All Topics / Finance / Newbie question – have good equity, but bank concerned about serviceability.

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  • Profile photo of ozdrjohnozdrjohn
    Participant
    @ozdrjohn
    Join Date: 2015
    Post Count: 10
    June 1, 2015 - 1:55 pm

    hi – apologies for the newbie question, so please be kind…
    My wife and i have just gone through the loan application process for two positively geared properties and were a bit shocked at how the serviceability was looked at by the lender. We welcome any thoughts on how can we grow our portfolio further given the following information:
    PPOR – $500k, equity $120k;
    Prop #1 – $750k, equity $200k, neg geared $5k pa;
    Prop #2 – $240k, equity $48k, pos geared $5k pa; and
    Prop #3 – $191k, equity $38k. pos geared $5k pa.
    With a combined salary of close to $200k pa, was pretty surprised to see the lender state we could show monthly expenses no greater than $2,750. Any thoughts on how we can grow our portfolio if the lenders are that tight on serviceability? we’re trying to grow our book to over 10 properties so there must be some creative trick to help get past this serviceability issue. HELP…… thanks, john

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010
    June 1, 2015 - 2:31 pm

    Different lenders have different serviceability calculations. This can include putting higher servicing requirements on their existing customers who they already have significant exposure. Making use of a good INVESTMENT focused broker who understands strategic lending can assist you to achieve your goals a lot further than going direct to any one branch.

    I would say around 30% of new business into our office is similar situations to yours – people who have found their lenders are trying to put the brakes on their long term goals, when in reality they are in a strong financial position and a strong WILL to grow their portfolios into something significant.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    June 1, 2015 - 3:41 pm

    Agree with Corey.

    Have you used the one lender for all your loans?

    Even with the recent changes introduced by APRA – there are still lenders who are more generous compared to others when it comes to assessing servicing. Sounds like you just need an overall review of your current structure and some good advice to help move forward.

    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 ozdrjohnozdrjohn
    Participant
    @ozdrjohn
    Join Date: 2015
    Post Count: 10
    June 1, 2015 - 4:47 pm

    thanks corey and jamie for your quick quality replies. agreed corey, the will is there and i thought we looked sound as a pound, hence the surprise. jamie, we have the first two with teacher’s mutual, and grabbed the 3.99% fixed with newcastle permanent for the other two (which we purchased through a shelf company). will have to chat with both of you early next year when we plan to buy our next two as i agree that getting an investment-focused broker looks like the key going forward. cheers and many thanks again for your replies… john

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    June 2, 2015 - 9:30 am

    How you structure ownership may also hold you back. A company is an usual way to own (did you set up this for land tax in NSW?) but you can limit guarantees by strategically choosing the director. This will free up the borrowing capacity for the non director. Sometimes one spouse will own but both will be on the loan. If this is not needed for servicing that loan then the non owner spouse should be immediately removed – both for asset protection and serviceability of future loans.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

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

    Profile photo of ozdrjohnozdrjohn
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    @ozdrjohn
    Join Date: 2015
    Post Count: 10
    June 2, 2015 - 11:16 am

    great tips there terry. when its time to make our next purchase we’ll be certainly giving you a call to ensure we are using our structures in the most effective way. the way the lender responded definitely highlighted some weaknesses in our approach (bloody newbies). cheers to all of you for sharing your knowledge and i’ll be in contact with each of you early next year when we’re ready to do our next round of purchases. thanks, john

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    June 2, 2015 - 11:36 am
    ozdrjohn wrote:

    i’ll be in contact with each of you early next year when we’re ready to do our next round of purchases.

    Terry’s your man :-) No need to share the love – just contact him.

    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 ozdrjohnozdrjohn
    Participant
    @ozdrjohn
    Join Date: 2015
    Post Count: 10
    June 2, 2015 - 4:17 pm

    thanks jamie – will do. best of luck and thanks for your help… cheers, john

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