Equity is running low. Any ideas if we can still borrow more?

[rambada]

Also remeber that some institutes do a pro rata refund of the MI within 12 mnths if the written valuations increase. So if you buy undr the market or add value or both, with the use of LMI then get a revaluation to get the LMI back and more equity.

We deal with Westpac and have had problems with the valuations that they used. So we attained other valuations from one on their board and knocked on their door again, got the money we deserved.

Its also funny. A complete refinance is handled by one department that may not be open to alternative valuations but a top up is by another department which are more open. Go figure?

As my lovely wife says - an obstical is something you go over, or go under, or go left, or go right. If that doen't work - just go straight through the bastard!!

 

[knightm]

Knightm,

The basic terms were as follows:

Interest rate 11.5%. Standard unsecured bank rate at the time was 9%
Period 12 months
Security Personal guarantee and caveat over PPOR
Frequency Interest was capitalised so paid all back in one hit at the
end


Tony

Thanks Tony,

appreciate the info - can I ask: re the caveat - thats not a second mortgage is it? Does your solicitor(or the lenders) register the caveat? And how does it get removed so when you sell your property theres no dramas?

And yes I do know some people who may want to be the bank for a while, but also have an uncle who is a broker who apparently has a list of 'private lenders' on his books. Will ask him how sharky they are

Cheers

 

[geoffw]

Knight

My understanding of a caveat is an interest which a third party holds on the property- it can be anybody.

When I bought one property a few years ago, the vendor's mother had a caveat on the property I was buying, and she died between exchange and settlement. It was nothing more than a minor inconvenience at the time.

I guess a guarantor for a loan on a property would want to have a caveat on a property, for instance.

 

[tony100]

Knightm,

Although a caveat was offered and referred to in the loan agreement it was never actually put in place. At the time I naively thought that just agreeing to the caveat in the loan agreement was sufficient. Because neither the lender nor me actually put the caveat in place there was never a caveat on my home. I guess the fact that I readily agreed to it gave the lender sufficient confidence.

My understanding of caveats is that they cost a few hundred dollars, can be done by yourself or by a solicitor, and give the holder a registered interest in the property - thus more security incase you default on the loan. Sorry I can't tell you specifics.

I would offer this advice with regards to private loans: don't kick off offering too high an interest rate and ask for a longer term than you think you need. I.e., if you think 12 months will be sufficient specify 15 months in the loan agreement. You’ll thank me for that one.

Tony

 

[knightm]

When I bought one property a few years ago, the vendor's mother had a caveat on the property I was buying, and she died between exchange and settlement. It was nothing more than a minor inconvenience at the time.

Thanks geoff and tony - appreciate the info.

Do you know how to get a caveat removed (say you bough a place and the lender (private finance, unsecured loan) put a caveat on (seems like a less intense form of security to me) - if you wanted to sell the property - would the caveat have a clause saying money must be repaid if sold (like a mortage provider gets their money at settlment in a standard arrangement)?

What I am really asking is if you get finance with a caveat, how does it get removed when selling the property? I wouldn't want purchasers to be scared off by finding it when their solictor does searches etc.

Sorry if I am getting into too much detail.

 

[TomL]

My mate here at work told me a story of a development his old man was doing recently.

They bought a development site with a fairly long settlement, solicitor looked into all legals etc, no problem.

However, their solicitor calls up with about 1 month to go to settle, saying hes had a call from neighbors solicitor saying there was a caveat on the property. However, the title office never registered it properly so it didnt show up on a search.

The neighbour had a caveat on it restricting development on or near the boundary - i'm not sure exactly what it was - but holy cow - how the hell does this happen?

Anyway, long story short it was lodged about 9 years ago but never properly entered into the system - the neighbour still had all the documents, paid receipt etc but after much lawyering to and fro it seemed the title office stuffed up and indeed there was no legal caveat.

Wow.

I guess going along with this thread, if anyone knows and can clear up for everyones benefit who/why/how people can lodge a caveat on a property - that would probably be handy info !?!?

Can Ell really get some extra private lending, with the use of caveat on their property ? Is it that easy?

T.

 

[TomL]

Oh yeah .. back on the original topic - some other ways to continue investing without necessarily having alot of equity left ..


1) Joint venture - You provide all the work; find the deal, negotiate the deal, put together a JV, reno, sell/keep split profit. Just need to find a moneyperson short on time.

2) Option a property for 12 months. Get DA approval for a development on the site. Sell the option, or JV it with someone.

3) Buy a property with looong settlement. Part of contract is clear access to
site before settlement. Do reno. When you settle bank lends against the new improved value.


I dont do this btw, just what i've read and heard people do.

T.

 

[<KS>]

Great thread guys!

I myself am in a similar but not identical situation as our friend Ell.

I myself have the problem of not such brilliant servicability but good equity for another loan.

We only make about 90k/year between us. (Crappy WA retail wages, despite me being a manager).

On the upside we will soon (building being finished) own $510,000 worth of property of which we will have about 175k equity in (a nice conservative estimate).

Going on the 80% rule this will enable us to borrow a further $365,000

The problem is that without a tenant that pays $1000/week we will be struggling with the short fall.

Keeping in mind we have 2 car loan that will be paid out in full in 12 motnhs and increase our servicability by $700 month.

My quetion is this:

What is the best way to get a loan and convince the lender we can afford it?

Would an LOC solve the problem? I understand the principle of it and as far as I can tell we could borrow slightly less than the full amount and use that to fund the new mortgage repayments for a year or so, then use the LOC interest as a tax deduction.

Just wondered if this was the best way to go.

===

Dont want to steal the limelight for this thread I just figured it was a relevant problem

<KS>

 

[Aceyducey]

KS,

Pay out the car loans NOW.

Then keep investing.

Car loans are a serious liability. It's been discussed a number of times in the forum, but actually hasn't come up much lately.

Cheers,

Aceyducey

 

[<KS>]

@Acey

AMEN BRUTHA!

We are doing just that

The loan is not an actuall bank loan it is just money borrowed from my parents so does not technically exist for the purpose of finance applications etc. Some months my parents get $1000 from us, others they get as low as $400, but either way we are paying it back at about 3 times the rate of a normal loan and overall the loans for both cars will have only taken us 18 months to pay back in full from start to finish. I HATE car loans - my biggest pet hate, in fact I dont really like cars all that much, nasty expensive things! One of those necessary evils I am afraid - a bit like mobile phones.

With some luck our 2 tax refunds and my annual bonus will wipe out half of what remains (we have about $11,000 owing overall) and that way we will have the cars paid off before my current project is finished (increases servicability bigtime), I just dont want to count on it being the case.

<KS>

 

[Smile]

Thanks geoff and tony - appreciate the info.

Do you know how to get a caveat removed (say you bough a place and the lender (private finance, unsecured loan) put a caveat on (seems like a less intense form of security to me) - if you wanted to sell the property - would the caveat have a clause saying money must be repaid if sold (like a mortage provider gets their money at settlment in a standard arrangement)?

What I am really asking is if you get finance with a caveat, how does it get removed when selling the property? I wouldn't want purchasers to be scared off by finding it when their solictor does searches etc.

Sorry if I am getting into too much detail.

To get the caveat removed you repay at settlement the money you borrowed when they placed the caveat there in the first place, same as a mortgage.