Hey guys,
Just a question on Servicability again. I too have just walked into a bank and been knocked back due to servicability reasons. I think my best option will be to go to a broker and try and find a new lender but I would like to hear any suggestions you have. My situation is as follows:
Income of $51 000 year
Rent of $118pw.
Margin loan of $45 000 paying of interst only with total invested in managed fund of $97 000
1st IP located in Brisbane in 2000 last valuation $285 000 in jan 2006, $98 000 owing with $250pw rent
2nd IP located in Canberra in 2006 $265 000 owing bought at $260 000 estimated at over $300 000 value now and receiving $320pw rent
No other outstanding debts.
I am considering another investment purchase at the moment in the range form $250 000 to $300 000 with similar returns to the Canberra unit. I have just returned from OS so my income is higher so on that they will lend but of course that ceases now I am home. I have managed to use that to pay off some of the brisbane house which I am considering it my house and paying it off while I am still renting. Any ideas would be much appreciated to get around this servicability issue.
Hi Goosehead. yes, seeing a qualified broker is a good start as far as process of elimination goes. To give you an idea, one servicability calculator I used at one point over a panel of eleven lenders, yielded a result of around $150k as the lowest and $225k as the highest loan amount that would be 'pre approved' using exactly the same information – so don't give up yet- your bank is not going to tell you to go and see someone else……..As far as your loans go on the other properties, are they interest only loans or P&I? And was the bank that declined you on servicability the same as you have the current loans with? Some banks only count 70% of your rental received as income (maybe 75%) but most good lenders will allow 80% – that alone makes the difference between a Yes or No on the outcome. All the best.
Look into raising your rent if possible, even if it means changing tenant and offering incentives,
think about switching a large portion of your debt on your growth properties to interest only, with an offset account and store any extra repayments in the offset account that way your lowering your interest as the offset account builds up, but the money isn't actually coming off the priciple so it is easier to get at for further improvements or deposits on more property,
see if you can refinance at a cheaper interest rate with another lender,
maybe try writting a full budget up and a mini business or investment plan showing how you are planning to repay the debt it might help bring a marginal deal accross they line.
No disrepect to the last post but by switching your loan to interest only or refinancing to a cheaper variable interest rate will have little benefit increasing your serviceability with a subsequent lender and unlikely to worth doing given the externals costs of refianncing.
Many lenders take into consideration 100% of the rental income where the loan remains with a 3rd party and do not apply a sensitised interest rate on your existing debts so this would make a difference.
A good independant broker should be able to crunch the numbers for you and find a suitable solution.
Richard Taylor | Australia's leading private lender
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