?Equity? to our property ? CBA and frustration.

G?day. We are facing some dilemma and hope this knowledgeable group can shed some light.

We have two loans with CBA: one home and one investment. Since they were created about seven years ago, the market values have increased to about $250k combined. Contacted CBA and was sent to see this 24-year old guy, supposedly the star of a super-branch.

In our first meeting, we told them about our wish to utilise our ?equity?. After a week, he send us a new loan application. Told him we don?t want a new loan, asked him to change it to refinance. I am on salary so he got my payslip. But hubby just sold his business 2 years ago, started some construction work late last year, about to wrap up this year, but didn?t have tax return yet. Hubby?s latest tax return is 2011/2012. The accountant is still doing his 2013/2014??. He is also about to embark on new venture after this construction is finished. The last email from the Lender said he can give us finance if we ?provide a new investment property with rental income?.
We are furious: our 2 properties value is well over $1M, original loan $740k, balance now $250k (mainly IP). How do we tap into our ?equity? that everyone talks about? We do have intention to buy a second IP but do not wish this property to be encumbered.

On a crossroad now: cancel this case, appeal (to who), move away from CBA (difficult)? Hope to hear from you all. Thanks in advance.
 
G?day. We are facing some dilemma and hope this knowledgeable group can shed some light.

We have two loans with CBA: one home and one investment. Since they were created about seven years ago, the market values have increased to about $250k combined. Contacted CBA and was sent to see this 24-year old guy, supposedly the star of a super-branch.

In our first meeting, we told them about our wish to utilise our ?equity?. After a week, he send us a new loan application. Told him we don?t want a new loan, asked him to change it to refinance. I am on salary so he got my payslip. But hubby just sold his business 2 years ago, started some construction work late last year, about to wrap up this year, but didn?t have tax return yet. Hubby?s latest tax return is 2011/2012. The accountant is still doing his 2013/2014??. He is also about to embark on new venture after this construction is finished. The last email from the Lender said he can give us finance if we ?provide a new investment property with rental income?.
We are furious: our 2 properties value is well over $1M, original loan $740k, balance now $250k (mainly IP). How do we tap into our ?equity? that everyone talks about? We do have intention to buy a second IP but do not wish this property to be encumbered.

On a crossroad now: cancel this case, appeal (to who), move away from CBA (difficult)? Hope to hear from you all. Thanks in advance.

Hey Sunshine,

Without knowing the full details, banks will need to see that you've got the income available to you to borrow the additional money you require. Having equity alone won't allow you to access it, it must be combined with adequate borrowing power.

Depending on the specifics of your husbands situation, its possible that his income can't be used (<2 years business?). Therefore your income alone and any rental income will need to be shown as proof that you can afford the additional funds.

Cheers,
Redom
 
From a loan structure perspective - make sure properties are not crossed securitised and make sure the equity release is a separate loan facility and not a top up.

Servicing is a big thing here and I wonder whether you have hit your limit with them now or close to hitting your limit.

Have you previously paid LMI on these loans?
 
Hi there

Looks like the banker is trying to control the purchase too.

Just tell them that you're going to another bank for the investment property - and you just want to use CBA for the equity release against your current property.

Tell them you haven't found your next property yet but want the funds to be available for when you do.

Cheers

Jamie
 
We are furious: our 2 properties value is well over $1M, original loan $740k, balance now $250k (mainly IP). How do we tap into our ?equity? that everyone talks about? We do have intention to buy a second IP but do not wish this property to be encumbered.

On a crossroad now: cancel this case, appeal (to who), move away from CBA (difficult)? Hope to hear from you all. Thanks in advance.

Why are you furious? Is it a "I demand you lend me your money!" sort of thing?

You need to demonstrate you can pay the money back before someone will lend you and to do this you must prove income. It doesn't matter whether you have equity or not for serviceability.
 
Hi there

Looks like the banker is trying to control the purchase too.

Just tell them that you're going to another bank for the investment property - and you just want to use CBA for the equity release against your current property.

Tell them you haven't found your next property yet but want the funds to be available for when you do.

Cheers

Jamie

Jamie I don't think this is the case at all. Sounds like they're unable to show that they can afford the equity release as not being able to verify any income for the self employed applicant with financials for 11/12. Having the equity doesn't meant that you can access it, you have to be able to show that you're able to repay the debt.

Sounds like Lender is able to show affordability if there is rental income.

How long until your accountant completes the financials? You said last financials were 2012, what about 2013? What about BAS statements? Was he in the same industry?

Just because you don't want the property unencumbered doesn't mean the rental income can't be used if you have found a property to purchase.
 
Jamie I don't think this is the case at all. Sounds like they're unable to show that they can afford the equity release as not being able to verify any income for the self employed applicant with financials for 11/12. Having the equity doesn't meant that you can access it, you have to be able to show that you're able to repay the debt.

Agreed - I read it that they were going to fund the release if/when they found a property.

If they can't demonstrate servicing than it doesn't matter how much equity is available - it's a no go.

OP -hit up Brady. He works for them.

Cheers

Jamie
 
I'm really confused about what the problem is?

Told him we don?t want a new loan, asked him to change it to refinance.

If you want to access your equity, you're going to have to change the loan. Refinancing would also change the loan (although I doubt that refinancing is necessary in the scenario you've described).

The rest of the post describes your income and employment situation. Whilst this is important because it qualifies you to borrow money, why is this something you're complaining about?



If you want to access your for another investment purchase the best way to do this is to either increase and existing loan or to set up a second loan alongside the first to access that equity. This releases your equity as cash which you can use as deposits and purchase costs for more investments.

The right structure is important, but this does depend on your circumstances and there isn't enough information to say if the structure is being implemented properly or not in the original post.

It's possible that things are being done badly, but it's just as possible that things are being done well. The problem I can see is Sunshine doesn't really understand what's happening or what's required. The solutions to this is the banker needs to spend a bit more time needs to be spend explaining the situation.
 
hmmmm....but CBA may go off one years financials if deal is sub 80% LVR (so might need to just get onto that recent return asap). Anyways - I'd still be giving brady a buzz and seeking a second opinion.
 
New CBA policy allows 1 year return to be used for self employed for =/<80% LVR. This isn't a credit exception this is now policy. Note need to be trading for 2 years though (although I'm pretty sure credit would accept as an exception).
 
Hi

Would your recent redundancy be playing a part, or have you secured a new role for servicing the debt? Different lenders act in different ways for new jobs.
 
I think a lot of people assume having equity means the banks will give it to them.

You need to think about it from the banks view. Let us say you are retired but have 1,000,000 in equity. If the bank gave you the money, then how would you pay it back to them? Yeah your house is worth a lot of money, but unless you sell it you still have no cash flow to service the debt.

Equity is like having your money in a bank vault.
Serviceability is like having the lock combination.
Selling is like Die Hard 3.
 
make sure properties are not crossed securitised
I suspect they are. How do I check this please?

make sure the equity release is a separate loan facility and not a top up.
Sorry can you please explain? We prefer a top-up, not a separate loan (The amount is not large enough)

I wonder whether you have hit your limit
I don't think we have given that the 'equity' is over $250k, and our loan balance is so low.

How do I check this please?

Have you previously paid LMI on these loans?
No
 
I don't think we have given that the 'equity' is over $250k, and our loan balance is so low.

Shahin is referring to your servicing wall, based on your income and expense. Has nothing to do with your 'equity'.

You need to be able to show that you can repay the debt.
 
Why are you furious? Is it a "I demand you lend me your money!" sort of thing?
Definitely not. It's the way we've been stuffed around all these weeks. Since Day One he knows what we wanted, what we have and dont have. He could have told us first up that Hubby didnt have 2-year history and we will bugger off. We wasted so much time and effort.

It doesn't matter whether you have equity or not for serviceability.
Thank you. I understand now. It also doesnt matter that we have some cash and shares sitting somewhere...
 
Sounds like they're unable to show that they can afford the equity release
Thanks, I understand now.

Sounds like Lender is able to show affordability if there is rental income.
It is a catch-22. We want our facility to be topped up so that we can buy IP and get some rental income, but how do we buy it if the finance is not enough??

How long until your accountant completes the financials? You said last financials were 2012, what about 2013? What about BAS statements? Was he in the same industry?
We have 2012/2013. Accountant is doing 2013/2014.. another frustration because it's a new accountant since the previous one retired. The new mob cant give a date :-(

Just because you don't want the property unencumbered doesn't mean the rental income can't be used if you have found a property to purchase.
Did you mean we can declare the rental income without CBA taking mortgage over our 2nd IP?
 
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