Greetings All,
I am interested to know how one can improve serviceability to be able to purchase more properties.
I have some equity (min $100K) in one of the properties I hold & some cash savings ($60K) which either will be able to cover a deposit on a new place, but since I already have other properties with LVRs up around 80 I will be struggling to convince the banks that I can service more loans.
My question is how do you overcome serviceability issues?
Some ideas I had were increasing wages, waiting until you have paid down the other loans, receiving more rent helps, selling properties that are not providing good rental returns, but I guess I am impatient so was wondering if there are other ways to let me keep expanding a portfolio sooner.
I really appreciate your comments.
Cheers.
jxf wrote:I already have other properties with LVRs up around 80 I will be struggling to convince the banks that I can service more loans.
Have you tried? Differen't lenders have differen't serviceability levels.
Do you have any credit cards, store cards, personal loans, car loans, etc that could be paid off with your $60k savings?
You could do some cheap, cosmetic renos that will allow you to jack the rent up a bit.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
As Jamie mentioned the serviceability model amongst lenders varies considerably especially where you hold other investment properties.
Some lenders take a percentage (traditionally between 75-80%) of your monthly rent others take 100%.
Some lenders will make an adjustment given the negative gearing others will not.
The variables are just too many to list.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Do you have any credit cards, store cards, personal loans, car loans, etc that could be paid off with your $60k savings?
No store cards, no personal loans, no car loans and only 1 credit card with a $1,000 limit (current balance = $0 ).I will look into a reno for one of the properties (it's an older unit and would therefore benifit as you say by getting more rent), the other properties are all in pretty good nick.
Cheers again for the comments, I will go back to the mortgage broker see what other lenders are out there that may help.
Richard I might send you a private msg with more details if that's ok.I've got similar problems. I can't see a solution in sight, even as the rent received increases as the bank sayes too much of our income is reliant on rent (which is not reliable). To buy our last house (which was going to cost a whole $100/mnth after rent rec'd) I had to play hardball and threaten to move all of our mortgages. Some of the things that did work in our favour was the fact we've never missed a repayment and are 3mnths ahead on all loans. Something that works against us is having so many kids (we've got 5 little ones, banks don't like it!)
Hi Jxf
Feel free to shoot us an email or send us a PM and be happy to offer some suggestions.
Hi Unreal
I thought the old days of lenders saying you were rent reliant had been and gone. I have financed many a deal for clients with a dozen or so properties and i personally have a lot more than that. Might just be your own lenders exposure.
Think you might need a general overvue of your total position.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Richard, we've only been told his since the gfc (before that we were pre-approved to buy, but chose not to). It is good to know other lenders may still be interested in loaning us money as we're hoping to buy again next year.
Yes will depend on the lenders exposure and of course whether the loans are mortgage insured or now.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
jxf wrote:Greetings All,
I am interested to know how one can improve serviceability to be able to purchase more properties.
I have some equity (min $100K) in one of the properties I hold & some cash savings ($60K) which either will be able to cover a deposit on a new place, but since I already have other properties with LVRs up around 80 I will be struggling to convince the banks that I can service more loans.
My question is how do you overcome serviceability issues?
Some ideas I had were increasing wages, waiting until you have paid down the other loans, receiving more rent helps, selling properties that are not providing good rental returns, but I guess I am impatient so was wondering if there are other ways to let me keep expanding a portfolio sooner.
I really appreciate your comments.
Cheers.
Hi jfx
You don't mention income, this is what serviceability is based on. You will find that if you can keep future LVRs under 80% and stay with the banks, then this will avoid LMI looking at the deal and they generally have tougher criteria than the banks, so this will make it easier. LMI companies also have maximum exposure levels per client (not sure what they are these days) and this will also hurt you – and going to a different bank may not help if they use the same LMI company.
In summary:
– Keep future LVRs to less than 80%
– increase income
– increase rent
– decrease bad debt such as credit card limits, personal loans, car loans etc
– decrease the number of kids you have, and
– make you spouse earn more
– try different lenders via a broker.And this should help increase serviceability
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Guys,
JXF and Unreal, another option that works for some people is starting a trust and then approaching another bank to lend you money. People usually use funds from an LOC from the first bank or some cach as the deposit. This can work because banks view trusts differently and more interested in whether you can service the debt and not whether you have too much exposure. basically banks can get nervous when one lender has too many loans, as you've discovered. But when you approach a new lender under a trust structure they only worrying about one property. The one you want to buy, not the others you have with another bank.
Feel free to send me an email if you want any more help.I work for a guy who does home loans for the Comm bank and has done stuff like this before. It's always handy to get a second opinion.
Cheers
Dean
Hi Dean
Hate to say that buying the property using a Trust structure has absolutely No bearing on your ability to borrow additional funds and Lenders do not lend you more money because you are using a Trust.
You are providing a personal guarantee as a Trustee or Director of the Company if a Corporate Trustee and as such are required to disclose any liability that you are guaranteeing.
Unfortunately it is a misconception that a lot of inexperienced brokers believe in yet learn the hard facts when they lodge the application.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
That's not my understanding Dean.
Banks will still require a personal guarantee from the individual behind the trust and will look at all their debts and loans they have personally guaranteed. So using a trust won't really change anything but approaching another lender may help.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I was typing while Richard posted – but we both wrote essentially the same thing!
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
i think Dean might be another advertising plant Terry as he has posted some interest responses !!
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi guys,
Certainly not. That was just my understanding. I thought by approaching another lender, under a trust structure you may be able to secure more funds?
No definately not.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Dean, sounds like you need a good broker.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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