flexible 100% loan, any recommendations?

[pete_pumpkin]

Hi, I'm looking at getting a loan in the next few months. The problem is I won't have all that much saved up in that time - I'll be lucky to have the 5-6% deposit for costs.

I bought my first property late last year, and claiming the FOH, I have a couple months left till I move back in with my dad. This place will be rented out.

All my money has been going to paying the interest and renovating the place. I've also had to borrow about 5K from my mum to finish renovations - but I guess I can take my time paying her back Not sure if she would lend me any more atm.

This property investing thing is pretty new to me, and I must say I'm rather exited/ impatient to get my next property asap. I'll be looking at purchasing something up to $150k.

Ideally, I would organise a LOC with the CBA on the place I'm in now, but reading through their documents, I beleive their LOC is $20k minimum, and I reckon that my place hasn't reached a value of 157k just yet, which would be the appropriate LVR needed fot the 20k LOC. So basically I'll have to save some money. $7K I reckon I might be able to save, But any more, ie 5% deposit plus 5% cost, would take forever for me to save. That's why I'm looking at 100% loans.

So what are my options?, Do I need 3-6months genuine savings?, or the fact that I've regularily been paying the mortgage for the last six months be comparable to genuine savings? (even though I don't actually have the dosh)

I have my fingers crossed and hope I might be able to borrow the money from some where, ie mum, LOC, or personal loan.. It's just a matter of finding a bank that will be flexible with this.

 

[Rolf Latham]

Hiya

Dont use a LOC product.

use their Standard variable loan product, min is 10 k and u are done

then get a 95 % normal loan for the new IP

Voila

ta
rolf

 

[pete_pumpkin]

Rolf, that 10k loan, what sort of loan is it?, Home loan, personal, investment? I reckon that would nearly cover what I would need. I did want to go to another bank to eliminate cross collateralization etc but I guess I can request for the loan not to be?

 

[pete_pumpkin]

Ok, unsecured personal loan obviously Are there any competative products out there? I think CBA is 11% - 15% form what I can see they quote some 'Average Annual Percentage Rate' ie 13% - 2% to 13% + 2%.

I'm not sure what they mean by this, is this a comperasim rate? Ideally I'd want 10-15k for their max period of 7 years. Also I think with the variable loan I can pay out after a year without penalty so would probably be most suited.

http://www.commbank.com.au/schedule/CBA_b1c1s24p7.asp

Any idea what the interest rate would be in my case with the above criteria?

Also a nother question, when interest rates go up, do they go up equally for home loans and personal loans?

Cheers,
Pete

 

[CairnsAgent]

Pete, it's time to speak to mortgage / finance broker mate.
Forget trying to decipher bank web sites!
Speak to a broker in your area, preferably one that can build/ tailor a loan to your specific needs. I use a single credit place for all my finances and they are capable of coming up with some amazing solutions to finance property purchases when other "traditional" lenders would baulk!

Also most brokers when they learn you are looking at investing will see the potential in you as a long term client, and will work hard to secure both your finance and your business.

Cheers.

 

[Rolf Latham]

Hiya PP

Its simply another 10 k mrtgage loan, same as what u have but just a weenie

ta
rolf

 

[pete_pumpkin]

yeah but I just don't understand - your confussing me ..How would the bank give me a homeloan worth 10K when the house is worth 140k, and what security would they want in this situation, especially when I'd still need a 133k loan which would be secured against the house.

Are we talking personal loan @ 12% etc

Or a 'home' loan at 8% ?

 

[pete_pumpkin]

Pete, it's time to speak to mortgage / finance broker mate.
Forget trying to decipher bank web sites!
Speak to a broker in your area, preferably one that can build/ tailor a loan to your specific needs. I use a single credit place for all my finances and they are capable of coming up with some amazing solutions to finance property purchases when other "traditional" lenders would baulk!

Also most brokers when they learn you are looking at investing will see the potential in you as a long term client, and will work hard to secure both your finance and your business.

Cheers.

Yeah I need to get back to my broker. Or get another one. This lady I have had previously hasn't gotten back to me on a number of occasions and has left me quite frustrated. So maybe I'll shop around..

 

[Les]

G'day Pete,

Someone is giving you a bum steer - or you are just not getting enough info from your Mortgage Broker - whichever.... I think you are RIGHT with this:-

This lady I have had previously hasn't gotten back to me on a number of occasions and has left me quite frustrated. So maybe I'll shop around...

There are MANY MB's on this forum. Some close by - some not - but FAX works pretty good. Check out those available to you RIGHT HERE - if they weren't good, their sins would have found them out already!!!

Rolf Latham has already replied to you - but he's in Bne (or Syd, or where ever - he's not sure Hi, Rolf) Is that a problem for you? That is a valid question, as some people WANT to sit in front of advisers rather than just FAXing everything, or talking on a phone ...

I started to think of all the MB's - but, as I won't remember them all, and don't want to offend by NOT remembering any) why not start a thread asking for Mortgage Brokers to reply to you. This could be VERY worthwhile for the whole forum. I think there would be at least 20 of them out there, maybe more. But, obviously, not all in YOUR area. You might choose one close to you - or not - your call.

Once you have the names, just do a Search on each, and choose one whose posts sound "right" for you (i.e. they seem to think the way that appeals to you - now and then, you need to "trust your gut feel").

It might take a week of diligent searching - but what could it GAIN you by doing this? Less stress, ease of doing business, less headaches, no cost to you, a mentor, a buffer between you and the lender, someone who DOES return calls, etc. Of course, with the right one, this could also accelerate your wealth building too - so don't take it lightly - it is serious business.

I mentioned Rolf earlier for obvious reasons - he has helped ME through MANY sticky situations, so I depend on him regularly. But, that's not to say that others WON'T do this - in fact, I'm pretty sure those on this forum will do likewise - but I can't speak from experience with them. Others have, though - and have provided glowing references for most (if not all) of the incumbent MB's. So, now it's time for YOUR due diligence - go find one !!! They are out there,

Regards,

 

[pete_pumpkin]

Thanks Les, yeah I reckon I'll have to do that if I don't get the info I'm after from this thread.

I'm just trying to get as much info as I can so I don't waste time / look stupid, when I do see a broker - probably someone local - Although I can't really see any harm in using someone interstate etc if I get just as good, if not better service.

This forum is full of useful info and people's queries etc, I did search for info on 100% loans but didn't find too much.
I guess If I need specifics then I need to ask questions specific to my situation etc

Anyway cool

Thansks for your reply

 

[CairnsAgent]

Pete,

Just start talking to a few of the brokers either here on the forums or in your local area, all will be happy to hear from you, after all thats how they get paid!
They can give you valuable advice on loan structures and what best suits your personal situation.

Cheers.

 

[Les]

G'day Pete,

I'm just trying to get as much info as I can so I don't waste time / look stupid, when I do see a broker - probably someone local

Yep, always a good idea to have a good understanding yourself too. So, even though I'm not a Broker, I'm able to provide opinion - and always happy to learn from others if I don't sound correct, so don't hold back....

Let's see then....

So what are my options?, Do I need 3-6months genuine savings?

Once you have Equity, I think you are past this point. Usually this is reserved for First Home buyers (as the lender has no "history" or Equity to rely on apart from your savings history).

Can I say, to give remotely accurate info, more needs to be known about your current situation. e.g. I haven't yet seen where you tell us:-
1. What the current mortgage owing is.
2. What kind of Equity you have in this place
3. What the LVR of the current mortgage is
4. What the amount of this mortgage is.
5. Are you paying P and I, or Int. Only

And the above might be info you prefer to keep to yourself (which is fair enough) or share with your Broker.

However, let me "create" a scenario that MIGHT have some resemblance to your situation. Then, by working through it, and using YOUR numbers, you may be able to answer your own questions - let's try it:-

-------------------------------------------------

Keen Investor (KI) bought a home 6 months back, got interested in investing, and now wants to see whether he can buy another.
Value of current home 6 months ago = $130,000
Mortgage (95%) in home purchase = $123,500
Added value from renovation (estimated) = $10,000
Growth in area (+ or -) over 6 months = +5%
Current value due to growth = $136,500
Anticipated value after reno = $146,500

Now, IF the Bank Valuer agrees with the projected value of $146,500,
the Bank will possibly allow a mortgage increase (at 95%) up to $139,175. This could lead to a further LMI "hit", but, since the original mortgage has only been running for 6 months, SOME deduction from that original LMI premium should offset this cost.

OR (as Rolf suggested to Pete P) perhaps the Bank will allow a 2nd loan (separate to original) up to $15675. The lower increment should lead to lower LMI, Stamps, etc.

---------------------------------------

There you go Pete. It might help to give you a "template" of what to check, what questions to ask (like RE agents, re growth in area), and what YOUR numbers look like - to see if a $10k loan is or isn't possible.

There are LOTS of other things too - but the above should give you an idea of will it work.

After that is determined, then you need to visit "all the rest" - like:- is new loan P&I or IO, is the Bank going to say "Yes", etc - and if they say "No", will you want to walk? Can you afford to walk? Or do you just wait for the growth to happen? Of course, a MB can answer all of this - but that's not me.

I think KI has a chance, depending on his lender. I don't know about Pete P though Good luck with it,

Regards,

 

[pete_pumpkin]

Hi Les, cheers for your long reply

A few details.

The loan for this first place of mine is 95% LVR, Fixed IO with the CBA total $120,660 - I haven't made any extra payments towards the principal

I'm on a wage of around $35k+ Gross per year

I anticipate a gross rental income close to $10,000 and the same on the second IP

I'm not sure what the 'banks' value of my house is, but on the council valuation its $139,000


-----

I had no idea that a bank might be able to 'increase' my current loan, this would be good, and I wouldn't mind paying the LMI again - Although I don't know if they would increase the interest rate for the whole loan to their current rate (~8%), or wether I could keep it at my current 7.24%

Or as Rolf suggested, a small mortgage; which I'm still not too sure how this would work as what would be the security needed on such a small loan, my first IP? or the next IP, and would the bank expect me to lend the remainder 95% from them or could I go elsewhere etc.

Any brokers out there?

 

[Les]

G'day Pete,

Did you run YOUR figures through that KI template? What did it tell you? Has your current property increased enough to sustain another $10k lend against it? (it would need to be near $140k today for that to happen - maybe a little less...)

Re the Rates val - on all of mine, it says UCV (Unimproved Capital Value) - that is, Land Value only. So, if it's worth $139k (and you paid $127k) that $10k loan is pretty much there. But a Bank Valuer needs to agree too !!

Anyway, you were right in asking for MB's - as I can't answer all of the intricate bits that follow - I've just got a rough idea of how it all works.

Good luck with it, and I hope a MB replies for you,

Regards,

 

[Spectre]

Pete

With a LOC included the max cba will lend to is 90% lend whereas with a 'normal' loan you can go to 95%.

Hoping I’m right with the #s…you owe 1$20,660 and need say another 10k then that comes to $130,660. Lets be fun and round it to $131,000.

Your place needs to value up (off the top of my head) @$138,000 to get your deposit for the new bit (i.e. the 10k new as discussed previously). That will take you to your 95% lend. If it comes up more, then it could be used either to increase your deposit or pay your mom back.

If the loan is already fixed at 7.24 then I’m fairly certain current rates are now higher so the additional funds would probably be as a new loan (i.e. loan #2). You could roll it into a present rate a bit higher if you wanted to.
Suppose it may be a question of whether or not you’re paying the monthly loan fee with cba, and if you have 2 loans then you’ll have two unless they sign off you on a pro pack.

If you get a personal loan to do things just bear in mind it will probably blow your servicing way out of the water when you go for IP2 unless its gone before or repaid at the same time.

You also have to bear in mind that a lot of the 100% loans might not lend you 100% of the property, they might lend you 96-97% and cap the mortgage insurance up to 100%, not to mention the LMI premiums vary between your institutions.

 

[pete_pumpkin]

Thanks Les, lukentel,

What would the correct/best term be used to describe what I need when I see a broker?

Revalue then increase my lend back to 95%LVR? top up my loan? refinance the loan..

 

[Rolf Latham]

Hiya

A separate loan to 95 % of the current value, for investment purposes.

Leave your existing loan where and as is (usually). Perhaps u could even go back to where u sourced that loan.

Not too many brokers will be excited by that loan alone, so the carrot of the new loan secured against the IP will be more tempting.

ta
rolf

 

[MishMash]

This is what I am doing, as I don't have a deposit or money to pay for costs for my second IP.

I am taking out a second mortgage against my first IP (with the same bank) for $25,000. I find out this week if this has been approved (fingers crossed)

IF it is approved, then I am going for the 'big' loan of $250,000 with a different bank (95% loan).

 

[pete_pumpkin]

Thanks for the advice everybody.

Yeah I just wasn't aware that I could do what you guys are suggesting. I thought a LOC or PL was my only option.

Anyhow I won't be renting this my current place out till July 1st so I still have some time to shop around etc.

Man this property investing is exciting stuff

Thanks again