Blue Gum Home Loans

[JD86]

Hi guys,

I have a house which is valued at $350k, and a loan of $230k. It was my first hous I built approx. 18 months ago. I am living in it.

I have just started a new job, 3 months ago, and I am sort of sub-contracting. I work fully time, but get paid as a contractor using my ABN.

It is great for me as I am getting paid more, and can claim more.

Downside is, I am trying to buy my first IP. No one will lend to me as I do not have enough earnings on my ABN for the last 5 years. I can wait til next financial year, when my ABN will have large earnings because of the way I am paid at the new job.

Or, my mortgage broker has said the only lender who will lend to me as a lwo doc with no BAS statements or 1 year financials, is Blue Gum. All they need is my last 3 months bank statements.

I have not heard of Blue Gum before, but I am young and just looking to get into investing. Wondering if anyone here has any feedback be it good or bad about Blue Gum Home Loans?

Or any advice on what to do in my situation?

Thanks

 

[Aaron_C]

I think there's other lenders who will give you a lo-doc without BAS. But don't forget the choice of lender isn't that important because you are the one borrowing money, not depositing money with them.

 

[Peter_Tersteeg]

I think there's other lenders who will give you a lo-doc without BAS. But don't forget the choice of lender isn't that important because you are the one borrowing money, not depositing money with them.

??? WTF ???

I'm a very concerned about the highlighted statement. The long term viability of a lender is very important when choosing a loan provider.

During the GFC a lot of lenders withdrew from the market or even closed their doors. I didn't see a single case where a borrower was asked to repay the loan in full, but in almost every case the interest rates skyrocketted after they stopped lending.

Anyone else remember what happened with Macquarie Bank?

Add this to the fact that refinancing lo doc loans is ticky at best and in this case likely to be almost impossible, I'd suggest that determining the long term viability of the lender is a crucial decision. With the wrong lender you could end up in a very expensive loan with no way out.



JD there are a few lenders who will allow you to borrow soley based on either an accountants letter stating your income, or 3 months of trading statements reflecting what you believe your income to be. I would strongly recommend however that you ensure that your business is trading consistantly before committing to a mortgage.

 

[Aaron_C]

I'm a very concerned about the highlighted statement. The long term viability of a lender is very important when choosing a loan provider.

The laws banning exit-fees has stopped this from happening to a large degree. Sure, lenders like GE (Ironbark), Macquarie and Citibank etc all slugged their existing customers a few years ago when the GCF hit. The $6,000 exit fee stopped people from leaving even to save 1.5-2% on their rates. But who was to know? And it can be, but not impossible to, refinance lo-doc loans.

In lending the most important thing is whether the lender will actually give you the money or not. Interest rates are, in my opinion, only a secondary consideration that is overplayed by most borrowers and even brokers.

 

[Rolf Latham]

Hiya

I think BlueGum is Mortgage Choices white label product managed by Advantedge, with NAB providing the wholesale funds

ta
rolf

 

[Peter_Tersteeg]

Exit fees (now defunct) are not the only barrier to moving lenders. The borrowers circumstances at a future date may dictate that there are no lenders willing to take them on in the future. I agree it is possible to refinance lo doc loans, but it's not easy and in 2009 (just after the GFC) it was almost impossible.

The trigger for the GFC was that many loans of low quality needed to be refinanced, but nobody wanted to take them on.

Interest rates increasing outside of the general economy to 12% or more did mean that some people were going to have to do things that comprimised their financial planning. People defaulted on mortgages. Some sold their houses for a loss. Others had to make significant lifestyle choices that affected them and others around them.

Aaron, NCCP stipulates that a finance provider must make a recommendation that is 'not inappoprirate'. This means a bit more than whatever lender is willing to hand over the money, or has the cheapest interest rate.

It means that you as a broker need to take reasonable steps to ensure that the loans you write do not put the borrower in to financial hardship in the future. Part of this means you need to give consideration to if the lender can meet their contractual obligation to the borrower in a manner which is affordable to the borrower.

 

[Aaron_C]

It means that you as a broker need to take reasonable steps to ensure that the loans you write do not put the borrower in to financial hardship in the future. Part of this means you need to give consideration to if the lender can meet their contractual obligation to the borrower in a manner which is affordable to the borrower.

While that may be true, it is outside the scope of any broker (or anyone else for that matter) to make a prediction as to whether any particular lender will/will not be solvent during the life of the customer's loan. We just have to make a good recommendation in the circumstances - nothing more. In most cases (like the OP's), it is about access to the funds that is important while considering interest rates and bang-for-your-buck. Not many people will lend to a self-employed person with very ordinary financials and no BAS to back up higher forecast figures. And if there is a lender who will - then that's who the customer should go with given reasonable terms.

Sure, borrower's circumstances change over time but that's just part-and-parcel of life. No one can ever guarantee that a lender will/will not be solvent for the life of the customer's loan, and neither the NCCP, nor common sense, expects you to.

 

[JD86]

thanks for the responses guys

yes I was concerned about them being new as I have never heard of them, worried about their conditions and risk of solvency

but, on the other hand, they will lend to me

so just wanted to hear peoples experiences with them or any history people know

they were recommended to me by a mortgage choice broker, and blue gum is affiliated with mortgage choice, so I'd like to know which other lenders will lend a low doc without 1 full year of financials or BAS statements

Also, should I just wait until next financial year, when I have a full year of financials on my ABN with decent earnings, and try to borrow/invest then?
any pointers welcome as I am new to this its a bit daunting

 

[Mick C]

But don't forget the choice of lender isn't that important because you are the one borrowing money, not depositing money with them.

Ummmm....
i would never recommend a lender that doen;'t have a solid reputation + service - even though exit fee are banned, the cost to "refinance" to set up a new loan can and does add up.

Fair enough if you have NO CHOICE of lenders because of your situation....but i would still double/triple think about the lender i recommend and choose, even if they are the only and last resort....if anything choice of lender is the most important in my books.

Hi guys,

I have just started a new job, 3 months ago, and I am sort of sub-contracting. I work fully time, but get paid as a contractor using my ABN.

It is great for me as I am getting paid more, and can claim more.

Downside is, I am trying to buy my first IP. No one will lend to me as I do not have enough earnings on my ABN for the last 5 years. I can wait til next financial year, when my ABN will have large earnings because of the way I am paid at the new job.

If Blue gum can do the loan; it means a lot of another low-doc provider can provide the loan as well; blue gum as ROLF mentioned is a NAB/advantage product and their serviceability ratio is quite high at 9.95% so if they are happy to service the loan....nothing stopping another low-doc provider doing the same

Blue gum's requirement of a 3 month bank statement only is a common low- doc requirement offered by a few lenders; some you have heard of as well.

Having said that; when i was a mortgage choice broker- Blue gum were one of the ok mortgage mangers to deal with- only downside was their customer service team was shocking! in fact i think they were based overseas as well...

Would your accountant be happy to declare a certain amount for you? if yes..then it might be easier to go for a "Accountants declaration" lender.

Regards
Michael

 

[JD86]

thanks michael, what is an 'accountants declaration'?

 

[Peter_Tersteeg]

JD, as Rolf mentioned Blue Gum is whitelablled by Mortgage Choice. This means that they're third party funds being sold under a brand created for distribution by Mortgage Choice brokers. In this case the third party funds is Advantege which is in turn funded by NAB.

Both Mortgage Choice and Advantege are well established operators. I wouldn not be concerned about the longer term viability of a loan from this funding source.

There is however a very good reason why lenders are reluctant to borrow to self employed persons with only a short track record. You need to think about if this is the right time for you to be purchasing. You need to be sure that you'll be able to continue to meet your repayments indefinitely.

 

[Mick C]

thanks michael, what is an 'accountants declaration'?

This is where the accountants declares how much you make as your proof- im not talking about "making" the number up...so you still need to make sure you can "afford the loan".

By the way- you mentioned you are making more and can claim more...what are you claiming back??

P.s one thing your broker should have given you- is a break down of the commission each lender he recommends gives him- you may find Blue gum pays one of the highest commission as their rate is quite high + it's a mortgage choice white label- yes it's not right for a broker or any industry to give a recommendation based on "commission" amount; but it does happen...

just make sure the broker is working to your full advantage.

Regards
Michael

 

[Adelaide]

Also, should I just wait until next financial year, when I have a full year of financials on my ABN with decent earnings, and try to borrow/invest then?

I read this and I am impressed that you are not just jumping into but taking time to plan your strategy. Investing is all about strategy in my books. You have to know what you want and how you are going to get there.

How about this for an idea.
For the next 12 months, act as if you have your investment property.
That will give you 12 months extra financials and you will know how your business is going. It's stable then go ahead and invest. If it's rocky at best, then you will have time to work on it. More lenders will be open to you.

At this same time, do your homework. Read the books. Listen to the experts. Work out your strategy.
Know where you want to invest and what type of deals you are going to do.
Are you going regional or capital city?
Are you going to renovate, develop, buy and hold....so many options?
Are you doing it in your own name or using a company and trust structure?
Are you looking for capital growth or cash flow?

Work out your living budget - know what you can happily and comfortably live on. Know your expenses. Living on porridge 3 times a day because you got your budget wrong is not fun.

While working on your business and stabilising it, act as if you own your investment property. So put aside the shortfall you would have been paying every month on the property into something like a high interest account and don't touch it. This will do 3 things;
1. You can prove to yourself you can afford the shortfall because you are not withdrawing the money
2. Shows a savings history to the bank
3. Increase your deposit meaning you have more strategic options available

An example is;
Pretend you Purchase a property for $350 000
Your loan is $300 000
Expenses = 10% of the value of the property (interest rate plus expenses like rates, property manages fees etc)
Rent $350 per week

Your shortfall would be around $12 000 pa.
You can put aside $1000 per month.

If you can do that easily every month, maybe you are ready to look after an IP.

Good luck