Thanks for that. Can you give an indication of current rates at those LVRs.
Citibank's carded 85% LVR product is currently at 9.13%, it is generally better at higher LVR's to do a blended product eg you use an interest only loan for 70% at prime rates, 10% also at prime rates, but P&I over a short period eg 5 years and the extra 5% at unsecured rates (generally a couple of percent higher) ammortised over 3-5 years. Don't take this as something you could definately do, but it is an example of a possible structure for getting 85% LVR relatively cheaply, the idea would be to get the property revalued after 12 months and get the whole loan into the the IO bracket.
Rates in the commercial market have been going up as bank bills are quite high at the moment, we are placing most smaller loans at around the 8% mark. The 90 day bank bill, is currently at abount 6.7%, most larger loans are set at a margin above this. The lowest margin I have ever successfully negotiated is 0.81% so in the current climate that would put the rate at approximately 7.5%, that was quite a large loan though.
What is servicability criteria like ? Do they accept 100% of nett rental income ? Do they do equity lending - ie a standalone loan based on income solely for the CIP - how strong does the tenant/lease have to be ?
Servicability criteria varies very widely between lenders. Some have servicability calculators for smaller loans, but generally they look at interest coverage. There is massive flexibility in terms of things such as how much rental they will accept and it is heavily dependent on a combination of the strength of the borrower and the deal itself. There are plenty of asset lenders and lenders who require relatively little in the way of income verification, they are generally more expensive but often not appreciably so.
And presumably they lend anythng from $100K - $100M+.
Pretty much any amount. Smaller lenders often have limits, especially if they raise money through a mortgage fund eg there is a small lender I use quite a lot that has no money at the moment as it is all loaned out, so any amount is too much. Often there are trustee guidelines prohibiting smaller lenders from lenmding more than a certain % of their money to a particular lender or on one project, but this only affects people borrowiung a hell of a lot of money.
A comment with regard to Gross's comment on the number of micro-lenders. There are a lot, but most of them are really just brokers and get their money from the same sources. Bank finance is pretty much always the cheapest and should be your first pint of call, if the situation requires a little extrra flexibility or reduced income documantation then mortgage funds, who raise and control their own funds are often very good (larger examples of these are Challenger and Perpetual, there arer also some small niche players that are very good for specific situations).
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