All Topics / Finance / for brokers – low doc question

Viewing 7 posts - 1 through 7 (of 7 total)
  • Profile photo of elberto_2001elberto_2001
    Member
    @elberto_2001
    Join Date: 2009
    Post Count: 2

    Hi,

    Have a scenario where a mortgagee is in possession of a property, also my dream property. 5bdr on 5 acres, 5 mins from major regional centre. The owner is bankrupt and the bank is owed nearly double what the property is worth.

    The bank value the property at over $500k. My client has a caveatable interest in the property of $150k (for works completed by my client on the property after the mortgagee took possession. So the bank will sell it to him for $350k if he wishes.

    My client for various reasons cannot purchase the property and says I can purchase the property at the $350k amount, if I can come up with the funds.

    So the first question is; would a lender consider this a favourable sale and base the LVR on the $500k value?

    If so, i have enough funds to stump up $50k plus pay stampduty outright and would need a low doc loan of 60% lvr. If not, I have enough to pay a full depost of 20% of 350k plus pay stampduty and therefor would be after a low doc loan at 80%lvr.

    Would have 2 mortgages operating until can sell current property or would need bridging finance (current loan 220k on a property worth 280-290.

    What sort of income for serviceability would I need to show to achieve geeting this over the line. I am self employed (through family trust) 2 years with ABN but no GST registration.

    Profile photo of Marty McDonaldMarty McDonald
    Participant
    @marty-mcdonald
    Join Date: 2010
    Post Count: 64

    Sounds a bit fishy and problematic. Why is the guy (your client) happy to forgo $150,000?

    Marty McDonald | Mortgage Experts
    http://mortgageexpertsonline.com.au/
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    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Maybe the fact of being 12000 miles away might have made my eyes go funny but if the Bank has a worth double the value they wont be caring too much about your clients caveatable interest.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of colinnewlandcolinnewland
    Participant
    @colinnewland
    Join Date: 2006
    Post Count: 128

    Make an offer; the Bank can only say 'No' or put it on the market and wait months for  buyer with addition lost interest income, fees/expenses etc.

    Is your client still looking are recovering his $150K via a VF 2nd mortgage with you or will he maintain/place a new lien on the property?

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    HI,

    Firstly no lenders will not consider this as favourable sale…and will organise their own valuation OR use the sale contract price–which ever is lower…

    secondly why consider low doc when you can go full doc?? unless u want to declare a higher income or your income from 2009-2010 has a massive change.

    With 2 years ABN that’s enough for a full doc loan; however you may want to consider low doc if:
    1.There have been a increase of more hten 15% bwt the 2 years?
    2. It’s hard for you to prove the income that you want to declare?

    Let’s work with the numbers.

    1. IF you did go down the low-doc path…i know of only 2 lenders that will do low doc at 80% LVR BUT- i can tell you now the rate is def higher- like 8.8% + you will have to pay a risk fee ( similar to LMI— risk fee would be 2.2% of the loan amount)

    2. However With no GST rego means you make less then 75k? if your married and your the only solo income earner on a 75k income you may not be able to service this loan on a higher rate of 8.8%

    So with limited infor …i suggest you give a broker a call and work with the numbers to see if they can find you a suitable lender.

    Regards
    Michael

    elberto_2001 wrote:
    Hi,

    Have a scenario where a mortgagee is in possession of a property, also my dream property. 5bdr on 5 acres, 5 mins from major regional centre. The owner is bankrupt and the bank is owed nearly double what the property is worth.

    The bank value the property at over $500k. My client has a caveatable interest in the property of $150k (for works completed by my client on the property after the mortgagee took possession. So the bank will sell it to him for $350k if he wishes.

    My client for various reasons cannot purchase the property and says I can purchase the property at the $350k amount, if I can come up with the funds.

    So the first question is; would a lender consider this a favourable sale and base the LVR on the $500k value?

    If so, i have enough funds to stump up $50k plus pay stampduty outright and would need a low doc loan of 60% lvr. If not, I have enough to pay a full depost of 20% of 350k plus pay stampduty and therefor would be after a low doc loan at 80%lvr.

    Would have 2 mortgages operating until can sell current property or would need bridging finance (current loan 220k on a property worth 280-290.

    What sort of income for serviceability would I need to show to achieve geeting this over the line. I am self employed (through family trust) 2 years with ABN but no GST registration.

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Ray,
     
    Registering for GST is not based on having an income of $75K + but having a Gross turnover of $75K+ and there is a big difference.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes, this doesn't make sense at all.

    The bank is owed $1mil but they are willing to sell the property to a third party for 35% of this amount.

    Having a caveatable interest would no give priority over a bank holding first mortgage. Even with a caveat the caveatee would probably just be an unsecured creditor and would have to wait in line with all the others.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

Viewing 7 posts - 1 through 7 (of 7 total)

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