Are banks still lending at a 97% LVR for investment properties?

[LisaP]

For those wondering, I'm currently exploring a number of options with regards to my LVR dilemma. They are:

a) Sell my manged fund, reducing costs by $230 a month (this is the interest I'm paying on the manged fund), which may persuade CBA to lend to me as an O/O at 97% LVR (I would check this out first before doing it);

b) Do not sell the managed fund, and look to see if I can get unconditional approval from another lender for 97% within the 6 week settlement period (if this is possible);

c) Bypass my mortgage broker and go directly to CBA myself and see if I can convince them to to lend to me as an O/O at 97%;

d) Accept the 90% lend with CBA, and factor in a reduction to my available equity of $15K.

So what do you think guys? Should I pursue option a, b, c or d?

OK, well after obtaining some feedback, I'm going to go with option C. Apparently, through the broker channel, you are really dealing with Colonial, and Colonial policies are slightly different to CBA's. However, being the nice person that I am, I will first see if my broker can do anything else for me, and if he feels that he can't, I will go to the brach myself. If CBA do agree to switch me to the O/O loan, I will ensure that my broker still gets the commission for the sale, since he went to the effort of organising my loan in the first place.

 

[Rolf Latham]

OK, well after obtaining some feedback, I'm going to go with option C. Apparently, through the broker channel, you are really dealing with Colonial, and Colonial policies are slightly different to CBA's. However, being the nice person that I am, I will first see if my broker can do anything else for me, and if he feels that he can't, I will go to the brach myself. If CBA do agree to switch me to the O/O loan, I will ensure that my broker still gets the commission for the sale, since he went to the effort of organising my loan in the first place.

Responsible lending isnt a slight difference in todays world.

While at the margins things can work better at branch for some clients, because they can be moved into the "commercial or private space", servicing calcs are servicing calcs. More often than not, in our experience, when things are approved at that level by a bankie its usually on a "nudge nidge wink wink" say no more basis.

So you may have some luck, especially until Jan 1 2011. If its like 100 bucks a month short it may get through, but more than that, its not a policy difference, but a "bend it" difference.

Financial dependents are left off, exisiting liabilities are part included, extra income is signed off. A bodgy loan app is not a good way to start to a long term relationship, especially if you need to leapfrog with the equity.

As for ur existing broker being paid comm after the deal has been run through branch, that does happen, but only if they put up a huge fight. Most brokers dont want to put up a huge fight because it may cause a review of the loan decision and inconvenience the client.

You may better served long term by going down a legitimate 97 % OO lend like RAMS.

ta
rolf

 

[JamesGG]

I then have the spreadsheet estimate my total cash flow (profit or loss) based on:

Rent
Tax benefits
Depreciation (if applicable)

I noticed this snippet earlier in the thread, Lisa, and just wanted to clarify someting... if I may?

When you include depreciation as part of your cashflow in that spreadsheet, do you add the entire amount or do you apply a marginal tax rate against it first?

I only ask because it seems to be a common misconception these days...

 

[LisaP]

I noticed this snippet earlier in the thread, Lisa, and just wanted to clarify someting... if I may?

When you include depreciation as part of your cashflow in that spreadsheet, do you add the entire amount or do you apply a marginal tax rate against it first?

I only ask because it seems to be a common misconception these days...

Hi James,

I take the amount of allowable deductions that I obtain from the depreciation calculator and multiple it by my marginal rate of tax to get the amount I will get back for on-paper losses.

Cheers,
Lisa

 

[LisaP]

Responsible lending isnt a slight difference in todays world.

While at the margins things can work better at branch for some clients, because they can be moved into the "commercial or private space", servicing calcs are servicing calcs. More often than not, in our experience, when things are approved at that level by a bankie its usually on a "nudge nidge wink wink" say no more basis.

So you may have some luck, especially until Jan 1 2011. If its like 100 bucks a month short it may get through, but more than that, its not a policy difference, but a "bend it" difference.

Financial dependents are left off, exisiting liabilities are part included, extra income is signed off. A bodgy loan app is not a good way to start to a long term relationship, especially if you need to leapfrog with the equity.

As for ur existing broker being paid comm after the deal has been run through branch, that does happen, but only if they put up a huge fight. Most brokers dont want to put up a huge fight because it may cause a review of the loan decision and inconvenience the client.

You may better served long term by going down a legitimate 97 % OO lend like RAMS.

ta
rolf

Hi Rolf,

Thanks for your post - it has given me another perspective on this issue. While I might be better served long term going with a 97% OO lend with RAMS, I am now unconditional with CBA, and this might make it a little difficult to enact - also I'm not sure what the ramifications are if I decline CBA once they've already granted me unconditional approval. Do you know?

I will be speaking to my current broker on Monday about what my options are. Given what you said about the possible problems I will encounter if I visit branch land myself, I have decided not to go ahead with this.

However, if I went to a CBA branch, I wouldn't be looking at fudging the figures. It would be more reminding them that I have a great savings record with them (which I'm not sure they've taken into account). Also, there is a possibility that they may give me a OO 97% loan if I sell my managed fund. While i'ts only a matter of time before the XJO uptrends again and breaks it's all time high (I took a hit during the credit crisis) I have to this up with whether it would be better to sell out and use this to achieve a higher LVR ratio.

Decisions, decisions....

Cheers,
Lisa

 

[MSB]

Have you tried with Credit Union of Australia (CUA). They offer 95% LVR + LMI capped at 97%.

 

[Qlds007]

While i'ts only a matter of time before the XJO uptrends again and breaks it's all time high

Personally i wouldnt be too sure about this.

 

[NigelW]

I'll post when I can about my journey to 15 properties. Given the PhD is due in April 2011, it will make for some interesting times ahead!

Cheers,
Lisa

Good luck with it Lisa. Think big but manage the risks. Even if you "fail miserably" and end up with only 5-7 IPs you'll be far ahead of most people!

Would love to see the spreadsheet, PM me if you'd like to share. I'm very skilled in excel so perhaps I can give you some pointers too.

Cheers
N

 

[HiEquity]

While i'ts only a matter of time before the XJO uptrends again and breaks it's all time high

Personally i wouldnt be too sure about this.

Actually I think it's most likely a correct statement. If it took a hundred years it would still be quite correct, after all "it's only a matter of time!"

 

[LisaP]

Good luck with it Lisa. Think big but manage the risks. Even if you "fail miserably" and end up with only 5-7 IPs you'll be far ahead of most people!

Would love to see the spreadsheet, PM me if you'd like to share. I'm very skilled in excel so perhaps I can give you some pointers too.

Cheers
N

Thanks Nigel

PM your email address and I'll send it to you. Since you're an excel wizard, I'd love to know what you think!

Cheers
Lisa

 

[LisaP]

Actually I think it's most likely a correct statement. If it took a hundred years it would still be quite correct, after all "it's only a matter of time!"

LOL - exactly! Although, I think it will take a little less than a hundred years

 

[LisaP]

An update...

OK a quick status update.

I spoke to my broker this afternoon. He has told me that CBA will not lend to me as an OO as my income is too low. Apparently, it won't even matter if I sell my managed fund to reduce my costs, as they don't take this into account. So, according to my broker there is nothing else that he can do about it and it's just a matter of accepting CBA's unconditional offer of 90% LVR.

As time is crucial (I've now entered the six week settlement period), I need to act fast if I am to try and secure another unconditonal loan with another lender.

Rolf> I like the sound of the RAMS option of O/O at 97% LVR. Do you still do business with them, as I know they removed themselves from the broker channel a little while ago? If not, I'll go to them direct.

Cheers,
Lisa

 

[Rolf Latham]

Hi Lisa

RAMS is still on our in house panel.


We do quite a bit of stuff that isnt considered "normal" in the broker space which is one reason we are seeking our own ACL, unlike a lot of small operators who are going to be a Credit Representative of say an aggregator.

ta
rolf

 

[LisaP]

Hi Lisa

RAMS is still on our in house panel.


We do quite a bit of stuff that isnt considered "normal" in the broker space which is one reason we are seeking our own ACL, unlike a lot of small operators who are going to be a Credit Representative of say an aggregator.

ta
rolf

Thanks Rolf. I might give you a call tomorrow to discuss my situation.

By the way, I assume ACL means an Australian Credit Licence? Out of curiosity, what is the difference between a broker who is an ACL versus a credit representative of an aggregator?

Cheers
Lisa

 

[martym]

Hi Lisa

There are a few 95% LVR options, borrowing capacity may be an issue though by the sounds of it. Get Rolf to run it through their calcs and go with the one who lends you the most. Yi7u are frugal enough to afford it by the sounds of it.

- Suncorp 95% + LMI
- Homeside (Nab broker) 95% inc LMI
- Nab direct 95% inc LMI
- Bankwest 95% + LMI

Marty M

 

[Peter_Tersteeg]

By the way, I assume ACL means an Australian Credit Licence? Out of curiosity, what is the difference between a broker who is an ACL versus a credit representative of an aggregator?

At this point in time there's really no difference. I dare say that there are very few brokers who actually hold an ACL or are a credit rep yet. The laws are only 5 weeks old and most of the industry is still figuring it out. At this point brokers (and lenders) need to have registered for a license, but actually getting the license isn't a requirement until January 2011.

Practically speaking, a point of difference might be that the credit rep is likely to be restricted to the master licensee's (aggregators) panel of lenders. Assuming an ACL holder doesn't have any other agreements restricting them, they can go to any lender who's willing to do business with them.

Like Rolf, I believe flexiblities' a good thing. Today I got a lo doc refinance completed with no BAS or trading statements. I dare say a credit rep from most aggregators would tell you it can't be done.

If a lender gets upset with a particular credit rep, they may refuse to do business with anyone working under the same license until the problem is resolved to their satisfaction. Unfair on all the other guys who do the right thing, but it's happened before.

The difference may be in the longer term flexibility of a brokers business. An ACL holder can sell their business to a broker who uses a different aggregator. A credit rep may only be able to sell within their own aggregator. More an issue for the business owner than the consumer.

The most likely distinction is that an ACL holder needs to get a whole lot of compliance paperwork together and document their business to the satisfaction of ASIC. A credit rep will only need to meet the compliance reporting to their aggregator. Not much of a concern to most borrower, more something for the brokers to consider.

I'm getting my own license because I'm very independent. It's unlikely I'll leave my aggregator, but I take comfort knowing that I'm not completely dependent on them.

 

[Sheryn]

While i'ts only a matter of time before the XJO uptrends again and breaks it's all time high

Personally i wouldnt be too sure about this.

I wondered who wrote the quote about the XJO and scrolled back through the threads to find it was LisaP. I agree with you Richard it will not be anytime soon. The XJO will most likely go up after October but I think it will be years before it breaks it all time high.

I will be watching.

Regards
Sheryn