Buffers and the credit squeeze

[marcodepaul]

It has been widely reported that the recent and ongoing sub-prime crisis has precipitated a ‘credit squeeze’. Are you finding the banks to be overly cautious in re-financing? Are the big lenders still using the same 80% ratio? Are our financial institutions undervaluing properties when being re-financed?

Many property investors maintain buffers which, when rundown, rely upon drawing on equity. The assumption is that if the financial institutions are skittish, they will be loathe to lend under such circumstances. Has anyone out there faced this dilemma?

What is the groundswell out there?

 

[boomtown]

No credit squeeze here - I have been able to access credit on 95% LVRs very easily.

 

[Michael Yardney]

Yes

Things are harder, but that doesn't take away form the value of the strategy.

Valuers are more conservative and this makes refinancing more difficult.

The banks are also more conservative and you may find it difficult to get draw downs on some lo doc loans.

And of course no doc loans are no longer around.

All the more reason you geta proficient mortgage broker on your side working for you. There are some smart ones on this forum who will probably answer this much better than me

 

[Big Tone]

Yes


And of course no doc loans are no longer around.

Yes.......they are!

 

[GoAnna!]

We have found it tougher and banks more twitchy.

 

[devo76]

No problems here. The banks are willing to lend me funds well above what i feel comfortable with. Have not noticed a change at all.

 

[Wake]

We are finding it a bit harder. Currently looking into finance for a dual occ, which in theory should be easier than our last two projects - 3 & 4 on one title. Apparently the pool of lenders for two or more on one title has shrunk. Our broker also advised Westpac won't do residential loans for trusts or companies at present.

 

[Rolf Latham]

Hiya Wake

WBC residential never did company or coroporate trustee, though personal trustee is ok

Ya gotta go commercial/ business.

You can have variable or fixed rate resi rate and lvr loans to 80 %.

No LMI though

In the past there was no comm payable to the broker, though i do believe that has changed.

ta
rolf

 

[Wake]

Hi Rolf

I may have misunderstood when I thought he said this was a recent change. He also said they won't take into account income from a Pty Ltd company when assessing serviceability, which makes a difference to us.

Just to clarify - WBC will do a commercial loan with resi rates at 80% LVR? I assume the difference is the shorter term of the loan, and perhaps fees? Is DSR calculated differently for commercial? Haven't been down that path yet.

We've maxed out CBA, and our broker was looking at Adelaide Bank or Origin for dual occ construction.

 

[Rolf Latham]

Hiya Wake

id say your broker is probably on the money, probably looking to use Domain Financial Services as mortgage manager for either ABL or Origin.

Both those lenders have a slightly better serviceability margin than WBC, BUT much depends on the individual circumstances.

Is your trust a HDT ?

ta
rolf

 

[Wake]

Hi Rolf
Its a family trust. Yes, the broker is recommending Domain, but i think we're borrowing/buying in our own names rather than the trust because borrowing in the trust name seemed to hit a brick wall everywhere. I need to clarify that with him though because he's looked at quite a few options in the last week, and although at last mention the trust wasn't a goer, that could be changed now with Adelaide Bank.

We own property in both entities, so its not a major issue although tax wise the trust would be slightly better for this deal. As its nearly time to sign a contract we need to sort it ASAP I guess. It certainly does get more complicated as you accumulate more.