Hi all, I’ve lurked around these columns for a long time but this is my first time posting.
I wonder if anyone has an insight into how I can get around this current problem of mine. I am in awe of the amount of knowledge and expertise on this site!
I am from a single income family and earn $95,000 part time. The mortgage is currently $295,00 and I have no other outstanding loans save for a credit card with a $200 limit. I have been told my credit rating is excellent. We have two young kids and hubby is limited to work he can do due to injury. I admit that is a drawback…however, I have just decided to go ahead and branch out into property investing so our financial future looks more secure.
The problem arose when we went into the bank to borrow $50,000 (to remain in the mortgage) to be drawn down to use for whatever purpose that might crop up. Education, investing costs etc. To my horror, we were declined. We tried a loan of $40,00 and that too was declined. The bank cited reasons of being nervous about my single income. So now we’ve asked them what they’re willing to lend us without us having to bargain it down with them. It is one of the big four banks and I was also shocked to hear the interest was 5.18%. we have been complacent whilst trying to deal with life and it is now time to pick up our game. I admit our complacency is our fault.
I wonder if my situation is really that much of a risk? I admit that it is difficult on just the one income but my situation is not desperate. I have the option of going full time if circumstances dictate it.I have heard others on lesser income making a go of it and that was an inspiration. Was I wrong? If the bank sees me as such a bad risk, how do I even think about venturing into investing where loans play a very major role? My PPOR is worth around $400,000. I would like to hear what your thoughts are on this. Thanks.
SaldTheFinanceShopParticipant@thefinanceshopJoin Date: 2012Post Count: 1,271
1. Don’t cross contaminate the tax deductibility of the loans. Ensure that you set up a separate loan account for the equity release
2. Single income is not an issue – plenty of applications have single incomes in the family
Can you please confirm:
2. Loan amount and approx value of the propertyChris BParticipant@cpbolerJoin Date: 2014Post Count: 2
Is your current mortgage $295k or $29.5k? I assumed $295k and that $95k is your gross income, not the full time income reduced pro-rata based on your hours worked.
If my assumptions are correct, you can comfortably afford to borrow additional funds, although many lenders don’t like advancing money for no specific purpose. Some lenders will be ok with this up to 80% of the value of your home, i.e. $320k but not the full $50k you wanted.
If you were planning to buy an investment property (e.g. for $150k), they would be more willing to lend you the money, as they would have security over both properties (worth $550k) and you would have an additional income stream.
You definitely should be paying less interest than 5.18%. Depending on the loan features you want (and lender you are happy to use), you could easily be paying less than 4.90%.
Hi, thanks for feedback and help. The bank is ANZ and I haven’t yet bought an investment property yet. The loan I was asking was for $50,000 and it would remain in my LOC until needed. The approximate value of property is $400,000 and we have equity of about $110,000. We are shopping around for a better rate!
Thanks for reply Chris, so basically they’re nervous about giving me a ‘personal’ loan even though it stays in my LOC until needed? They’re eager though to lend if there’s more security and I actually have a property in mind. Thanks for the explanation. Looks like we have a looooong way to go in our investment journey.
saldKinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151
They’re eager though to lend if there’s more security and I actually have a property in mind.
Just make sure they don’t cross collateralise you properties.ChrisA1Participant@chrisa1Join Date: 2011Post Count: 172
mmm sounds like a broker situation so the broker can talk the bank’s language on your behalf.
Persistence is 'to keep on keeping on, no matter how hard the going may be'TheFinanceShopParticipant@thefinanceshopJoin Date: 2012Post Count: 1,271
That explains a lot. Different lenders will lend different amounts based on your income and liabilities. ANZ is down there with the links of Bankwest and ING as one of the more conservative lenders. Other lenders like AMP, NAB, Macquarie will certainly lend you more.
Also why are you doing a LOC and not a term loan. Its cheaper and there is no repayable clause?Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Standard deal and structured correctly can’t see an issue.
Sure there maybe some LMI payable but it is a Tax deductible expense.
Anz certainly aren’t up there with the best when it comes to serviceability or indeed “cash out”.
Yours in FinancebruynjustinParticipant@bruynjustinJoin Date: 2014Post Count: 2
hello there, every family wants to make its future safe and property is one of the best field to invest in.I think your situation is not that much risky but the main problem is not that you are the only person who is earning but the problem is here that you are on a part time job so may be that put some negative impact on bank and that is why they were hesitating as they are afraid that what will happen if for some reason you also lost your job as their is no job security in a part time job and also their is no fixed income.
So, i think if it is possible for you to switch from part time job to a full time job than you can get your loan with ease and than you can invest in property.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
hmmm – something doesn’t sound right here.
ANZ are generally ok with equity releases up to 90% providing you can service the debt. If it’s for investment purposes than that’s the only thing that needs to be stated as the equity release is less than $50k
Sounds like the deal may have not serviced – but if that’s the case, I don’t understand why it would have been submitted in the first place.
Thanks for the feedback everyone..I am in contact with brokers at the moment to see what options are out there.
I am unsure as to what you mean. Not sure what the deal is not serviced means. I am putting in more than the minimal monthly payment. I did tell them that the loan was for investing, business etc. however, I gather from this site…telling them an honest reason gets them nervous. I haven’t even started on my investing journey yet, so I haven’t even got a property in mind. Thanks.
SaldRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Said, “”Serviced”‘ means the way that Anz calculate how much you can borrow applying their own internal calculation.
There is no issue with Cash out but taking it to 90% requires is most cases a Stat Dec confirming what the funds are to be used for.
I have a couple going thru the Bank at the moment for Forum members and no issue with them.
Yours in FinanceDon NicolussiParticipant@donJoin Date: 2005Post Count: 1,086
The approximate value of property is $400,000 and we have equity of about $110,000.
Sald – would echo Richards comments only to add that as I often say to people lets start with an free RP Data report on your property and or free valuation to see what equity you actually have. You may be no need for lmi at all.