Advice on increasing borrowing capacity

[sashatheman]

This is our current situation. We currently have 1 PPoR and 1 IP. My wife would like to get a bigger house before any more kids. That is not my preferred option, but I had to compromise with her (that's another story). We agreed that an option we are both happy with would be to find a new PPoR and rent out the current house, essentially giving us two IPs and a bigger house to live in.

We have about 100k in the offset account, and looking at a place around the $450k amount.

This is our problem. When we asked our broken to get pre-approval, the bank came back with a pre-approval of only $350k. We were hoping for at last $400k to cover fees and still have a buffer.

Is a revaluation of our current house an option to access more funds? We bought it nearly 5 years ago, looking online comparable properties are now selling for around $40K more.

 

[Terry_w]

There are 2 main things that lenders consider. Income and deposit.

If you have $100,000 cash then the deposit side is probably not the issue, but the income would be. Has your broker considered a number of lenders? some are more generous than others - Macquarie, ME Bank and AMP especially. Has the investment costs been taken into account with serviceability?

Other than that you may need to increase your income and/or decrease expenses.

 

[Rolf Latham]

The varition between what different lenders will provide based on both income a equity position is quite significant.

Sit with a few bankers or a broker and see how much that spread actually is for you. You may be surprised

Often, bankers and brokers arent keen on moving fwd with loans that require LMI, so yor 350 k may be based on a 70 k + costs + buffer estimate from your banker........?

ta
rolf

 

[sashatheman]

We are currently with Commonwealth, and the pre-approval for the new loan was done with them as well.

Perhaps asking for pre-approval from other lenders is an option for us. I would imagine there would be additional costs for going with another lender?

I personally don't believe that our income is an issue. Our IP is slightly CF+, and after looking at comparable rents in our area I believe our current house would provide enough rent for CF neutral. My current salary is 70-77k depending on bonus, however my wife only works 2 days a week due to 1st born.

 

[D.T.]

We are currently with Commonwealth, and the pre-approval for the new loan was done with them as well.

Perhaps asking for pre-approval from other lenders is an option for us. I would imagine there would be additional costs for going with another lender?

Dont go getting more pre-approvals. They are probably checking your credit file which marks it in the process. Further enquiries will then result in declines because the credit file has too many marks.

Find a broker who knows what they're talking about. In your income calcs, ensure you include future rent of your current PPOR since it's going to become an IP when you move. Make sure the loan is set up separately from the others.

 

[see_change]

We are currently with Commonwealth, and the pre-approval for the new loan was done with them as well.

Perhaps asking for pre-approval from other lenders is an option for us. I would imagine there would be additional costs for going with another lender?

I personally don't believe that our income is an issue. Our IP is slightly CF+, and after looking at comparable rents in our area I believe our current house would provide enough rent for CF neutral. My current salary is 70-77k depending on bonus, however my wife only works 2 days a week due to 1st born.

Talk to a broker . We've done DIY with a bank , then to a broker then back to DIY . After going back to DIY with a bank . we've gone back to brokers and we won't be going back to dealing directly with a bank .

If you are dealing directly with a bank , our experience is that they stuff you around more . After all , it's just one loan .

From the banks perspective , when they are dealing with a broker , it's an ongoing relationship , so they are less likely to stuff them around as the broker will just take their business to another bank .

Cliff

 

[jonmardell]

This is our current situation. We currently have 1 PPoR and 1 IP. My wife would like to get a bigger house before any more kids. That is not my preferred option, but I had to compromise with her (that's another story). We agreed that an option we are both happy with would be to find a new PPoR and rent out the current house, essentially giving us two IPs and a bigger house to live in.

We have about 100k in the offset account, and looking at a place around the $450k amount.

This is our problem. When we asked our broken to get pre-approval, the bank came back with a pre-approval of only $350k. We were hoping for at last $400k to cover fees and still have a buffer.

Is a revaluation of our current house an option to access more funds? We bought it nearly 5 years ago, looking online comparable properties are now selling for around $40K more.

With 100K it looks like equity is not the problem. It looks like servicing, CBA is generous when it comes to servicing but there are other lenders out there who will have more favorable policies for your situation. It is time to look at other options/brokers but do not put any more conditional approvals up as this may affect your situation further.

 

[K_Raheja]

What a timely post.

Am in similar situation...

1 PPOR = worth conservatively $350K ( owing $280K )
1 IP positive geared = worth conservatively $250K ( owing $230K ) -
Single ncome 90K.Wife stay at home mum.

my downside is that offset has $20K only...but no other debt ( besides the home loans ofcourse ). But will start increasing this year.

My target is house/unit worth $430K including costs by mid 2015.

Just met with the broker yesterday....to get a baseline really.
Really wanted to see how much income/saving shortfall will there be.

I am hoping she would come back to me saying i can get a loan provided i increase my saving upto x$ or Dont ever ring us again you only have a micky mouse saving

This is our current situation. We currently have 1 PPoR and 1 IP. My wife would like to get a bigger house before any more kids. That is not my preferred option, but I had to compromise with her (that's another story). We agreed that an option we are both happy with would be to find a new PPoR and rent out the current house, essentially giving us two IPs and a bigger house to live in.

We have about 100k in the offset account, and looking at a place around the $450k amount.

This is our problem. When we asked our broken to get pre-approval, the bank came back with a pre-approval of only $350k. We were hoping for at last $400k to cover fees and still have a buffer.

Is a revaluation of our current house an option to access more funds? We bought it nearly 5 years ago, looking online comparable properties are now selling for around $40K more.

 

[Aaron_C]

So you want $400k with LMI? CBA may not be the best lender for you in that case as they assess all existing debts over a P&I basis.

 

[Mick C]

We are currently with Commonwealth, and the pre-approval for the new loan was done with them as well.

^ there you go!
You will most likely need to take your new loan with a different bank that's more generous in their serviceability - like Macquarie/ Homeside/ AMP etc..

If CBA is saying $350,000 you could easily get $400,000+ with the more generous banks. Also now that you have one credit hit with CBA, be careful accumulating too many- your next pre-approval or full approval should be the last one for this property.

Also if you have equity in your current property you can potentially still buy this place at 100% LVR without LMI and there''s no need to stick with CBA as well.

Cheers

 

[allsuccess]

If you are dealing directly with a bank , our experience is that they stuff you around more . After all , it's just one loan .
Cliff

Agree with this 100%. They stuffed me around on how much I could borrow. Said one figure one day and another one the second day.

 

[wylie]

I'd definitely not to direct to any bank. Go to a broker so you get to see everything that is on offer, and don't take any more hits on your credit file.

 

[impala67]

I'd definitely not to direct to any bank. Go to a broker so you get to see everything that is on offer, and don't take any more hits on your credit file.

Agree. +1

The brokers on here are an invaluable resource also.

 

[cadence]

Go see a different bank.

CBA is very tight. My relative went to CBA recently seeking pre-approval, her whole family has been with CBA all their lives. CBA granted $350k. This is problematic as you can't buy a studio in Sydney for that price. Went to a different bank, got $650k.

I have had similar experiences in the last few years, though not as dramatic as the above.

 

[r3ckless]

So you want $400k with LMI? CBA may not be the best lender for you in that case as they assess all existing debts over a P&I basis.

Not exactly.

My lender at CBA told me this. She put thru the application and said to the credit assessment team to approve the loan as her mitigant on my behalf was I could sell my investment proeprty to repay debt. Hence she shwoed them that my borrowing capacity based on itnerest only since they are investment proeprties are itnerest only...

 

[Aaron_C]

My lender at CBA told me this. She put thru the application and said to the credit assessment team to approve the loan as her mitigant on my behalf was I could sell my investment proeprty to repay debt. Hence she shwoed them that my borrowing capacity based on itnerest only since they are investment proeprties are itnerest only...

I'm sorry but this is not accurate. CBA amortises all debt - PPOR or IP with any bank - at P&I over 25 years if it's interest only or over the remaining loan term if it is P&I anyway. They do NOT load interest rates like ANZ etc but they definitely amortise all loans which means the repayments are higher even if the loans are interest only. Your CBA lender is telling you a convenient story but I know for a fact this is not accurate. Mitigating factors are only relevant if your application is borderline for some other reason but servicing is a critical part of the assessment process which cannot be argued with unless it is a dispute over how income is calculated.

The fact you 'could' sell your IP to clear debt is only relevant if you are a pensioner and need an 'exit strategy'. It has nothing to do with servicing loans.

 

[Rolf Latham]

Not exactly.

My lender at CBA told me this. She put thru the application and said to the credit assessment team to approve the loan as her mitigant on my behalf was I could sell my investment proeprty to repay debt. Hence she shwoed them that my borrowing capacity based on itnerest only since they are investment proeprties are itnerest only...

personally,id rarely put through an app that needs a policy exemption to any lender.........because hope is not a strategy, and in most cases for a portfolio growth investor its foolhardy anyway, since the next time you want to pull equity the lender will have to go through the same process again.

Exceptions to the above rule is where a pre existing condition such as LMI, or a fixed rate loan, or a great valuation demands we use lender X .

ta
rolf