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If you are going to build your portfolio – bankwest is not the best lender to start off with unless there is a specific reason that you are with them (such as if you are planning to construct 4 dwellings on a single title).
A good mortgage broker doesn't need to be in the same state/city as you but certainly if you prefer to deal with someone face to face then Tom on this forum can help you.
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Jude13 wrote:Thanks for your response Shahin. Two further questions.1. How do the banks use the $170,000 in usable equity exactly? 2. What do you mean by tapping all of the equity? Sorry for not understanding but like I said I am new to all of this.You can draw upon the equity either by way of a line of credit or a standard variable product with an offset. With the latter – the funds would sit in an offset so no interest would be payable until the funds have been accessed.
However be careful of contaminating deductible and non deductible interest on the loan. There is a lot of things to factor – e.g. a lot of lenders will only allow for one offset and you may need a lender that can accommodate multiple offsets.
Tapping all the equity – accessing the funds at 80% so that you can use for subsequent purchases, renovations, etc depending on the strategy.
Who is your current lender?
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Why do you need to buy 10 properties in 1 year or however many years? Focus on quality of product (even cheaper properties) not quantity.
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A lender will lend you up to 90% (some times 95%) of the value of the property. At 80% LMI is not payable but anything over that is.
So if your property value is $400,000 then at 80% you have $320,000 in equity minus your current loan balance of $150,000 – the usable equity is $170,000.
Make sure the loans and properties are standalone and not crossed. Also ensure that all your income (include the proposed rental income) is going in an offset held against the PPOR loan.
Consider tapping all of your equity today even if you do not plan to use it all in the next purchase.
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Good work – create a "superman" account against the PPOR and pay IO. Divert all rental income to the PPOR Offset and then have all outgoings going from that offset.
Disaster diverted.
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a) how are you calculating "equity" and
b) different lenders may use different valuers so it could turn out that your equity is more than you think
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a) there are at least a dozen lenders out there – do you suggest the OP to approach each lender one by one or have the broker do this?
b) right or wrong – rate is one of the last things we talk about with clients. There is so much more to a loan than just rates. Careful long term portfolio planning is key.
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Yep classic case of cross securitisation and poor loan structuring. Good for the broker and the bank because it will give you less flexibility to move but terrible for you.
Did you go through longer term planning and discuss your plans with the IP and overall portfolio strategy?
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Get the property valued and see if you can access the equity in the property.
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This is why upfront valuations are key however be careful you dont have the same valuer inspecting the property. Also when they did the valuations – did you provide all the outgoing costs to the valuer?
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Be careful – option one has CGT implications. Best to understand your options before choosing the appropriate strategy.
Second thing is that you will not have as much ability to manufacture CG in a unit as you would in a house/land. That rule doesn't of course apply to all houses but definitely look at something that has a good land size, frontage, zoning, close to the station, etc and less focus on the house itself.
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Best to stick with the current broker as you don't want another hit on your credit file at 95%.
However – something is not right and Westpac is probably the best bank right now in terms of turnaround times.
Just to give you an idea – I submit an application this morning at around 8am and had it Formally Approved by midday.
Just tell him that you spoke to your friend's broker who is also going with Westpac and he said the turnaround times are 24-48 hours.
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There is no way that you cannot have an answer by now if you submitted an application to westpac on Monday.
Have you spoken to him since monday?
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If you submitted the application on Monday you should have received the approval back by Tuesday.
Westpac is currently working on 1 day turnaround times.
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Ok again thats good – if the application is structured correctly then application looks ok.
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Ok credit enquiries wise – you are ok. To a degree I would like to see a breakdown in the enquiries (i.e. if they were unsecured or secured enquiries).
Re the jobs – is it the same line of work/professional or is it a change in professions?
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Ok where to begin… I will make some comments in points format:
1. Lenders look at 12 months credit enquiries, then 6 months, then last 3 months. So the question here is what does your credit file specifically look like in each of those periods.
2. Some lenders auto credit score and some don't. Both Westpac and ANZ auto credit score so if applications are borderline then it may not be good to go with a lender that credit scores. Other lenders like Suncorp may be a good fit as they do not credit score.
3. There are different types of credit enquiries – unsecured and secured. Obviously unsecured credit enquiries are more destructive than secured enquiries
4. I have had many situations (even with Westpac) where applications have been declined due to multiple credit enquiries but they were due to the applicant purchasing so many properties so my point is that you should be able to justify explain the number of enquiries.
5. Credit enquiries are not the only thing that lenders look at – there is also employment background, occupation type, unsecured debts, number of applicants, asset position, and so much more so it would be a mistake to only look at the number of enquiries on an application.
Hope that helps.
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You will have finance restrictions so you will need to look at sub 80% LVR.
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Terry posts here can can be a good point of reference re the legalities of the caveat.
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Get specific legal advice – a caveat is not a legal instruct claiming ownership. It just states that you have interest in the property and issues will arise when it comes to further borrowings against the property. Lenders do not like caveats.
Also not sure how old your dad is but is age may be an issue so you need to factor this.
All in all please plan carefully rather than unknowingly and randomly choosing a lender and creating unnecessary hits on your credit file.
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