Forum Replies Created
I wouldn’t suggest going to a branch with this but maybe Richard can look in to it for you.
CBA accept commercial as “collateral security” for home loans e.g. You can potentially use the commercial equity and the new residential without having to refi from NAB.
I settled a residential loan through CBA last year on this product. 2nd mortgage on the commercial required a deed of priority however no set up costs and a rate of 7.01% (0.8% discount) on the entire debt.
I don’t know of any other lender with this policy so worth looking at. If I can locate the policy doc I’ll post some more info.
Allow me to be the bad guy…
Te wrote:We used a broker to help us buy the business, set up a LOC with property equity and made it look more like and investment loan, rather than a commercial business loan. LOC $150K.That’s OK. Honesty is not required by banks anyway.
Te wrote:made small profits (08/09 $40K, 09/10 $80K) ……
we are currently only able to go LoDoc loan……Is it only me that fines it funny someone can tell your income but there are 100s of brokers that will still start talking low docs?:
Are you going to declare you actual income or make something up?
Of course I'm sure a good broker will tell you how much you can declare.Te wrote:The profitability of the business is probably going to plateau if not go into a lossWell that’s OK then. Put that at the start and I would have suggested a low doc
Te wrote:Its possible the rent will go up and there is a real chance that will adversely affect our profit.Now you're talking… Why not just declare 150k profit and all your problems go away!
Te wrote:we sometimes regret buying the business instead of property now! But hindsight is a beautiful thingIt doesn’t matter. We can do low doc. Bad for you. Bad for the lender. Commission for me. Everybody wins!
Te wrote:Anyone have any ideas of how on earth we can get ahead?Unfortunately yes. Cashflow is king. It is important to have your cashflow in check before you start gearing. I would focus on growing the business and increasing your income before fudging a low doc declaration and gearing for investment. Especially if you are concerned about maintaining profits in the business.
There are hundreds of brokers that will help you. In terms of Richards comments re Doctors; you should keep in mind that you could also see 10 doctors that wont prescribe medication that is illegal in Australia. But if you shop around you will find a back yard unregistered doctor (most likely in QLD) that will give you anything you need for a fee…
Also – to all the other financial professionals out there. With ASIC and there new undercover investigators posing as potential clients (looking for someone to make an example of). This deal has compliance issues all over it… Not only has TE noted the requirement of low doc because declared income it too low. There are also comments such as "there is a real chance that will adversely affect our profit"
Have to go now. My dinner is ready. Would not touch it with a large stick!
Sorry Te. Maybe your existing broker is not doing a bad job if he has knocked it back. Could even be in your best interests.
It’s not impossible. How much debt do you have on the house?
CBA use Genworth not QBE (unless they are now the same).
Defaults under $500 can be approved without going to the mortgage insurer. Unless the loan is over 1M, default is over $500 or another breach ( there are a few others), the mortgage insurer does not see the deal. Bankers often hide behind the insurer rather than telling you they have declined themselves.If your are refinancing the credit card a lot of lenders will want up to 6 months statements. Make sure you pay the bill on time so your statements don’t have any late fees or reference to being over the limit.
6 months statements are not always required. Just keep them clean to keep your options open.
Sebastian Shauw wrote:Equation: $350,000-$125,000=$225,000 the amount of equity in your home.
Maximum line of credit from your bank: $225,000 X 80%=$180,000.This is the maximum the bank will loan in this scenario, solely based on the home’s value.
In addition to Richards comments the above calc is incorrect.
Home loan of 125k plus line of credit of 180k would mean total debt of 305k.
305 / 350 = 87% LVR.
To work out your availabe equity mutiply your property value by desired LVR.
E.g. 350 X 80% LVR = $280,000.
Then subtract any existing debt.
280k less home loan of 125k = 155k available
Banks will generally take 80% of rental income and assume the other 20% goes towards agents fees, rates and maintenance etc (in my opinion that's quite generous for older properties that may require some work). They also assess on higher rates to ensure you can maintain your repayments if interest rates increase (usually assess 1% to 2% above actual rate).
So your projected $100 per week shortfall will be a bit bigger in a "sensitized" risk assessment.
In short it is unlikely you will be approved when on a pension.
The option of getting a guarantee in generally gone after NCCP legislation as you (the borrower) must be able to service the loan. Although guarantees still exist they are security based an generally not available for income support. Therefore not an option.
The other option that is available is to buy with a family member (if they are chipping in 70k cash why not let them go on title?).
It may not be appropriate in your circumstances however might be the only real option a bank would consider. It also assumes the other person has good enough income.
250k – can you let us know your bank?
In some cases there are reasons behind this
e.g.
1. If you have a good customer rating they may not need to value the property (your estimate may be OK)
2. Some don’t charge valuation fees and do not have the ability to charge them via the branch. Because they are wearing the cost they only order the valuation once they have completed an assessment and determined if a valuation is required (assessment for existing client can be done in as little as 15 mins – subject to lender)
3. Some let you order you own val (you can order your own with CBA on their website for $99 without applying) – it comes back to you not the bank – the bank just need the reference no when you apply.Unless you got offered an amazing deal it is generally not worth moving banks once exit fees, discharge of mortgage fee (bank), discharge of mortgage fee (titles office), new establishment fees, new mortgage registration fees etc are all added.
If you can let me know the bank I might be able to give more info.
Hi Packer, CBA can generally uncross with no fees. Restructure via a 3 page switch application. Should be as easy as pie.
evernat wrote:Hi allSo I go in to the commonwealth bank the other day to apply for my LOC to use for my deposit for first ip.
They first ask me where I'm getting the rest of the loan for the ip , I tell them Bankwest.
They proceed to question me why I would not just go with them for the whole loan ect.
They tell me even if I had the loan with bankwest the banks could still put an injunction on your ppor if anything went wrong with the ip loan.
Is this just a con to get you to go with them?
What do you guys think?
Just because CBA want to write the loan it does not mean has to be crossed. If you get the line of credit and new loans un-crossed they are as good as being with a different lender.
A few things people should be aware of:
*The banks need a court order to sell your property – even if they have a first mortgage
*When the bank needs to collect from other assets e.g. get an injunction over other property, they need a court order whether the other assets are mortgage to them or to another lender. Therefore much of a muchness.Keeping the loans not crossed is the important part. This allows more flexibility to restructure your portfolio and enables you to control the distribution of funds received from a sale (rather than the bank). The benefits of splitting the lending between banks does not really add to the benefits of keeping the loans not crossed.
Agreed with Marty. Land is OK up to 125 acres. Must be something else they don’t like so I’d get clarification…
If you take your 300k to 90% this equals 270k which nets a little cash to pay stamps etc. You already have your 5%.
It will come down to income.
I would say Richard is spot on here.
But if you want a more detailed answer here goes.
Acceptable existing income*
Plus acceptable proposed income**
less tax***
Plus neg gearing add-backs****
less living expenses*****
less repayments on existing loans******
less repayments on new loans******** some lenders don’t accept some forms of income (e.g. casual).
In some cases only a % of these forms of income can be used.
Some lenders require income to be evident for a specific time before being deemed acceptable income.** proposed rental income can be used. Usually at 80%.
This can be proven by valuation, lease, agents letter etc.*** you can work out tax on an ATO calculator which would be accurate. Some lenders allow for Medicare rebate where others do not.
**** after taking 80% rental of income, less propossed interest deductions (use actual not sensitized rate) you might have a loss. Go back to the ATO calculator and work out the difference on total income versus proposed net income. Add back the tax difference. This will only apply with lenders that allow deductible interest caclulations.
***** living allowance is generally based on a published poverty index however varies between lenders.
****** some lenders use actual rate. Some use sensitized rate. Lines of credit and IO loans generally assessed over 25 years. Credit cards calculates at a % of the limit.
******* generally a higher rate used. Try 1.5% above. Don’t count the IO term e.g. If 30 years with 5 yes IO reverting to 25 PI – work off 25 years PI
In a bizarre way the banks actually come out pretty close to each other if working on the same figures. If there is a large variance it is usually due to one lender forgetting about your kids or not declaring an existing loan or credit card.
Best option is to go see a bank manager or two plus a broker. Take your numbers and get them to show you how their spreadsheet works. Most can be worked out via the banks excel spreadsheet without an application needing to be lodged.
Most lenders will be happy to go through these calcs with you as you are a potential client.
No point in trying to manually work out your capacity unless you have in depth knowledge of bank policy.
Good for the major 4 who had the lowest Deferred Est Fees in Australia and can afford to waive them (two of the 4 already had).
Many non bank lenders only have a half good rate because they either get 4-5 years interest revenue; or if repaid within that time revenue from DEF.
Keep in mind that many non banks insure all loans. Over 80% they charge LMI to the clients and under 80% they pay the premium themselves (but get back via DEF if paid early).
There are two expected outcomes.
If you read between the lines I think the government is looking to support some building societies and credit unions; but at same time squash small non bank lenders out of the market.
Lenders like ratebusters with their low rate but $10,000 exit fees on a 500k variable loan will be a thing of the past.
doggity wrote:What are the banks rules on titles? Do they need the name on the title to be the same as who has the loan? What if the title has two names, one that is on the loan and one that isn't. Does that reduce borrowing capacity (since the bank can only have security over one owners share)You cannot mortgage half a property.
The loan contract can be in different names than the title however everyone offerring security (on title) must be either a borrower or guarantor (otherwise no mortgage can be lodged).
Putting the loan in your mums name and property in your name would breach new NCCP and the Code of Banking Practice (might actually be UCCC) as the “borrower” must have a financial interest in the transaction. Therefore not an acceptable borrower if the title is going in your name and she has no legal interest in the purchase.
She could consider setting up a family trust so future profits and eventual profit from sale could be forwarded back to you in distribution however if she is trustee and therefore a guarantor I would say ethically and morally there should be something in it for her.
The trust option would be a lot easier and cheaper than options outlined above.
No1
(previously Banker) – I locked myself out…To the best of my knowledge it is illegal to lend to someone who is bankrupt. Whilst bankrupt you will be allowed to earn up to something like 65k p/a and have a car to the value of x. You can not enter in to a credit contract – nor can a lender offer one to you.
It is believed that banks will not lend to someone who was once bankrupt. This is not true. Policy of the major banks is that they can not lend whilst you are bankrupt. After being discharged you can apply.
Once discharged it is more a matter of your credit rating – e.g. If your credit report still shows defaults and judgments you will have problems however when it is clean you can go to a major bank. You will still have to declare that you were once bankrupt however if you now have a clean credit report, stable employment etc you should; be OK with a bank.
They have no need to revalue unless you are borrowing more money. It will make no difference to the loan as it is already mortgage insured regardless of current value.
Even if they did get a new valuation for legal reasons they are not generally allowed to give them to customers. Therefore a pointless exercise.
Steve,
How much is your loan?
You are on Wealth or MAV Package with 0.5% discount?
You can increase the discount to 0.7% with no cost (7.11%).
Cheaper than ING.Susannah,
When X Investments p/l goes to the bank it has two options.
Option one is to set up an account in the name of ‘X Investments P/L’
Option two is to set up an account in the name of ‘X Investments P/L’ as trustee for ‘The ABC Family Trust’It is important to note ( as others have) a trust is not a legal entity. It is only a structure. It requires a legal entity to enter in to transactions on it’s behalf (the trustee) and legal entities to send its income to so tax can be paid (beneficiaries).
Terry mentions a trust is an entity for tax purposes, meaning it has it’s own tax return – not to be mistaken as a legal entity like a person or company.
Therefore answers to your questions;
1. Bank accounts and lending should be X Inv. P/L as trustee for the ABC trust
2 + 3. Contract and invoicing can be in the company only, or company as trustee (I would include the trust) – make sure you use the trusts ABN if it has one. Only the company name will be on the title and transfer ( as the trust is not a legal entity).
4. The trust has its own tax return. If there is a profit there will be a section at the end outlining which beneficiaries received those profits and how much they received. It will then appear in the beneficiaries tax returns as income.
5. A book? I don’t know of one. Trusts are very simple. If you get the basics right you will understand them – you will still need an accountant for the tax side.Important.
The trustee can also own asset in it’s own right, or carry on business outside of the trust. If it runs a business out side of the trust it will have it’s own ABN. The best way to know if a company is acting on behalf on a trust is to google “ABN look up” and enter the ABN. This will tell you if the A.B.N is linked to company or trust.
This is why it is important to have bank accounts and lending with company as trustee for trust. Otherwise without have the trust listed on contract or title someone could argue funds are not in the trust but rather owned by the trustee…
A large majority of small lenders pay mortgage insurance for all loans – even if only lending 10%. Banks usually only insure over 80%.
To remain compeititive smaller lenders only pass on the insurance cost over 80%. They absorb the cost for loans under 80%.
To date ASIC is indicating they will allow lenders to recover costs – but not charge penalties.
For loans terminated early; banks will “claw back” broker commission and don’t pay for their mortgage insurance – therefore have no costs to recover and are abolishing exit fees.
Smaller lenders will still recover their costs e.g. Broker commission and mortgage insurance from the customer. Most dont “claw back” broker commission.
In some cases a small lender will now charge more than $10,000 versus nothing from the banks.
This is nothing new. Problem is the government is exposing the banks for offering a lowest exit fees in Australia. Like normal they did not do their homework and by default – exposed the huge and often non disclosed cost smaller lenders.
Brunswick is only 6 km north of Melbounre CBD (I have walked it a few times – not far). Access by tram and plenty of trendy cafes..
Only downside is it is not that cheap anymore. Id buy there. But be careful – there are a lot of shoebox apartments and studios turning up there. Try to get 2 bedrooms if it is within your price range.
