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Hi Adam,
What you are doing is right on the border between residential and commercial. You could go either way. The choice would depend on your situation, your intentions and your needs. You would really need to discuss this in detail with a mortgage broker to work out the best way forward.
It is when you apply for a construction loan that they will then use the on completion valuation. I.e. you need to have your builder / tender in place too. Pre-sales are irrelevent for residential finance and in many cases essential for development finance. As a general rule building up to four dwellings on one title is residential and any more is commercial / development.
Wade it is quite likely that the bank valuer will value it "as is" and will ignore the value of the DA. I have seen these go either way, however more often than not the bank valuer will ignore it when instructed by a bank to value for mortgage purposes.
When you apply for a construction loan to build them then they can take the on completion value into account which would effectively include the DA value.
200 acres is more viable, however still outside policy for most residential lenders. For a home loan most lenders want less than 50 hectares, some want less than 8 hectares! The cheapest bridging loans are types of home loans. If the property is large then you would have to seek more expensive specialist finance.
With the property being 1500 acres it will be unacceptable security for most lenders. Off the top of my head I don't know one that can help with that large a property AND offer a bridging loan. It is a little complicated. My recommendation would be to find out why they want a quick sale and see if you can negotiate around that. There are a few private lenders / commercial lenders that can help with a property that large as security, naturally they are a little (or a lot!) more expensive.
Auctions are quite dangerous, and there is no perfect way of protecting yourself as the purchaser. The bank can't effectively value a property prior to auction, as by definition the sale price is the market value. Unless of course two bidders went way out of control.
Please be aware that some lenders have pre-approvals that are effectively worthless. We've written a guide to help you work out how reliable is your pre-approval.
As mortgage brokers we all hate to hear of customers that were "pre-approved" on the spot in a bank and then they went off to an auction. In most cases the bank hasn't completed a full assessment and then when the customer wins an auction they then go through everything in detail. They do this to save money, processing a pre-approval and getting a credit manager to review the file is quite a lot of work. Many pre-approvals never convert to a full application so the banks just don't bother!
I don't believe in ordering a valuation prior to the auction as the bank valuer will generally value it slightly below the actual value. So if you then bid over that amount and apply for full approval you can only borrow using that initial valuation, not the purchase price. This is because the bank valuer is unlikely to do a new valuation a week later saying a property is worth more than in their prior valuation.
Buying at auction is best avoided for first home buyers or for people with very little in the way of a deposit. If something goes wrong there aren't many options. Unfortunately there are plenty of homes that are sold at auction and if you want them then you just have to take the risk.
By the way there is a template for a returning from maternity leave employment letter here. Just scroll down the page for the wording for maternity leave. Generally you will need to provide a little more evidence than just a letter, primarily showing your income from when you were working to backup the letter itself.
It is likely that increasing your existing loan (likely as a separate loan account) is the best option. BankWest has relatively competitive LMI premiums.
Do not cross securitise the properties! This will make the LMI quite expensive, as the individual loan size will be >$500k for both loans and so both will be charged a higher premium rate. We have an LMI calculator on our website you can use to work out the cost of LMI for each loan. BankWest's premiums are relatively similar to lender # 5 in our calculator.
Note that if you paid LMI on your current loan when you took it out then you will only pay an LMI premium on the increased amount if you increase your loan with BankWest. The calculation of this is more complicated and our calc isn't designed to handle this type of query. However it will be cheaper than our calculator quotes. As a general rule with BankWest the premium you originally paid will be deducted off the new premium. This is because they use QBE as an insurer and that is their policy.
Keep in mind for tax deducting the interest it doesn't matter what the loan is secured on. It only matters what the loan is used for. So if you borrow on your home to buy an investment property then the portion of the debt on your home that was used for investment purposes should be tax deductible. As always, talk to your accountant.
Just be careful of mortgage brokers that sell new properties as part of their debt reduction plan. We've seen quite a few sell overvalued properties, just do your own due diligence and research into any strategy they propose. I haven't dealt with them before.
Yes this is acceptable to a few lenders as an exception to normal policy. Please note that due to new legislation that was introduced on the 1/1/2011 some lenders are being cautious to any policy exceptions where the customer cannot prove that they can afford the loan with their current income.
If you are borrowing >80% of the property value then you are unlikely to be approved.
The policy from one of our lenders for maternity leave mortgages is as follows:
Process:
- applicants payslips (from the last 3 months prior to commencing parental leave)
- letter from employer confirming employment and salary
- letter from employer stating the terms of the parental leave, particularly the return date and the employment tenure upon return (FT, PT or casual)
Credit decision
- how long to they have before they return to work?
- do they have liquid reserves to fall back on? Do they have any cash to fall back on if they are unable to service in absense of the female's income?
- does the SP allow for child care costs
- does the SP include DSS payments which may cease upon their return to work
- have they included expenses for the new child
Upon considering all of the above, if acceptable the lender can take up to 100% of the income.
If the flat in Melbourne has no loan on it then you can use the equity in that to fund this investment without the need to bring in your funds from overseas. I agree with Jamie it is likely to be best to use interest only for this new loan.
You can also consider a guarantor loan if your parents are happy to provide security for your loan. This is only an option to consider, it is not suitable for everyone. If you do take this approach then you should have a plan to remove the guarantee as quickly as possible & should consider taking out income protection, life & TPD insurance.
This can allow you to borrow 100% plus costs for owner occupied or investment purposes without paying LMI.
That is right most will not accept it more than a 20% increase. There are two lenders that just use the most recent years income. However if you are looking at $45k between you then I think a low doc loan may be the only option. You can read more about how lenders assess self employed income here.
The rationale behind this policy is that if your income fluctuates significantly between years then it may just go back down again. It isn't fair, however that is how most of them do it. Most would only use 120% of your previous years income.
Finance for the self employed is very complex. You would really need to show your financials to a good broker for them to be able to work out which lenders you qualify with and how it would all work. There are factors to consider such as:
* Is your husband a contractor with no employees & no major expenses? If so then a much shorter time in his current role would be fine with some lenders as they would assess him as being PAYG.
* Has your husband been SE for a minimum of 2 years, if not then many lenders will not accept him.
* Different lenders assess income in different ways. Some take the most recent years income, other average the two years. There are also some expenses he has which can be added back.If you have previously had a proper pre-approval via Aussie then it is likely that you will be ok. The "you can borrow this much" from a branch is meaningless, it is not a pre-approval and has not been to a credit department. It is dissapointing that the Aussie rep didn't investigate your needs properly to begin with and select the breakfree package for you from the beginning. If you were borrowing under $250k then the breakfree discount isn't competitive in which case Aussie's system would have likely have removed it from the results. If you are borrowing over $250k then the breakfree is relatively competitive.
Be careful with on the spot pre-approvals, in particular if you are borrowing over 80% of the property value. If the loan needs to go to their credit department for approval then they can (and very often do) disagree with the branch staff. Read through this forum and you'll see countless complaints from people who have been pre-approved, won an auction and then to find out that the bank doesn't want to do their loan.
In ten years you can extend the int only period with ANZ by internally refinancing the loan or by refinancing to another lender if ANZ refuses to do it. You could also consider a product switch to their line of credit product which I believe is evergreen (no set term).
They very rarely self insure at 95%, it is much more common for existing customers at 90% LVR. The self insurance saves stamp duty on the premium so it is a maximum saving of around 10%.
Not every lender requires you to be an existing customer. In addition to this some do not allow even existing customers to borrow 95% and have strange definitions of what an existing customer actually is! Borrowing 95% is very much a specialist area and choosing the right lender requires a full understanding of your situation.
Yes it can still be done however as Richard has mentioned it is very strict. The basic criteria are:
- 3% genuine savings
- Mnimum 6 months in job (ideally 12)
- Few enquiries on your credit file
- Low consumer debts
- Acceptable credit score (based on location, assets, liabilities, credit file, occupation and many other aspects).
- Current rates from 6.9% upwards so they are still quite comeptitive.
Good luck!
HSBC can consider Foreign Currency in US or HKD. As for SG I am not entirely sure however I expect there are still a few banks that can do it. It would just be a matter of doing the research to find out.
