Advice please - Finance dramas and options?

[hudbry]

Hi all,
we recently put an offer in on an IP that got accepted. It needs some work on it so we negotiated a 20k reduction in the asking price. Bank A gave us pre approval for 90% loan.
Bank A went to value it and the valuer came back saying he'd noted that work needs to be done on the property and requested a building report be done. The bank said that is the report comes back with anything structural then they will struggle to lend the cash. We are hesitant to get the report as we know what the report will come back with, and that there is structural work that needs to be done.
Our agent put us in contact with Bank B who are known to be more........ flexible. We told them the situation and having asked their finance section came back to us saying that there shouldn't be a problem. They initially said they would not need a building report, only a builders quote for the work to be done and for us to take out a building loan to that amount to add to the mortgage (same rates etc etc) which seemed fine to us. Saves using our own savings!!
They then came back and said because there are 4 units on one title they could not offer it to us as residential but instead a commercial/business loan. They would also need a 20% deposit.

I'm in a quandary as to which avenue to take:

Get a builders report done anyway and hope Bank A are happy and leave it at that and I move forward with them only committing a 10% deposit.
Go with Bank B with their suggestion but with 20% deposit. As yet we have not had pre approval yet with Bank B so their caller might say the same thing and need a report. They did say it was unlikely, but are they just saying that to draw us in?

Thoughts?

 

[Rolf Latham]

I'd hazard a guess the issue revolves more around the 4 OOT than the condition of them per se

Very few lenders will do 4OOT period at residential, let alone above 80 % lvr

My guess is that bank B isnt one of the few ( eg CBA, RAMS, heretic ( on a good day) and a smattering of others).

Id be more concerned about the state of my credit file in the middle term than this specific property......................

I have seen peops toast their file and make it unuseable for 12 to 18 mths by acting on advice from agents, bankers and inexperienced but hungry brokers.

ta
rolf

 

[Shahin_Afarin]

Let's start from the beginning - so who is going to lend you money on a property that is 4 units on a single title:

1. CBA
2. St George
3. RAMS
4. Bankwest (let's move this option to the trash can)

Now CBA and St George/RAMS use different valuation systems and this is good as you will most likely get different valuers.

now you don't want to go to whatever lender and use bank A's valuer. You want a new one. The new one may not pick up on the defects so lets call this option 1.

Option 2 is you get the building inspection done and negotiate with bank A to accept it.

Look if you did a building report on a lot of properties - they will have structural dramas so I think you need to try and "sell" this to the bank. I have had a few shockers in paddington and redfern which we got across the line.

 

[hudbry]

Thanks you guys.
Really appreciate you're feedback.

Will look into it further around those options.

Rolf: not sure I understand what you mean by my credit file? What is our and hope we'll or be affected?

Thanks again you have been very helpful.

 

[hudbry]

Also, what is the difference between residential loan and non residential loan? Rates? Fees? Why will one bank offer it and the other not?
Thanks?

 

[Rolf Latham]

Also, what is the difference between residential loan and non residential loan? Rates? Fees? Why will one bank offer it and the other not?
Thanks?

banks compete against each other and at extremes have very different ways of looking at things

eg ANZ will do 70 % mx lvr for 3 units on one title, CBA and NAB will do 95 ( in theory)

typically, for a portfolio builder on limited resources a big 4 comm lend isnt worth having due to

usually up to 1 % or more higher in rates
usually 2 to 3 times the fees of
Usually max of 15 year terms ( sometimes with 5 years IO), but this cashflow consumer is mostly the killer of this product
Annually reviewable etc

would want to be a really really good upside to consider going common a resi block


ta
rol

 

[Rolf Latham]

Rolf: not sure I understand what you mean by my credit file? What is our and hope we'll or be affected?

If you make a few formal enquiries to lending institutions, they will all mark your credit file with that enquiry. when next going forfinance, the next lender will see whats been happening and their black box systems make assumptions

say 3 to 4 lender enquiries 180 days, and a few other soso thinggs in the borrower profile, and one faces the real risk of having no readily available finance above 80 % lvr.

yes I know, there are lenders that dont credit score etc , but your file is as important as choosing the right property - more so sometimes.

once again, the NCCP is really letting borrowers down with the lack of disclosure on such mission critical stuff.

When the bank or the broker says another application should only affect your file "slightly" , then youd want to seek clarification.

www.mycreditfile.com.au

gives some good info

ta
rolf

 

[Perp]

hudbry, what they're trying to politely say is that you don't know anywhere near enough about how lending works to be trying to navigate this yourself.

If you ask lender A, B, C, then D for credit, when lenders A through C were never going to approve you, then you may be knocked back by the time you get to lender D, even though they'd have approved you if you'd approached them first.

It's really, really important not to "waste" hits on your credit file.

You need a good mortgage broker. A couple of them are offering you advice.

 

[Jamie M]

You need a good mortgage broker. A couple of them are offering you advice.

Spot on - that will make or break this. Hit up Rolf or Shahin above who've already provided excellent advice.

Cheers

Jamie

 

[hudbry]

Absolutely right.
Thanks again for all your thoughts. I'm on it.