Equity Line question

[Gargamel]

I currently have an investment property with IMB. As I've had the loan with them for over 5 years I've accrued a fair amount of equity I'd like to access.

I've applied for an equity line with them to gain access to these funds. I've just had a call from the bank manager which seemed a bit odd to me. I confirmed that the purpose of the loan was to provide a deposit for another investment property. I was then told that without supplying the address for the new property I would only be able to access $50k (less than 1/2 of what I asked for). I said I was still looking and wanted to have these funds approved first. I was also asked if I wanted pre-approval on a loan for my intended purchase and I said no.

Sounds to me like they want me to x coll the new place when I just want to access my equity!

I've never applied for an equity line before, how does the approval/fund access normally work?

 

[Rolf Latham]

Hiya Gargamel

Not so much xcoll, more control of "cash out"

Number of reasons for this including anti money laundering and anti terrorism laws.

Also, the lender doesnt want to provide a facility that you arent going to use. Costs them money to have the facility undrawn.

You could consider mocing to a lender that doesnt have these rules.......yet.

ta
rolf

 

[Rixter]

I've set up 2 LOCs with AMP Bank earlier this year. Never had any problems with them. Maybe worth approaching them via your broker.

 

[Gargamel]

Thanks very much for your suggestions.

I'll look into AMP, feel free to nominate any others.

 

[jonmardell]

looks like cash out restrictions on IMB's side (cant be sure cause i dont deal with them) If it is a cash out restriction look for other lenders with higher cash out restrictions. Homeside lets you take up to 100k without verification... this is just one lender there are many more.

 

[jonmardell]

also i should add that if your sole purpose was to just put it as a deposit for a new property then a deposit bond could solve this for you.

 

[Rolf Latham]

Homeside lets you take up to 100k without verification

On a very very very good day................

We do a fair bit of volume with them and if the cash out is more than 20 k ish or > than 20 % of the loan amount they want a note from mummy.

Personally Id go AMP, Citi, and leave HSL well alone

ta
rolf

 

[VIC Lender]

On a very very very good day................

We do a fair bit of volume with them and if the cash out is more than 20 k ish or > than 20 % of the loan amount they want a note from mummy.

Personally Id go AMP, Citi, and leave HSL well alone

ta
rolf

I don't understand why you would go to one the these lenders unless a major would not deal with you. CBA has the best cashout policy - that is they don't have one up to 80%. Recently did a 1.2m line of credit undrawn. Westpac has also approved the same deal but lost it on rate.

I'm pretty sure ANZ and NAb would be pretty much the same.

 

[Marty McDonald]

Sounds like imb may have a 50k cash out restriction without verification as the others have alluded to. As Rolf said amp and citi are very flexible with cash out.

If you know who you want to place the new ip loan with maybe do a refi with cash out / equity facility with them?

 

[Marty McDonald]

anz would not do that $1.2 mil loc IMO, nab direct not sure and homeside no way. People / brokers must support the 2nd tier lenders or they have no hope of keeping the majors honest price wise. Sometimes believe it or not they even have cheaper rates not to mention good policy niches. amp's 3 year fixed rate was a case in point being cheapest in market for at least 3 weeks recently with the ability to lock the rate from the day it was quoted to the client. Viclender I get the impression you work for CBA?is that right?

 

[Gargamel]

If IMB won't do better than 50k I think I will be going elsewhere. I'm curious to see what they come back with.

Interesting to learn about cashout restrictions, thanks everyone

 

[Rolf Latham]

I'm pretty sure ANZ and NAb would be pretty much the same.

Hi

retail maybe, third party.............no way, every day.

Anz want a letter from Mummy for anything much more than 40 k, and NAB direct is pretty mich similar.

Its not that they WONT do them, its that they want a bunch of supporting paperwork which can range from as simple as a stat dec stating I promise I wont put it all on black, to a note from the acct or FP that its for shares, to in some cases a copy of the full financial plan

With Wbc credit score, as soon as you have cash out on the table as a new client it really puts a big ding into the chances of the deal getting across the line

ta
rolf

 

[VIC Lender]

Hi

retail maybe, third party.............no way, every day.

Anz want a letter from Mummy for anything much more than 40 k, and NAB direct is pretty mich similar.

Its not that they WONT do them, its that they want a bunch of supporting paperwork which can range from as simple as a stat dec stating I promise I wont put it all on black, to a note from the acct or FP that its for shares, to in some cases a copy of the full financial plan

With Wbc credit score, as soon as you have cash out on the table as a new client it really puts a big ding into the chances of the deal getting across the line

ta
rolf

Hi Rolf,

So we are narrowing options down. Which is good for Gargamal as it gives clarity on the where to go first.

So from what you have said Westpac, NAB and ANZ are maybe but more chance direct than via a broker. Albiet finding a good bank manager can be like panning for gold in your underpants!

The other lenders outlined were CitiBank, Amp and CBA. CBA having no cashout policy (<80%).

Problem with Citibank, AMP and IMB is that they have all been in again and out again of the market and have higher set up fees.

Gargamal - what at your thoughts?
Any reason to avoid a major ?

 

[Rolf Latham]

Hi Vic

We are making asumptions as to serviceability here too.

properly structured AMP, Adelaide and bunch of other second tiers outlend the majors by 1.2 to 2 to 1 on an equivalent portfolio.

That big thing, and often policy and product niches is usually the reason why many choose away from the big 4.

In addition, at the moment, if a broker is a notebook jockey and uses price as a main selection tool, then ABL and AMP blow the others into the weeds in terms of rate and fee base on loans of 150 to 500 k.

ta
rolf

 

[VIC Lender]

Depends how you use the calculator and how you verify income. Sometimes majors can outstrip 2nd tiers for lending capacity - sometimes second teirs win. Not sure how many second teirs use bank statements to verify income e.g. If a client has an ATO adjustment they get higher net pay and if you use bank statements to verify income (working on net) you can ultimately boost lending capacity by plenty versus payslip verification. Then for self employeed clients there are abnormal one off add backs (outside of Int + dep) that majors will sometimes allow. Plus of course the majors have LMi delegation so insurers policy restrictions are irrelevant.

I'm not going to say banks are better than non bank. Am not going to argue that banks or non banks are better for servicing or that one is more flexible than another. All have benefits in different situations.

In relation to the original post the problem is cash-out. Correct I am assuming servicing is fine but I am also assuming that the poster is an Australian resident, not bankrupt, has clean credit and has no other specific problems bar cash-out - which in my opinion is only a problem in the non bank and second teir sector - or as you pointed out maybe broker chanels.

 

[Marty McDonald]

Vic I don't want to get in a slanging match but you seem to very combative to anyone entertaining the idea that there are viable alternatives to CBA out there. If Amp and citi have no cash out restrictions how exactly is that a problem confined to the second tier market / broker market when their policy is looser than cba's. I think you would find it's an industry wide issue with a few exceptions one of which is CBA. I personally like using CBA more than the other big 4 but the arrogance is a turn off.

 

[VIC Lender]

You are correct that CBA is one of the exceptions. Exactly my point. They have unlimited cashout within 80%. Hence I am trying to point it out as valid option rather than disregard them because they are a major?

retail maybe, third party.............no way, every day.

As Ralf acknowledged; these are the sort of deals that get written in the branch and mobile lender networks every day (retail) however struggle in the broker channel (third party). The policies are actually the same however there are plenty of reasons credit decisions appear stricter in the broker channel (that is another argument). I'd be happy to say that all major banks do cash out without many problems - especially if making a deposit available for a future purchase.

anz would not do that $1.2 mil loc IMO, nab direct not sure and homeside no way. People / brokers must support the 2nd tier lenders or they have no hope of keeping the majors honest price wise.

THe original post is nothing to do with keeping banks honest or stering deals to the 2nd teir lenders. If you have been in the market a while you would have seen what happened to CitiBank clients during the financial crisis. Not only did rate rises exceed the major banks but they also pretty much stopped lending - they have higher exit fees than the banks.

Non banks in Australia need government assistance to help them be competitive. I would not put a deal with a non bank over a major until the government has taken a few steps to protect the consumers when they get burnt giving a smaller lender a go. There are hundreds of examples.

So Marty. Im not looking for a slinging match but support open debate on an open forum where people can offer different views.

 

[Rolf Latham]

The policies are actually the same

We are getting off topic here, but its a worthwhile chat

My experience isnt that at all................both sides of the coin often have different levels of flexibility. Any broker ( or branchie) that thinks the playing field is level has a thing or 12 to experience. The lenders like us to believe that and even have their own broker staff believe that.......but if you have been around long enough, experience shows its not so.

On the other hand, there are deals that can be pushed through 3rd party that cant go through retail.

Working policy exceptions and being "on a favour" or at the "edge of the envelope" dont work well for many clients in the middle term, and hopefully the implementaion of the NCCP will square up some things that are just plain dumb.

In recent times, I have found the larger lenders making many more a transgression than the little guys and or mortgage managers.

Examples in recent times include

1. A big 4 approves a 770 k mill FULL DOC loan for a self employed existing client on 25 k income with a 70 % lend for a bunch of units on one title. Client exchanged and paid 50 k deposit, then came to us to pull the balance of the 30 % and costs needing around 330 k from their sole other property worth 350 k with a exisiting 150 k mortgage on it........

2. A big 4 big wig private lender signs off on an 80 % lend for a purchase. Client goes to auction and puts down his 10 %...............comes to us for funds to complete by pulling equtiy from another property. They are so far out of serviceability their only food variety is which flavour of instant noodles tonite ?

3. A big 4 arm being a "specialist" medical funder contacts my doc client through some 3rd party referal. The doc is looking to buy his first ppor and has only 2 okish years of tax rtns, but its clear from these and oct q P&L that things are on the UP. Initial chat with funder tels client 90 % no lmi easy. 2 weeks go by. they come back with...........your income is bad and you cant afford IO. So, we will do u a no LMI loan to 90 %, but we want the 10 % amortised over 3 years.

I can go on and on, and on but its boring. Retail is now so competitve that some funny things can and do go on. The times where a broker would ( and could) stitch up an 88 yr ol granny for a 500 k lo doc lend to stick into a margin loan scheme are gone...........and thankfully effective 1 jan also for all bank lenders.

ta
rolf

 

[Spectre]

True years ago you had banks like your cba, westpac, anz, nab saying we're safe, go with us... we'll be cheaper... smaller 2nd tier lenders are dangerous.... the 'securitised' demon being painted in the mind of the broker and the public

Where at the end they all did it.

But now the complaints I hear most about cost of funds comes from the big 4

And non bank in gfc, you had macquarie, old rams to name a few melt down
and bank you had cba, boq overlending to people victims of storm - both still standing.

So hundreds of cases either side of the fence.

IMO it isnt entirely issue of who you borrow the money from but the policy to get from point a to point b with the least amount of BS for everyone. So a good chunk of discussion now is lender a will want you to do x,y,z to get the loan thru. Lender b will want you to do x. Lender B is 0.10 higher than lender a.

But nothing at all wrong with using smaller lenders, compare their product offering against the big 4 and you'll usually find they're just as competitive.

In reference to retail vs broker channels, each has their own pros and cons and both run on different policy. Brokers can get cba deals approved branches cant. Branches might advance on cash out a bit more -for now perhaps. I'll be interested to see how/if the rules change when they have NCCP on the branch network which the brokers have been dealing with for six months now.

It'll be interesting when Jan 1 rolls around and if cba does a branch policy change to say cash out is now to cease for amounts of $30k that is where the broker value will come into play as Citibank and AMP and Macquarie might start to look pretty good to those who dont want to do x,y,z and only do x.

Sorry if this is kind of grossrealisation typing (jk gr), i'm buggered.

 

[Rolf Latham]

Sorry if this is kind of grossrealisation typing (jk gr), i'm buggered.

for a mo I thought we had an ID take over

ta
rolf