At the moment im applying for another investment interest only loan, roughly about 95% of property amount (maybe 97%), about 390K. My broker says it probably wont go through because the bank wont lend this much too me, considering i have to borrow an additional 20K worth of equity on my other investment property. Basically my broker says i need to save up more cash for a deposit.
What are peoples experience in obtaining finance? Obviously the more deposit you have the more likely you will get the loan, but trying to constantly come up with around $30k in cash everytime you want to purchase a property can be difficult. Is there any strategies to apply to make the bank lend you the money? Maybe state what the property will rent out for (mine is a 1 bedroom luxury apartment), to demonstrate you will be able to make the interest repayments.
There's not enough info to provide a decent response.
With a 95% lend, some factors that will strengthen an application include strong servicing, good employment history, equity in other resi property, a good asset/liability position relative to age, the source of the deposit, the list goes on.
It will also help if the deal gets assessed within the lenders Direct Underwriting Authority with the LMI provider – that way, the application doesn't end up requiring external LMI sign off.
I wouldn't bother putting up a loan if I knew it was going to be declined. It's a waste of time for all involved.
Getting the loan at 95% is not an issue per se as long as you tick a lot of boxes so it really depends on the situation.
The concerning thing with the above comment is re the 'it probably won't go through because the lender won't lend that much'. You should be able to know whether you can service the loan or not prior to submission.
The last thing you want at a 95% lend is hits on your credit file. This affects the approval of an application more than people think.
Is that the reason why your broker thinks it won't be approved? Because of servicing? If so, like Shahin said, that's something that should be ascertained prior to submitting.
Also, if that is the primary issue – then get your broker to suss out other options.
STG will do a 95% + LMI lend and their servicing can be pretty generous if taking out a 3 year fixed rate.
Cheers for your responses,
I will double check with my broker the reasons, the loan application hasnt gone through yet.
So if a loan gets disapproved then this goes against your credit rating? I wasnt aware of this.PLCParticipant@plcJoin Date: 2012Post Count: 400
Yep, anytime a loan application is made (approved or not), it finds it way onto your credit file. Most people don't realise this when they go to lender after lender seeing what they can do, and then all of sudden their credit rating has been tarnished.
Your credit file doesn't state that the loan has been declined or approved.
However most banks have computer credit scoring engines. This is a complex formula that not even the lender's credit team can explain to you. There are many many things that the formula (for a lack of a better word) takes into consideration and weighs up. Obviously high LVR's, short employment, regular changes in employment, tight servicing, defaults etc all negatively affect the scoring. The other thing that affects the credit scoring is several and recent hits on your credit file.
No back to the point – if your LVR is as 95% then please don't submit an application unless you are 150% sure that it is going to be approved also go with a lender that has their own DUA.
ShahinMick CParticipant@shapeJoin Date: 2010Post Count: 1,099
Sounds like your having a serviceability problem?
Change your loan structure from I/O to P/I – might get you over the line….really depends how tight your serviceability is and which lender.Alistair PerryParticipant@aperryJoin Date: 2004Post Count: 891
Even things such as non disclosure of a home phone number can adversely effect credit score, I know this definitely is the case with at least one lender. Credit scoring is weird and makes no rational sense, it's basically trying to come up with a statistical calculation to predict human behaviour, but its something we all have to concern ourselves with.
Yes my broker thinks the loan should go through. He said paying principal and interest initially until the loan goes down, and then later i can fix the rate.cs_rlewis wrote:Yes my broker thinks the loan should go through. He said paying principal and interest initially until the loan goes down, and then later i can fix the rate.
Is this an IP purchase? Do you have other non tax deductible debt? If not, do you plan on having non deductible debt like a PPOR loan in the future?
Yes this is an investment purchase. I have no other debt other than my other investment property. No credit cards, no car loans, nothing. Im currently renting.cs_rlewis wrote:Yes this is an investment purchase. I have no other debt other than my other investment property. No credit cards, no car loans, nothing. Im currently renting.
OK – so what's the rationale behind P&I on an IP? Not saying it's a bad thing – but is there a particular reason as to why it's being set up this way? IO with an offset against either IP may be a better alternative providing your ok with money.
Do you think you'll ever purchase a PPOR at some point?
According to my broker he said some lenders wont do an interest only loan if the loan is quite high (mine is 372K$). He said pay some of the priniciple off it first and then in time I can switch back over to interest only.
At some point ill buy a home for me to live in, maybe when i get a family, which wont be for some time! The property im buying is a 1 bedroom luxury apartment so I could always live in that.YossarianMember@yossarianJoin Date: 2006Post Count: 136
Oddly enough, credit scoring is entirely rational, which is why it works.
Certain variables, alone or in concert with others, prove to be reliable predictors of a loan defaulting. They change and are changed over time but the bottom line is they are better at predicting default than people are.
Telephone numbers are a case in point. Historically, people who didn't have land line telephones werepoorer consumer finance risks than those that did. If you think about it for a minute you can see why that might be the case.
Today, the lack of a landline has less predictive validity because there are an increasing number of people relying entirely on their mobile. Less value but not no value.
Credit scorecards are used because they are good at scoring credit..