Lo Doc Hardship Repercussions?

Hi all,

This is my first post on Somersoft and unfortunately not a happy one so please be gentle.

I have 2 lo doc loans 1. Rams Lo Doc 90% 2. Challenger Lo Doc 80% on ppor.

I read with great concern that lo doc/no doc loans are pretty much a thing of the past which has dire consequences for my strategy in going forth and has left me all of a sudden with no where to turn i.e regarding refinancing.

I am in an absolute bind. Due to circumstances my income has been reduced to virtually zero of late, I have a lot of other commitments i.e bad debt and the time has come for some drastic action to avoid going under or having to sell ppor.

What I am thinking of doing is to try to strike a hardship deal with those 2 lenders to give me some breathing space to get things back on track with regards to my income and payments etc. This would also involve me moving out of my PPOR and renting it for a while to help things along.

I guess my question is, if I take the "hardship" option, and have to "bare all" with regards to my actual current financial situation (which isn't good), is there a possibility that either lender might "call in" their respective loans and force me to sell. Also, what are other potential repercussions i.e. CRA etc etc.

On the up side I guess I know that if I could get 3-6 months breathing space I am confident I can trade out of this dilemma without have to sell either property.

The other thought I had is that there is enough in my super to get me out of this situation if I could get my hands on it. Thoughts?

I'm seriously stressed about this situation and any advice or thoughts would be welcome. No lectures if you can help it, I've got enough stress going on.

Thanks very much
Higgins
 
I have been in a similar situation, several years ago, and I have friends also who have struggled through the same.
I assume you have your own business, and this is why things have been tight.
I would encourage you to use this time to really objectively analyse your business and see whether it is going to be viable going forward, before you consider borrowing more money.
In my case, when my business started going badly, i borrowed extra money, because I assumed the business would turn around. In the last 6 months of the business operating, I lost ALOT of money. If I'd closed the business down when it was first clear that it was not working, instead of borrowing more to keep it afloat, I would have saved more than $200K worth of debts.
We managed to hold onto our house, but were left with big debts. Many of my friends decided to sell their house, rather than have the big debts lingering.
Sometimes we just want to hang on to something because we believe it will turn around, when its better to cut our losses and get out. It may not be the case in your situation, but I think its a good time to really obkectively analysed the business and what needs to change for it to be successful.
Once you've done that analysis (and also get someone who can objectively review it as well), then you can decide whether to go to the lenders for hardship assistance.
The ATO will also allow you to delay payments, if that's causing problems, or at least to make smaller instalment amounts. In my case, when I wrote to them requesting additional time to pay because the business was going under, they rang me and offered to repay all the interest I had paid.
I know that its a really difficult time, and I hope you are able to resolve it quickly.
Pen
 
Thanks Ajax, MTR & Pennyk

I have thought this through a great deal since I panic-posted and if I take evasive action on various levels NOW I should be able to establish a holding pattern at least until I can get my income back to their previous levels. Which really means putting my head down!

MTR thanks and I have replied to your PM.

Pennyk I am not a business as such but I do freelance work under both my ABN and as PAYG....the problem is that I have not been doing nearly enough so it just comes down to cash flow. I am currently up to date but this will change with one loan from this week and then the cycle will continue over the next month and I'll be snookered.

My bad debt is 70% credit cards from previous reno's etc (not plasma tv's) and Im of course paying dearly for that. The plan was to refinance all this at at much more reasonable level soon but I may be too late by the sounds of it.

The world may not be coming to an end but the dust clouds are on the horizon.

Thanks
Higgins
 
When my business was in the throes of going down, and we already had some debts, I transferred them all across to a very low interest card, with Citibank I think. Alot of credit cards offer low interest on balance transfers. This can help to keep things under control for a while, as long as you don't put any extra debt onto them, or any other credit card.
Perhaps thats an option for some of the debt at least,
cheers,
Pen
 
When my business was in the throes of going down, and we already had some debts, I transferred them all across to a very low interest card, with Citibank I think. Alot of credit cards offer low interest on balance transfers. This can help to keep things under control for a while, as long as you don't put any extra debt onto them, or any other credit card.
Perhaps thats an option for some of the debt at least,
cheers,
Pen

citibank is offering I think 2.99% or could even be 1.99% for transfers, currently ad onTV.
This one from citibank is 0% for 6 months.
http://www.citibank.com.au/AUGCB/AP...Cards&path=/prod/det/cards_clear_platinum.htm
 
Pennyk and NWW

Have just applied to citibank to transfer 21k of various balances over at 1.99%. Fairly confident that'l get through. They just need to verify income through my accountant which should not be a problem I hope. That'll save me 5K over the next 12 months.

Thanks so much for the input. Sometimes when you have a lot going on it becomes overwhelming and one doesn't seem to be able to think straight or logically. Your suggestions seemed to have snapped me out of my stupor so greatly

Higgs
 
I wish you all the best higgins in getting back on track.

I too have gone down the No-Doc path and with regrets.
At the time l was sure l was doing the right thing.
I also never in my wildest dreams believed that property prices would or could drop like they have.
The ip is in a great location and has not been 1 hour without a tenant.

I purchased an ip with a Mac loan and used funds from a LOC .
I capitalised interest , bought at the wrong time as well.:(

The ip is now worth less than l paid the loans are more than l borrowed due to the capitalising interest and the high interest rates at the time:(

l have been paying down when l can on both these loans but it does seem to take forever to make a dint in them.

I was paying the Mac loan only then l stopped the capitalising interest and have since been only paying down the Loc.

However l am now seeking opinions on which is the best to pay down.

the Mac loan ? to me this is the bad loan as its the higher interest rate and its No-Doc loan , from memory its about 7%+ interest at the moment.

the Loc is a much lower interest rate and its with WP. and not frowned upon in the lending world like the no-doc is

I still have Loc funds un-drawn available
Would you use these loc funds to pay down the Mac loan further?

What would you do?
It has bought my investing to a screaming holt .

Fire away:eek:
cheers
yadreamin

higgins if you want me to move this from your thread just let me know but l think we are seeking similar opinions.
 
No please don't remove it. I think its sorta related.

My situation is more a "head in the sand" type of thing and now its come home to roost and Ive got no one else to blame except myself.

I'll get through it though. I have a new determination as from today and I've just gotta bite the bullet and earn some serious cash for the time being and get things back on track. Thought about prostituting myself but, after a good hard look in the mirror, came to the realization that I'm too old and wrinkly. (just joking, not about the wrinkly part though) and my gut is not fit for viewing by the general public.:eek:

Good luck and I'll watch this thread with interest

And thanks again for others suggestions, has definitely made me think hard and realize that its not only me. I think thats quite important as you can stress yourself into some terrible mental states and start to believe that you are the only person on the planet that has screwed up.

Thanks
Higgs
 
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Hi all,

This is my first post on Somersoft and unfortunately not a happy one so please be gentle.

I have 2 lo doc loans 1. Rams Lo Doc 90% 2. Challenger Lo Doc 80% on ppor.

I read with great concern that lo doc/no doc loans are pretty much a thing of the past which has dire consequences for my strategy in going forth and has left me all of a sudden with no where to turn i.e regarding refinancing.

I am in an absolute bind. Due to circumstances my income has been reduced to virtually zero of late, I have a lot of other commitments i.e bad debt and the time has come for some drastic action to avoid going under or having to sell ppor.

What I am thinking of doing is to try to strike a hardship deal with those 2 lenders to give me some breathing space to get things back on track with regards to my income and payments etc. This would also involve me moving out of my PPOR and renting it for a while to help things along.

I guess my question is, if I take the "hardship" option, and have to "bare all" with regards to my actual current financial situation (which isn't good), is there a possibility that either lender might "call in" their respective loans and force me to sell. Also, what are other potential repercussions i.e. CRA etc etc.

On the up side I guess I know that if I could get 3-6 months breathing space I am confident I can trade out of this dilemma without have to sell either property.

The other thought I had is that there is enough in my super to get me out of this situation if I could get my hands on it. Thoughts?

I'm seriously stressed about this situation and any advice or thoughts would be welcome. No lectures if you can help it, I've got enough stress going on.

Thanks very much
Higgins

higgins,

Depending on the lender and other bits and pieces, if you apply for hardship you will need to open your books.

Will they be broadly consistent with what you declared on your Lo Doc declarations?
 
higgins,

Depending on the lender and other bits and pieces, if you apply for hardship you will need to open your books.

Will they be broadly consistent with what you declared on your Lo Doc declarations?

Ditto, Good point, I also interpreted the original question as to what would happen if actual and declared incomes are substansialy different
 
Hi TFund,

In short, not a chance. Thats my concern. I can see a situation whereby the lender may, call in the loan, or choose not to play anymore if I bare all. Having said that I have managed to service the 2 loans for a period of 2 and 5 years respectively with no major dramas to speak of.

I've made up my mind to attack my situation from with a more pro active approach. I would like to keep this thread going as it interests me, and hopefully, others.

TFund welcome your thoughts.

Thanks H
 
Depending on the lender and other bits and pieces, if you apply for hardship you will need to open your books.

Will they be broadly consistent with what you declared on your Lo Doc declarations?
In short, not a chance. Thats my concern.
Do they at least match for the time period when you made the declarations? ie Is this because your income has dropped, or because you lied? :confused:
 
To both Higgins and Yadreamin,

This is crunch time. It's happened before when things slow down, and it will happen again.

It is simply a case of "batten down and ride it out". Maximise your income even if you stack shelves at Woolies at night, pour drinks at the local pub orclub etc, and cut your expenses to the bone. Don't spend a single cent unless it is on basic necessities of life. Pay ALL bills on time.

Things WILL get better and if you can hang on to your properties it will all pay off.

Good luck!
Marg
 
However l am now seeking opinions on which is the best to pay down.

the Mac loan ? to me this is the bad loan as its the higher interest rate and its No-Doc loan , from memory its about 7%+ interest at the moment.

Hi,
What I did was to pay the smallest loans off first, to get them out of the way. I had several under 50K loans. Each time I paid one off, I added the repayment amount to the next largest loan, and so on. Now, I only have the one large loan to pay off. I didn't actually look at interest rates as much, as the motivation to keep going by getting rid of all the little niggly debts.


Higgins, I didn't receive any PM from you.

Cheers,
Pen
 
To both Higgins and Yadreamin,

This is crunch time. It's happened before when things slow down, and it will happen again.

It is simply a case of "batten down and ride it out". Maximise your income even if you stack shelves at Woolies at night, pour drinks at the local pub orclub etc, and cut your expenses to the bone. Don't spend a single cent unless it is on basic necessities of life. Pay ALL bills on time.

Things WILL get better and if you can hang on to your properties it will all pay off.

Good luck!
Marg

I agree Marg.....however, tenacity and attitude will only get you so far before the realities of high LVR and debt come looking for you....just like the Grim Reaper
 
Hi TFund,

In short, not a chance. Thats my concern. I can see a situation whereby the lender may, call in the loan, or choose not to play anymore if I bare all. Having said that I have managed to service the 2 loans for a period of 2 and 5 years respectively with no major dramas to speak of.

I've made up my mind to attack my situation from with a more pro active approach. I would like to keep this thread going as it interests me, and hopefully, others.

TFund welcome your thoughts.

Thanks H

*insert usual TF counsel about telling fibs on Lo Doc applications including counting actual or potential gains as income*

If you have been servicing you loans from debt rather than income or your financials then and now aren't likely to show serviceability, you may be in strife.

Did you actually have the income you declared back then?

Generally speaking, a bank won't extend hardship unless there is a probability (not posibility) that the situation will cure itself in a reasonable time. Failure to do so just delays the inveitable and makes the end result worse for the borrower.

If you made stuff up on your Lo Doc application, for obvious reasons, this won't help.
 
I have no other personal debt at all and l have a very good cash buffer, the bells are not tolling for me just yet.

What l really want to do is get rid of the Mac loan its a No Doc.
I would like to transfer it to another bank as a full doc loan but l dont have the income for the banks to do that so l thought if l paid it down enough they may then consider it. I have been focasing on paying the the Loc but l think maybe the Mac loan is the important one to get rid of.

The tax savings dont come into this as my taxable income is very negative.
I save well and l live very modestly. I dont have all the toys.Not interested in them.
For anyone considering capitalising interest, think long and hard about it. Its a big no no when IR are rising and property prices are falling. This will happen again. [is that a prediction?]:eek:
Thanks so far for the replys l already do what many of you sugest, so l quess l am doing ok.[l just wish l could do it quicker]
Any other thoughts are apreciated
cheers
yadreamin
 
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