Bumping up against debt limit. Allready?

Ray Brown

Ray Brown

Hi everybody,

I wonder if anybody could shed any light on this situation. Currently...

Property...1 x PPOR, 3 X IP's, Valued = 400+250+220+240 ($1.11M)

Loans 1 x P&I, 3 x IO. = 110+145+150+220 ($625K)

Rental income...200 + 350 + 260 = ($810pw)

LVR.......So far so good.

Income ~ $55K pa

other income ~ $10K pa

1 x dependant

Now the banks are telling me thats it, no more money. I don't understand why they are not interested.

I have found an IP in a mining town for $290K with 500pw rent, but I'm not allowed to play anymore!

Any ideas about where to go from here?
 
Hi Ray,

Are all your loans with the same bank?

LVR wise, youre well under the radar, and you have some breathing room with serviceability. Have you spoken to a broker about your options?

I cant imagine a good broker would be at a dead end given the details youve provided. Have you sourced all the lenders, or just a few?

Jamie
 
Hiya Ray

There are funders that will look at your scenario and provide further funds, BUT may be a wee bit concerned about exposure to smallish mon industry towns, still I reckon there is a deal there.

Seek the services of a good independent mortgage broker and you can play it again Ray :)

ta
rolf
 
Jamie said:
Are all your loans with the same bank?
Have you sourced all the lenders, or just a few?

Jamie
Click to expand...

Correct. ANZ would only lend a bit over 90% on the latest purchase. All my loans are cross colaterized to each other. They were very picky.

I would like to borrow about 50K also for a managed share fund, but they aren't interested because they won't accept the income from the fund.

Time to see a broker I guess.

Rolf, Its coal mining, I would rather be exposed to that than the syd-mel apartment market at the mo.

you've given me an idea.....

ciao
 
Hiya Ray

OUCH.

The cross coll is what is stopping you most likely
, and could cost a lot to explode. Likely cost a lot more to leave it as it is though too !

When you are cross colled, the aggregated limit is mortgage insured, rather than the individual deals, and that makes it harder and harder to get more money. If you are wokring with sole securities you can move from lender to lender and LMI provider as required

ta
rolf
 
Rolf,

any idea what I would be charged to remove the x-coll on the loans mentioned above?

All but a fixed one are standard variable types.

I don't see why they can't stand alone. At least the PPOR and the 1st two.

cheers
 
Serviceability

Ray Brown said:
Hi everybody,

I wonder if anybody could shed any light on this situation. Currently...

Property...1 x PPOR, 3 X IP's, Valued = 400+250+220+240 ($1.11M)

Loans 1 x P&I, 3 x IO. = 110+145+150+220 ($625K)

Rental income...200 + 350 + 260 = ($810pw)

LVR.......So far so good.

Income ~ $55K pa

other income ~ $10K pa

1 x dependant

Now the banks are telling me thats it, no more money. I don't understand why they are not interested.

I have found an IP in a mining town for $290K with 500pw rent, but I'm not allowed to play anymore!

Any ideas about where to go from here?
Click to expand...


Hi Ray,

I'm no financial genious like some here but it appears to me that your Serviceability is the problem, not your equity.

You don't mention what your outlay is on all those loans but I bet its quite alot more than what they are making. Your not on a huge income so the bank I suspect is wondering what you are going to use to pay the monthly/fortnightly payments with.

You've mentioned your getting $810pw in rent but don't forget that the bank only takes a percentage of the potential income for the properties into account when working out your serviceability. I think its %80? Someone correct me please if I'm wrong.

Then of course they take into account vacancies and other ongoing costs like maint, insurance ect.


You may know that you can afford it, but on paper using the banks calculations on living cost it may look entirely different.

You have obviously done very well getting the properties you allready have on your income so please excuse me if I am telling you to suck eggs.

I am on a similar wage, but with a spouse and 4 kids, and I am relegated to the less expensive properties. eg $100,000 - $120,000 and the bank tells me the same thing as you. I have a PPOR and 2 IP and I have hit the serviceability wall. The only thing I can do is wait for a good market and sell up and invest in better quaility houses later.

My 2c worth.
 
Ronulas

Many lenders add back any negative gearing benefit which helps increase serviceability.

It may also be a matter of structuring the loan correctly to ensure a blend of fixed and variable rates. Some lenders take a higher pecentage of the rental into consideration and use a lower living allowance.

You should certainly from the limited information to hand be in a position to increase your borrowing to a an amount greater that you stated.
 
Hi Ray

Uncrossing can be quite expensive, especially where LMI has been paid on the whole portfolio :(

On the other hand there may be a way to fix it up. As I suggest sit with a good independent broker and see how you go. Little point in going back to the lender- they hav got you into the pickle in the first place.

ta

rolf
 
Rolf Latham said:
Hi Ray

Uncrossing can be quite expensive, especially where LMI has been paid on the whole portfolio :(
Click to expand...

Hi Rolf,

went to the bank and they cheerfully uncrossed all the loans without charge.

:eek:

And banks get so much bad press...

;)
 
G'day Ray,
went to the bank and they cheerfully uncrossed all the loans without charge
Click to expand...
Fantastic !!! Did it lead to any more borrowings with them? Even if "No", it sounds like a good start.

Next move might still be a MB for the right info to allow you to move on. But anyway, well done !!!!

Regards,

PS A search on "too rent reliant" might expose a few gems too - I'm sure it's been around a while..... ;)
 
Being told you have reached your borrowing limit doesn't necessarily mean it is your limit. Read between the lines and you may see that the limit is how much money the lender wants to lend to one individual investor; a glass ceiling so to speak. A documented business plan and an individual appointment with someone of authority to alter the standard loan rules may open the doors again for you.
 
Regretfull Brenda with Anz providing them with a Business plan and seeing someone in authority will not increase your serviceability.

As Rolf suggested earlier it seems like a time for Ray to seek an alternative option by consulting an independant mortgage broker.
 
Great news Ray


We had to un-X our loans a while back to move forward, then a bit of restructuring and *presto* another IP (our most expensive to date, but great prospects).

CG is still going well for me and I will revalue all IP's soon and then contact the brokers again to see where we sit.

Currently and using your post as a guide..

Property...4 X IP's, Valued = 300+220+205+180($905K)

This will go up once properties are revalued

Loans 4 x IO. = 232+170+158+80 ($648K)

Rental income...300+190+165+155 = ($810pw)

LVR.......67%-70% depending on whether you take savings into account which is being transferred to IP at $80k as an Offset (thanks for the tip 007).

Income ~ $50K pa (another $10-12k if you take into account vehicle/fuel/phone savings etc paid by employer)

other income ~ $25K this FY as a redundancy for my wife

1 x dependant (13 months old)



Ray, Keep us posted and let us know how you go...
 
Brenda Irwin said:
Being told you have reached your borrowing limit doesn't necessarily mean it is your limit. Read between the lines and you may see that the limit is how much money the lender wants to lend to one individual investor; a glass ceiling so to speak. A documented business plan and an individual appointment with someone of authority to alter the standard loan rules may open the doors again for you.
Click to expand...

totally agree - when we had two ip's and wanted to buy a third the bank went all funny and refused finance ... until we got verbal approval from elsewhere and threatened to go.

now that we have 11 properties, they just ask how much do we want.
 
Rolf Latham said:
Hiya

Thats good news. Did they give you the $ to buy the new place ?

ta

rolf
Click to expand...


Hi Rolf,

I think I need to regroup and restructure and re-think, especially now I have to move south for work.

I'll get some re-vals done. Then hit the broker.
 
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