Breaking up with my "Bank"

Hi All.
I seems it may be time to look elsewhere for funding to grow as I appear to have hit the serviceability wall.
I have been with Westpac all of my investing life and done very well from the arrangement.

IP#1 Built 2003 cost 380k, current val =$1m
IP#2 Bought 2007 cost $695, current val = $720k
IP#3 bought 2007 cost $675, current val = $795

2&3 are on fixed IO terms of approx 7.4% with 2.5 years to run.
IP#1 is on P&I variable.

Income on these 3 properties is $2700 per week thanks to sensational rents in NW regional areas and obviously they are cross collaterised.
I earn $110k per year.

I have just been informed that the rent on one of the IP's is to rise by $200 per week which will affect my taxable income considerably. I have been able to keep that below $60k. Obviously, my intention is to buy again and use this extra income to service another IP however the banks current lending criteria will only allow me $275k. This will not allow me to stay within my target band. I want between 500k and 700k for this.

Is it time to access all available equity by refinancing IP#1 and look to another lender.
Will this get me better than $275k.
Any advice on brokers or other banks current lending policy would be appreciated.
Thanks
Pango.
 
Hiya Pango

Rather a broad question.

I suspect that speaking with an IP experienced broker will give you more scope and information than chatting with lenders directly.

Your situation is absolutely typical of where clients arent structured to their benefit, rather their lenders. Westpac is one lender that isnt fussed wither way with cross or non cross, so your HFM or broker has been a bit "lazy" at best.

Most dont see that this is an issue until it becomes an issue.

You may also be greeted with the "rental reliance" tag with some lenders

Looks to me like there are some options there though, subject to your vals holding up.

ta
rolf
 
Pango,

Good brokers will have the software that will aloow you to compare servicing against all lenders.

This is important, as you would want to choose one that allows you future room to grow as well.

As a side note, it sounds like you have the figures under control, but just make sure you are not entering into a transaction outsie your means if rates are expected to rise. The servicing tests are there for a reason, not just to annoy you.
 
Yeah thanks for that guys.

As Rolf said, it aint a problem until its a problem, and I agree with the servicability criteria being there for a reason, however, when you go to the bank and say hey, the rent has just gone up $200 a week on one of the IP's, and its a 5 year Govt tenant, I would like to hear them say, we need to help you into something else, as it appears that all is going well, and I just took a look at your history, not only have you banked with us all your life, but you have never been in arrears, and you have always been conservative with spending, I think we can relax things a little and help you get where you wanna go.

But no, its the sheep factor, and you know, I owe them $1.75m on a grouping worth at worst $2.4m and Im cash flow positive. Its a problem when you are already in a high PAYE tax bracket.

The reason we get into this game is to get tax effective. I expect that there are many out there who would like this problem, but Im not one of them.

Rolf, I may call you during the week to discuss the possibility of working with you on a finance solution.
Thanks again.

Cheers
Pango.
 
Keep the loans separate so if you need to move you can do.

Ever lender has a different method of calculating its serviceability criteria so if you dont meet one lender then it could be a matter of getting over the line with another.

Must admit i am not one for software as i believe if you know your lenders you will find a solution or at least an option for the client.
 
Software ..............blech

Notebook Jockey Broker is the disparaging term.

There isnt enough fuzzy logic in any of the systems we have come across that can make it work, thats why many of the "new to the game" franchise brokers without mentoring really struggle with all but basic deals.

Their frans systems are sold to them as being the bees knees...........they dont know any better :(

ta
rolf
 
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