Need to borrow $1 MIL

[james55]

So the bank has knocked us back on our request to purchase our first PPOR. The amount we want to borrow is approx $1m. The branch lender would only lend us about $700k-$800k. This is not enough to buy a decent house in our area. Working in a bank, I have never had to go to a broker but I think I'll put it out there and see if you brainy brokers can help me out

We currently have 4 investment properties. I estimate the total values to be $2.47m and total debt is $1.8m. Rental income from the properties totals $2980 p/w. We are currently building a granny flat on one of the properties and I have included the estimated final value and income in my figures above.

Me and the wife are PAYG on only $62K each We have a $6k credit card limit between us which we pay off every month. A $35k personal loan currently at nil balance but will draw out to fund the granny flat construction.

We are currently renting a place paying $685 p/w comfortably so we figure if we buy a place for $1m and throw a granny flat at the back for $100k which could rent out for $500 p/w we could actually save money living in our own home.

I have heard low-doc loans would be a great option reading some of the other threads here. I'm ok with paying a higher interest/fees initially until I can refinance it to a full doc loan.

Any suggestions appreciated

Edit : I forgot to add, we have 2 kids under 7

 

[Jamie M]

Hi James

Different lenders assess borrowing capacity differently- so whilst it might not work with one doesn't mean it won't work with another.

First thing I'd be looking at is using a lender that takes into account other banks loan repayments at what they actually are - and not an inflated amount.

I'd also look at how your current loans are structured and if repayments can be reduced there to improve borrowing capacity. Converting loans to IO for instance.

There are a few ways to enhance borrowing capacity.

Cheers

Jamie

 

[james55]

Hi James

First thing I'd be looking at is using a lender that takes into account other banks loan repayments at what they actually are - and not an inflated amount.

Thanks yes, I hadn't thought of that. The bank i'm with takes into account P & I when all my loans are interest only. I also have all my properties un-collaterised because I knew one day I will may need to see another lender.

Can we qualify for low-doc loan with letter from accountant stating our PAYG income + rental income ?

 

[Rolf Latham]

Hiya

Welcome to ss

Lo doc ............... for a PAYG income earner, probably not wise, whats more the ATO may end up with a nice audit double layer cake.

Have a chat with Jamie

if he cant sort a compliant and great deal for you, no one can

ta
rolf

 

[james55]

Welcome to ss

Lo doc ............... for a PAYG income earner, probably not wise, whats more the ATO may end up with a nice audit double layer cake.

rolf

Thanks Rolf. I've been lurking here for years but rarely post

Not sure what double layer cake is but i bet it ain't good

 

[D.T.]

If youre keen to take on 7 figures of debt I can reassign my loans if you want?

 

[james55]

If youre keen to take on 7 figures of debt I can reassign my loans if you want?

Do I get the properties attached to them?

Actually I'm not worried about the ability to repay. We have not had any problems servicing our debts so far. The tenants pretty much cover all the costs.

 

[Jamie M]

Thanks yes, I hadn't thought of that. The bank i'm with takes into account P & I when all my loans are interest only. I also have all my properties un-collaterised because I knew one day I will may need to see another lender.

Can we qualify for low-doc loan with letter from accountant stating our PAYG income + rental income ?

Hey James

No worries.

Lo doc isn't an option for PAYG - but I don't think you'd need it anyway.

Cheers

Jamie

 

[MsAli]

Have you considered buying this ppor as an investment? Could rental income help?

 

[neK]

I'm interested in understanding how 4 properties could derive so much rent.

I'm assuming all the rent is above board. None of this rent to multiple unrelated parties on the same site stuff.

 

[Terry_w]

Can we qualify for low-doc loan with letter from accountant stating our PAYG income + rental income ?

That wouldn't change anything. You would still have the same income and rents

 

[james55]

Have you considered buying this ppor as an investment? Could rental income help?

Yes that is the plan. So we have already taken into account the expected rental income. Without it, I don't we could borrow much. Then after settlement we can simply move in

 

[james55]

I'm interested in understanding how 4 properties could derive so much rent.

I'm assuming all the rent is above board. None of this rent to multiple unrelated parties on the same site stuff.

No the properties are in Sydney. They're all house & granny flat setups. Mostly garage conversions & Serge on this forum has been getting them approved for me. So all legit now

 

[james55]

That wouldn't change anything. You would still have the same income and rents

I see thanks Terry. I've never really understood low doc loans. I thought people made up magical numbers and the banks would happily lend based on that

 

[Rolf Latham]

Just be careful with what lenders you approach since some arent very keen on rental rtns above 6 to 8 %.

A decent broker can make that call for you ..................but oddly enough, many of the locals wont know of the restrictions because such % rental rtns are quite rare in Sydney.

If you need LMI as well, pls choose a lender that has in house DUA ( approval of the mortgage insurance in house) since if you use a lender that needs to send the deal to the LMI provider you are toast before you start since you will be deemed to be "rental reliant"........... go figure 9 leases, 2 jobs, wrong maths hey, but dems da rules

ta
rolf

 

[Rolf Latham]

I see thanks Terry. I've never really understood low doc loans. I thought people made up magical numbers and the banks would happily lend based on that

nah, they are lo doc loans of old.

Thats why we liked no doc............... where the declaration said "i can afford the loan"

Under the NCCP rules a broker and a lender needs to make sure the numbers a borrower provide are real, and there are a few checks and balances.

ta
rolf

 

[Marty McDonald]

Seems like a lot of debt for your salaries to me. I realise you have the GF's so better than normal yields but on your figures it is still only 6.2% gross so you are not that well covered if rates rise in the future. I would want more PAYG income to be comfortable with + $1 mil in new debt.

 

[redwing]

These questions are the good brokers brokers bread and butter

Can't help, but looking at the numbers you have

$2,470,000 Value
$1,800,000 Debt
$670,000 Equity

And a LVR of 72.9%

Drawing out $200k equity at 80% LVR would give a cool $1M Loan

How about acquisition costs?

Then the $100k Granny Flat costs?

I'm presuming things get a bit tougher for the brokers if you go over the 80% LVR in these situations?

If it can't get over the line, would selling an IP with a good deal of equity (assuming they are stand alone loans) assist get the PPoR deal over the line?

If the IP's are in Sydney the value side of the equation has been racing northwards recently, you would expect a retraction, or pull back at some point?

If you both work full-time, is their additional costs with the kids (childcare etc)?

 

[jonmardell]

With the right structure this might be achievable

 

[james55]

Seems like a lot of debt for your salaries to me. I realise you have the GF's so better than normal yields but on your figures it is still only 6.2% gross so you are not that well covered if rates rise in the future. I would want more PAYG income to be comfortable with + $1 mil in new debt.

Hi Marty, yes it's starting to look a bit scary but I'm planning to mitigate the risk with a granny flat on the new property. Is that 6.2% figure would be based on the current estimated values? Would it be more accurate to calculate it based on current debt? Obviously the banks would not look at it that way but for my SANF I based it on my current debts. $1.8m at 7% interest (interest rates will rise at some point) is $2423 per week plus about $500 per week for council rates, insurance, agent fees etc will leave me neutral