Not happy with Pre-Approval. What should I do?

[Mason]

Hi,

I am planing to buy my second IP. Just got a pre-approval of $290K from CBA (including IP1's equality) and really not happy with it. It is much lower than I expected ($350K+). What should I do?

My status:

Annual Salary $98,850 (Including super)
IP1: Worth $320K ( Westpac $175K IO loan and $310 rental income p/w)

My son is 6 month old and my wife is on parental leave. However, she has $220K in saving account so the monthly interest income is about $600+.

We are renting and the monthly rent we pay is $2173.

I am the sole owner of IP1 and will be the sole owner for IP2.

In addition, another part of the pre-approval also includes refinancing the Westpac loan to CBA.

I am not sure what is wrong. Why is the pre-approval amount so low? What should I do?

 

[j_p]

Get a broker. And again. Get a broker.

Can't be stated how important it is. A good broker will work for you and your goals, maximise lending, plan for the future, give you options you didn't know about and even offer ideas about tax to confirm with your accountant. All for free.

So get a broker. If you don't then there's nothing I can say that will help.

 

[Jamie M]

If you use a lender that takes IP 1 repayments at "actual" repayments rather than an inflated amount it will improve your borrowing capacity straight away. Lenders such as Nab Broker, Advantedge, Macquarie, AMP, etc.

Why do they need to refinance your Westpac loan?

Can't you do an equity release with Westpac to cover the deposit/costs on IP 2 and then take out a preapproval for the remaining balance?

Cheers

Jamie

 

[Jess Peletier]

A couple of things - if your're the sole owner they may not have used your wife's income toward servicing.

They also may not have included any projected rental income.
Just a couple of things to check.
What about family tax benefit? That will also bump it up.

You should speak to a broker to get a second opinion, but don't stress - there's nothing locking you into CBA and as Jamie said other lenders are more generous.

 

[Terry_w]

You are getting rorted by CBA and will end up cross collateralised...

 

[Peter_Tersteeg]

The CBA isn't the most generous lender out there. If they'll only give you $350k, there are probably quite a few lenders that can do a bit more.

By the CBA using IP1s equity they might be trying to cross collateralise this property with another which is not a good thing, it will get in the way of your future IP purchases and is completely unnecessary.

You've also mentioned that the existing loan is with Westpac. Why refinance? This only costs you money and Westpac is often a little more generous than the CBA?

You need to:
1. Access the equity in your existing IP in a controlled manner.
2. Avoid cross collateralisation so you don't give yourself a larger problem in the near future.
3. Explore more than 1-2 lenders. There's almost certainly a lot more options out there than you think.

 

[Redom]

Biggest issue is the recommendation to have all your debt loaded into one bank.

Just by having it separated out (which you currently have!) will increase your borrowing power substantially. Hence its best to stay with Westpac to do the top up. If your must refinance, keep the two banks different to each other.

Next step is the choice of lender to extract out as much as possible. As Jamie said, you could benefit from trying NAB, AMP, Macquarie, etc for your IP.

Cheers,
Redom

 

[Rolf Latham]

your Westpac loan?

I dont like leaving money on the table either.

im sure there are logical reasons for the recommendation.................. like trying to get better pricing from the ONE lender.

A lot depends on the brief of the borrower.

get me ALL the money you can at the best rate and LVR.............. pretty much choose any 2 I guess.

Many dont like doing the weeny top ups, but often its the right thing to do

ta

rolf