Interesting visit to the bank...

[FelixL]

Today I went to get a loan for buying an investment property. Some of the stuff the banker ask leave me speechless...

Under the new NCCP regulation, they need to access if getting the loan is suitable for my goal. I said "Fiancial Independence" as the goal. The reply was that its not specific enough, in the end putting down as buying a BIGGER HOME as suitable!!

I am told I can borrow up to 800k on my income alone, even though my own calculation is about 300k with wife income (equal to mine), wtf???

When putting in assets - "how much is your second car worth?", there was a shock pulse when I said there is no need for more than 1 car in the household

Cash is irrelevant to risk. My PPOR loan is practically paid-off, but by choosing to leave the cash in the offset account, I had to be assessed the full loan amount, as if have nothing.

 

[Aaron_C]

Yes that is standard. So if your servicing is so good why are you and your wife both being guarantors? I would've thought that's a more important question.

 

[alexlee]

Visiting the bank was your first mistake.

 

[esh]

lol. I used to work at a bank. Staff are not required to use common sense but standards- and that's why I left.

It's good to have policies/standards but sometimes like your situation can be ridiculous

 

[FelixL]

@Aaron_C

yeah I am bewildered when I hear how much I can borrowed, not sure how they calculated the 800k figure. I can never afford that!

@alexlee

yes, i realised afterwards that I should have gone to a broker instead...

Overall, my investment strategy is to max leverage through other people's money, and likes to borrow money when I have cash

 

[Peter_Tersteeg]

Today I went to get a loan for buying an investment property. Some of the stuff the banker ask leave me speechless...

Under the new NCCP regulation, they need to access if getting the loan is suitable for my goal. I said "Fiancial Independence" as the goal. The reply was that its not specific enough, in the end putting down as buying a BIGGER HOME as suitable!!

I am told I can borrow up to 800k on my income alone, even though my own calculation is about 300k with wife income (equal to mine), wtf???

When putting in assets - "how much is your second car worth?", there was a shock pulse when I said there is no need for more than 1 car in the household

Cash is irrelevant to risk. My PPOR loan is practically paid-off, but by choosing to leave the cash in the offset account, I had to be assessed the full loan amount, as if have nothing.

"Financial Independence" is very vague and is unlikely to understood by someone in a branch anyway. "Purchase investment property" is something they do comprehend and will accept.

Borrowing capacity is based on a number of factors, most of which are simple rules of thumb and don't actually relate directly to your circumstances. Instead they're based on stats collected over a wide range of borrowers from all backgrounds. Had you given them a copy of your budget and day to day household expenses, either they would have ignored your budget or the amount would have been far less. You're doing the right thing. Take their figure as an assurance that you can borrow the money, set your limits based on your own figures.

Your cars value and other assets are simply building a profile for their computers to match. It's not really specific to you, but again based on their own statistical analysis.

Cash in the bank is great and will improve the system generated risk profile, but your financial commitments (such as P&I repayments on your PPOR) don't change if you've got a lot of cash in the offset. Cash can also disappear very easily. Who's to say you haven't been saving for a first class round the world holiday?

 

[Aaron_C]

yeah I am bewildered when I hear how much I can borrowed, not sure how they calculated the 800k figure. I can never afford that!

It's just a random figure that was spit out of the computer. Don't take it as any indication of what you can actually should/could borrow.

 

[FelixL]

I have learnt many rather painful lessons over the years and now can see the funny side of things. But if I had walked into that bank 10 years ago, I would most likely believed what the "financial expert" said, got the biggest loan he gives me and then go out to buy an expensive apartment in the cbd!

then again, on my graduate salary back then, the bank would not be as generous

 

[vendorfinance]

I am here new member. forum is nice activity to share the knowledge each other of regarding project.