if your cash flow can support it, P&I is all the rage with investors due to <4% interest rates with some products which the interest saving pays for a significant portion of the principal component of the payment.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
If you do end up using a POA – make sure you keep the original POA document as this will generally be required to be provided to the lender during the finance process/prior to settlement. If you throw it out/scan and get rid of the original you can leave yourself in a pretty tricky spot.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
It’s not about tightening – your broker probably just isn’t as familiar with commercial or has access to non-stress tested products. The original post still remains the same in terms of options with lease doc and even full doc without stress testing of existing commitments.
As per dividend strategies – that can help. Overall you will need to show 1-2 years of tax returns showing the dividend income and have this shaded down to a lesser amount (ie 80% of the income received). It’s effectively treated the same as other income but with more strenuous evidence requirements (the tax returns than just a statement from a PM or lease agreement) – so I wouldn’t say its any more favourable.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
I’m curious – are you saying you are looking to do a development which only requires 100-250k (talk about a range to begin with) in development costs to divide 56 allotments?
If you’re looking at finance you will definitely struggle in the current environment, with most lenders not wanting to take on first time developers at all – so you will have a limited range of funding partners who will consider this.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Good question. I think I’ve explained this in another thread you’ve asked similar – effectively with commercial it’s possible to still borrow indefinitely so long as you have an overall neutral portfolio in real terms. In this scenario the borrower can indeed continue to borrow as the new transaction isn’t seen as a burden in further transactions.
Residential lending rules are completely different with regulator requirements making it nigh on impossible to have a positive improvement to your borrowing capacity with a purchase unless its effectively a majority cash purchase – which defeats the purpose of using an asset class which benefits from being able to effectively leverage.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Corey Really like the information but for me you just touched on one aspect of the title,
I would love to hear if you were starting today how would you reach say 100k in income within the shortest time frame?
Including average wage, etc.
Think it would be useful to lots as well.
Kind regards
Jaxon AveryGood question – it really depends on the person as to how they can get there the fastest. ie age, what assets they have to start with, risk profile – there’s a millions strategies for a million people.
Overall the general trend is definitely in building an asset base in property, which you can then draw on into other effective income generating assets. (ie shares)
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Basically no capital growth. You have to find out whats the rental growth if any – otherwise you might end up paying cash for an asset which will have increasing costs each year and stagnated rents – quickly reducing your cash flow from the investment to a low level.
Personally I would rather not have a property which has a maximum potential net return of 5.4% per annum assuming nil, or potentially even negative capital growth.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Just an update on this – a number of lenders have been removing/looking to remove their lodoc products for commercial lending. Interestingly the lease doc products which provide the best bang for buck in terms of extending your borrowing capacity have not been limited – and actually had more broader policy features to allow for larger loan amounts etc.
I would note that even if you’ve got a constrained borrowing capacity you may still be able to use full doc cost effective commercial lending. With the very different borrowing policies in commercial compared to residential lending, some lenders still calculate existing at the actual repayments made and not at higher buffered amounts etc. As an example – we recently completed the finance package for a client who has <200k borrowing capacity left for residential lending, but instead we secured lending for them to purchase a commercial property @ 1.5mil @ <5% interest rates, 75% LVR with a 25 year loan term, instead of the more prevalent 15 year periods a number of lenders are offering.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Definitely engage a property manager to handle this for you – that’ll keep it running above board.
You’ll need to work out how to handle any costs of holding the property and how to pay for these – the agent should be able to facilitate this. if you have to pay into a single account you can have the bank account require both parties to give authority for any transfers out.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
There’s quite a bit written about that product – in most cases you end up coming worse off than if you had an aggressively priced PPOR and IP debt. The big caveat is that you can only get as low as that interest rate if you have multiple times the amount of IP debt at a substantially higher rate to offset the interest saving.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Doesn’t surprise me that the builder isn’t too happy. I’ve never had this issue – I just provide the build documents to the accountant and a report from a quantity surveyor.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Don’t worry about it too much then – the variety of commercial products at this time means that even should your serviceability be constrained with time, there’s freestanding products available through certain brokers accredited with commercial lending panels which can be used to allow you to continue purchasing without your existing portfolios dragging your borrowing capacity down.
Most people will run out of deposit funds before they run out of capacity.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Commercial generally won’t help your residential lending capacity all that much. In terms of commercial though it can help, or be treated as neutral/excluded from calculations – allowing you to keep rolling into new purchases as long as you have sufficient deposit funds.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Not the worst interest rate out there, but likely to be able to be improved depending on how you would like to have it structured. With the right lender you could get a an IO loan in the low to mid 4’s, else if it suits your strategy there’s P&I options at sub 4% at the moment.
To get the best bang for buck – have a chat with a broker who will be able to let you know what your existing lender should be able to offer you without having to move, and then compare that against options which may be available elsewhere.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Steven,
The last option I’ve suggested will do just about that https://www.realestate.com.au/neighbourhoods. Otherwise sift through all the data in Australia – but you’ll find with over 3800 suburbs in Australia over 2000 of them will likely be <500k and be of little value to search via that method.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
