All Topics / Help Needed! / Bank refused my loan application.

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  • Profile photo of saldsald
    Participant
    @sald
    Join Date: 2007
    Post Count: 5

    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.
    Sald

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post 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:

    1. Lender
    2. Loan amount and approx value of the property

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Chris BChris B
    Participant
    @cpboler
    Join Date: 2014
    Post Count: 2

    Hi Sald,
    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%.

    Cheers,
    Chris

    Profile photo of saldsald
    Participant
    @sald
    Join Date: 2007
    Post Count: 5

    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!
    Sald

    Profile photo of saldsald
    Participant
    @sald
    Join Date: 2007
    Post Count: 5

    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.
    sald

    Profile photo of Kinnon BellKinnon Bell
    Participant
    @kinnon
    Join Date: 2014
    Post 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.

    Kinnon Bell | Kinetic Funding
    http://www.kineticfunding.com.au
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    Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

    Profile photo of ChrisA1ChrisA1
    Participant
    @chrisa1
    Join Date: 2011
    Post Count: 172

    mmm sounds like a broker situation so the broker can talk the bank’s language on your behalf.

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post 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?

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post 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”.

    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 bruynjustinbruynjustin
    Participant
    @bruynjustin
    Join Date: 2014
    Post 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.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post 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.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of saldsald
    Participant
    @sald
    Join Date: 2007
    Post Count: 5

    Thanks for the feedback everyone..I am in contact with brokers at the moment to see what options are out there.

    Profile photo of saldsald
    Participant
    @sald
    Join Date: 2007
    Post Count: 5

    Hi Jamie,
    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.
    Sald

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post 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.

    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 Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post 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.

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

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