Commbank knockback on guarantor loan, next steps?

[sickofrenting]

Hi All,

Been a while since I've been here but thought I'd try and get some ideas for my next approach for bank loan.

Currently I have a contract of sale of for lot of land worth $224,900, with subject to finance pending last date to exit is 12/03/2012. Land is pending title in May, and has a 12 month build requirement from title.

The plan is to get approved for the land, save for 6 or so more months to get a stronger deposit together for building loan, and move into mums house until the house is built, and see what this years renurmoration review brings in the way of increasing my borrowing power in May.

I've applied for loan with combank using:

$9000 cash, bank account floats arround this level for 3 or so months.
$2500 cc debt with an $8000 limit (always paid in full monthly)
$93,851 Gross a year, 1 wife (no income), 1 child
Currently renting $1604., but ends on 23/03/2012 (have given notice) lived here for 3 years.
No other lines of credit, debts, loans, etc.
20% of the loan was to be secured against mums property of which she owns the property in full with no finance against it.
Mum is working 56, arround $25,000 year but also has about $25,000 in debt on 2 credit cards, 1 line of credit and 1 personal loan with combank.

So anyway we were knocked back yesterday with the comments that we didn't have enough rating, possibly due to a system issue with their system not recongising our address and that may have affected our rating? wtf?

Since then (today), I now have recieved $4,000 from centerlink for backpay of rent assist and what im assuming is family tax benfit, and to be paid baby bonus.

That leaves me at about $12,000 after paying CC to $0.

I'm very keen on this piece of land so I don't really want to go back away and save for a few more months.

Should I try my application again now with NAB?
Should I cancle my CC before I apply? will this change anything? (I need it hire a truck when i move into mums on 9/03/2012)
Will my mums position help or worsen if i use her as a guarantor?
Will moving back in with mum help my position, or create an issue of no credit history due to change in address?
Bank says I need 5% which I have (12K), but then also said I need another 5% for fees, stampduty, LMI if I try with out the guarantor, Is this required to get the loan approved? ( I can get the rest of the 5% by settlement in May )
Should I apply now, or try and extend my subject finance date, and apply in 1 month when I have another $4500 or so in the bank from work? How long can these generaly be pushed out with out the developer knocking it back?

I still have tax return ~$2k and sale of a car ~3-5K that could help come up with the other 5%, but I will be cutting it very close, so I'd like to use the guarantor option if possible, but I don't really want failed CRA hits either.

If anyone can add their 2 cents in on what ever questions they could help I'd be greatful, im going a bit nuts from a stress

 

[D.T.]

Commbank has already marked your CRA.

Don't go applying to NAB as they'll mark your CRA too.

Instead get the advice of a mortgage broker who knows which hexagon hole your hexagon peg fits into so that you deal with the correct bank.

 

[Bigtone]

Commbank has already marked your CRA.

Don't go applying to NAB as they'll mark your CRA too.

Instead get the advice of a mortgage broker who knows which hexagon hole your hexagon peg fits into so that you deal with the correct bank.

i agree, i reckon its a deal but u need to get it right this time

go and see a broker from this forum in melb and get ur land!

 

[Aaron_C]

Hmm you'll just have to present this in a better fashion to the bank...

 

[Terryw]

Sounds tight. You don't have much deposit and you will need to apply for the building part of the loan within the next year too - what happens if you cannot build within 12 months?

If you think you can afford it, what about mum gifting or lending you some more money from her LOC? Keep her off your loan altogether - less risky for her.

 

[sickofrenting]

Sounds tight. You don't have much deposit and you will need to apply for the building part of the loan within the next year too - what happens if you cannot build within 12 months?

We could build now with the borrowing power we have now, but are chosing to cash up a bit more before we enter the tender stage, so that we are more flexible on some items that we would like to change., we will also be able to cashup a lot more with moving in with mum. basically the current rent will pay the land compoent, and we will be able to put away arround $3000/month., theres also the $20k FHOG when we build.. and stamp duty will be alreay paid. I am also waiting to see % of wage increase (if any in May)

If you think you can afford it, what about mum gifting or lending you some more money from her LOC? Keep her off your loan altogether - less risky for her.

She only has maybe $1000 on her LOC :/, asked Dad also (lives seperatly) and he is moving out of his current home into his shop... so didn't go there..

 

[Aaron_C]

sickofrenting - lenders these days do a 'credit score' which usually gives nonsense results. It is best if you go through your situation with a broker who can then advise on the next best cause of action. A 'no' is not always a 'no' - everything is negotiable.

 

[tobe]

I specialise in construction finance, and have done for the past 7 years or so.
I regularly have to talk people out of obtaining just finance for the land.

Usually the land loan mortgage and their rental payments are more than the home loan repayments in the first instance (I realise your intention is to move back to mums).
Secondly vacant land isnt as secure a security for the lender, therefore its harder to get approved. Its much easier to walk away from a mortgage you dont rely on for shelter.
Thirdly there is rarely if ever enough capital growth in vacant land to warrant the mortgage payments for the time spent 'saving' for the building. Builders costs increase regularly and often, its part of their marketing strategy, so holding off may cost more in terms of the house price in any case.
Lastly the FHOG is set to expire the 30th June. The state government may extend the grant, however we wont know this until the state government releases their budget.
In your case, if you dont have the serviceability for the house and land, and are therefore just applying for the land, the assessor will pick up on this, and either ask for an explanation, or decline the loan. The major banks credit scores will also put a higher risk rating on vacant land, and the postcode of the land (usually on the outskirts of town) will also reduce the credit score.

Most of the major lenders have tightened up their written and unwritten policy around guarantors, such as the applicants having genuine savings, and the guarantors having to show servicing, or being in paid work etc. There are a couple of lenders who dont have these restrictions, Rams being one.

 

[Jake D]

We could build now with the borrowing power we have now

I don't understand this part. If you've been knocked back, wouldn't that mean you can't?

Also, as no-one has answered you question about cancelling your credit card, yes, do it. From what I understand, an $8k limit is as good as an $8k debt in the lenders eyes, so your $9k deposit becomes $1k.

As usual, I don't really know what I'm talking abut so I'm open to corrections.

 

[Peter_Tersteeg]

You've credit scored badly with the CBA on what appears to be a 95% loan. The NAB also uses credit scoring which is likely to end in a similar result.

From your description I can see a few things that are negatives on your credit score but not huge ones. There may be additional factors but your biggest challenge is likely the 95% lending.

There's a few things that could help here.

1. Don't start shopping around different banks. It'll only make your situation worse. Ideally you need to find a lender that suits your circumstances, doesn't credit score and has their own underwritting authority with the mortgage insurers - for this you really need to consult a broker (the big 4 banks can't help you here).

2. See if there's anything you can do to get together a higher deposit. A parental guarantee from your Mum might also work here.

You may also need to accept that you may not be able to get this property.

 

[sickofrenting]

But the loan was an 80% lvr based on mums house being security? It seems from comments on here that I may have to do h&l together? This will need time to organize a tender, I would have though with that lvr the Bakst risk is lower? Guess I need to find a mortars broker in Vic. Any recommendations?

 

[tobe]

Pick me, pick me!! LOL

 

[Aaron_C]

But the loan was an 80% lvr based on mums house being security? It seems from comments on here that I may have to do h&l together? This will need time to organize a tender, I would have though with that lvr the Bakst risk is lower? Guess I need to find a mortars broker in Vic. Any recommendations?

Any of the Melbourne brokers here like Peter (PT_Bear) or tobe above can help you. Best consult with them before you talk to another bank.

 

[Mick C]

sickofrenting ( ohh the irony...) - you been knocked back because of the Big 4's credit scoring.

Pick up the phone and give Pete or Aron a call they are both VIC based brokers and i'm certain you will enjoy a more pleasurable exp + outcome compared too you shopping around and dealing with the banks yourself...

If you start to rack up a few credit hits; then it be GG mate...


Ace Capital - www.acecapital.com.au - 0400 808 368
Peter Tersteeg- [email protected] -1300 880 225

P.s If You got Knocked back by CBA then NAB will def say no....CBA tends to be more flexible with Guarantor loans, especially in the high LVR space

Regards
Michael

 

[Rolf Latham]

CBA not approving on score is not a great sign...............

Id be 10 th person to say see one of the Melb brokers that have already responded here.......

I reckon you will only get ONE more bite at it, and then you are on strike 3, and out for the innings

The innings could be 6 mths or as long as it takes to get to a 90 % lend


ta
rolf

 

[bdc]

$9000 cash, bank account floats arround this level for 3 or so months.
$2500 cc debt with an $8000 limit (always paid in full monthly)

If you talk to one of the brokers I would assume they would ask you about this in detail, but I imagine this part doesn't look very good?

You say it has been hovering around the $9000 for about 3 months, was it higher before or lower? And why hasn't it been increasing over the last 3 months...I thought the banks liked to see a pattern of saving?

It seems especially low considering your income?

Sorry this isn't meant as an attack or anything, there are obviously plenty of reasons it might have stayed there (including that just being the level of savings you were happy to keep...mine is around 20-25k, I start getting unhappy when it gets below that 20k mark), just curious which I assume the bank would be too?

Also, as no-one has answered you question about cancelling your credit card, yes, do it. From what I understand, an $8k limit is as good as an $8k debt in the lenders eyes, so your $9k deposit becomes $1k.

I'm curious about this if I can just hijack this for a second (as one answer has been given over and over ("see a broker")).

When you are on the Breakfree package you get a "free" credit card, I have a $15k credit card (because I want the benefits of the platinum card basically, like extra insurance, travel insurance etc) with mine, and when I saw the bank today they still punched that in as part of my financials.

Now, I have never paid any interest on it of course as it is paid automatically, what I'm curious about is, that when I go for a 2nd loan it will actually be worth me cancelling the card, and then asking for a new one again when my annual fee comes up under the Breakfree package...

Is this really the case? And is it not one of the most stupid things you have ever seen? AFAIK they never reject you for the card as it is included in the package...you will always receive it, so why on earth should it count to reduce your borrowing capacity with the same lender that issued you the card?

 

[Mick C]

canceling your card is fine most of the time, presuming it's a $0 balance and paying it out won't reduce your deposit ...hence increasing your LVR;
You be ask to provide a letter from the CC company to say it's closed and paid out in full ie you didn't simply do a balance transfer.

Most Lenders will reduce your borrowing capacity by 3-4% of the credit card limit; ie

Presuming a $0 balance.

A $5,000 CC = Less ~$18,000 in Borrowing capacity
A $10,000 CC = Less ~ 38,000
$20,000 CC = less ~ $90,000

Of course this is jsut a rough general guild; and the cal diff lender from lender to lender and product to product.

If the CC is not on a $0 balance; then that's a diff story as well for certain lenders.


----

Regarding the break free; if i understood the question correctly....

Yes you be given a compulsory CC with the ANZ breakfree, which needs and will be factored into the ANZ cal- however if your an existing client break free client and you go for a 2nd loan- there;'s no need to apply for the break free again...so hence no need to apply for a 2nd CC.

Regards
Michael

 

[Rolf Latham]

Is this really the case? And is it not one of the most stupid things you have ever seen? AFAIK they never reject you for the card as it is included in the package...you will always receive it, so why on earth should it count to reduce your borrowing capacity with the same lender that issued you the card?

its called good lending practice and being compliant with NCCP legislation.

If you have a 15 k limit, you can draw it, and thus needs to be taken into account as such.

Lower it to 5 to be compliant with the Breakfree and that would be ok ?

ta
rolf

 

[Aaron_C]

Lots of people don't even declare all their credit cards...

 

[Jake D]

I'm curious about this if I can just hijack this for a second (as one answer has been given over and over ("see a broker")).

When you are on the Breakfree package you get a "free" credit card, I have a $15k credit card (because I want the benefits of the platinum card basically, like extra insurance, travel insurance etc) with mine, and when I saw the bank today they still punched that in as part of my financials.

Now, I have never paid any interest on it of course as it is paid automatically, what I'm curious about is, that when I go for a 2nd loan it will actually be worth me cancelling the card, and then asking for a new one again when my annual fee comes up under the Breakfree package...

Is this really the case? And is it not one of the most stupid things you have ever seen? AFAIK they never reject you for the card as it is included in the package...you will always receive it, so why on earth should it count to reduce your borrowing capacity with the same lender that issued you the card?

I don't really know what I'm talking about and may very well just be passing on anecdote, so hopefully someone who know better will also reply.

But since I raised it in the first place: I had been told that regardless of balance, the limit is seen as a potential liability. I was advised to cancel a $0 balance, $10k limit credit card when I applied for a home loan a couple of years ago.

I imagine if it is a free card, linked to the mortgage, with the bank you are applying for a second loan, they may look at things differently.

EDIT: Just saw micks response, must have posted while I was typing, Thanks.