Beginners Question (I'll try not to sound dumb)

[bigfella966]

Hello all,
As we have only just started in this game, 1 rental bought 18 months old and a vacant block (I know what everyone thinks about vacant land, but it was purchased 30k under asking price & excel growth potential with 35% growth in the last 10 months), but we have hit a snag for future borrowings. Our LVR is currently 59% but our DSR is up the creek. I am just on an average salary and my wife has a home Business and of course "tax wise" she has a low income from the business. As we really don't want to let go of the block for at least 2-3 years, the only thing we're doing is putting as much $ as we can to reducing the loan on the vacant land (thereby reducing our DSR).

Does anyone have any other ideas as to being able to get around this dilemma??

Thanks & regards,
Bigfella :confused:

[Martin Vdb]

Hi Bigfella,

Have you looked into LoDoc loans yet?

With these your partner can declare her income at the original level (before deductions for tax), so you have a larger income to use for serviceability purposes.

Hopefully this will improve it enough to allow you to borrow the funds you require.

It might pay to find a good Mortgage Broker in your area.

Regards,

Martin

[geoffw]

If you were able to build on the block, it may well cost a lot less than another IP, and you would start getting income to service the loan on that. A loan without an income can kill a DSR.

[bigfella966]

Hello Again,

Martin - No I haven't looked into LoDoc loans yet, but I would if I knew what they actually were (I guess I failed "I now sound dumb!"), can you give me a rundown on what they are.

Geoff - The only problem is that these blocks were a very limited 1/2 acre bush block release in the suburbs & the reason they're increasing in value so dramatically is that there is only a few undeveloped one's left for those who want to build their own home (supply & demand type thing), so I'm caught between a rock & a hard place on what to do.

Regards,
Bigfella

[geoffw]

"Lo doc Home Loan: A loan for borrowers who are unable to provide traditional forms of income evidence" - for example http://www.hsbc.com.au/personal/homeloans/index.html#LDHL

They can provide for people who are running low on servicibility as well.

Other things which can help might be cutting down on credit card limits or eliminating cards, or ensuring that you don't have loans approved which you're not using (say a LOC).

But that block is the killer. It's probably a very big debt without income, and you may have to sit in your present position for a few years if you keep that debt there without income.

[quiggles]

[QUOTE=bigfella966]The only problem is that these blocks were a very limited 1/2 acre bush block release in the suburbs & the reason they're increasing in value so dramatically is that there is only a few undeveloped one's left for those who want to build their own home (supply & demand type thing), so I'm caught between a rock & a hard place on what to do. [QUOTE]

Is it that you can't get a loan, or can't get a builder? There are construction loans and other items that you should talk to a mortgage broker about (for a start, send a PM to Rolf Latham on the forum, who might be able to help). If it's getting a builder, then we feel your pain, but Geoffw is right - you may be stuck for a while.

[bigfella966]

geoffw, thankyou for the rundown, I'll definately look into the LoDoc loans, I gather they would be available over here in the West.

quiggles, I don't actually want to build on the property because its "vacant land" of this size that is in very high demand thats pushing the value up at such a high rate. We will sell it I suspect in approx 2 years, our theory is that it will pay off our home loan & give us a big boost in further IP acquisitions.

It's just that we would like to get a loan for another rental property in this area for long term IP but we are at our "face value" DSR limit.

Regards,
Bigfella

[geoffw]

Bigfella

Your best bet would be to talk to one on the Mortgage Brokers on the forum.They're not based in Perth, but that should not make much difference to you. They are experienced in difficult situations.

See http://www.somersoft.com/forums/showpost.php?p=126404&postcount=6 for the MBs on this forum.

[bigfella966]

Thankyou all for your advice & input

Regards,
Bigfella

[Kristine..]

Hi 966

Due to the different broker licensing requirements in WA you may care to try www.iafba.com.au as Southern Cross are based in Perth although have broker members across Australia.

Cheers

Kristine

[bigfella966]

Thanks for the link Kristine

Regards BF

[Medine]

Hi bigfella,

You'd be surprised at how different your capacity to borrow is between the banks. A broker who has a reasonably diverse panel of lenders might be able to show you a big difference for your specific scenario.

Cheers, Medine