Only at Alpha



From: Fat Boy .

I would one day like to get an IP at the moment I'm trying to set up my massage business from home. My current house is not suitable for it so I am selling because the bank will not lend me the money for another house. (Because it is bigger $300,000).
So I am selling it's on the market for $230,000. Once sold I pay my car off $19,000. And the left over will be the 5% deposit for the new house from which I will be working part-time for now (Therapeutic massage).
I have been told that I can get quite good tax deductions if I run my part time business from home. Thus improving my chances of later buying a P+.G. property.
The bank says there is no other way for me to borrow $285,000 without paying my car and selling my house.
It's a bit of a shame especially when I hear people say never sell.
At the moment I believe that in my situation of needing a bigger place so that I can run my business there is no other way.
I have even tried a broker to see if he can help me get a better loan. He says that I can't afford to keep my first house.
At the moment I don't know how I will ever get an IP. Do they always have to be on the low scale of the market?

Anyway I hope some of you professionals out there can make some wise comments.

Hoping to be fat.

Da Fat Boy
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Reply: 1
From: Michael G


I'm sure there are a few mortgage brokers on this forum that may be willing to have a look at your problem.

Basically it comes down to LVR (loan to value ratio) that is the amount of "worth" compared to the amount of "debt" you have and your serviceability.

In regards to LVR banks like 80% but will go up to 95%. So if your house is worth $100k they will allow you to have debts of $95k.

Things that will reduce your LVR will be other loans, for example if you have a credit card with a $5000 credit limit, then your LVR limit will be reduced to $90k, same goes for your car loan. So step one is to examine all your personal debt and look at ways of eliminating it.

The other factor is serviceability. Roughly this is based on your income, the lenders usually don't allow any more than 30% of your gross(maybe net) income to be allocated to debt paying.

So if you earn $1000/per month, you will not be allowed to have repayments totalling more than $333 this figure includes all loans.

So I would encourage you to work out your gross monthly wage, determine what 30% of it is, then see how much of your car loan eats into this amount. The balance will be the allowable repayments for your mortgage.

Other factors that determine your lending ability is your martial status and children. Some lenders will reduce your gross by certain amounts for every child you have. This is to ensure you have enough money set aside to support them.

Anyway a mortgage broker will tell you this, but its good to know WHY you are unable to do something, that way you can DO something about it.

Ok, getting back to your situation. Is your current house in a good area?, is it on a big block?, If its on a large block you could possibly consider sub-dividing the block and either sell off the back half to generate some cash or even sub-divide and build an IP, being a new property your deductables would be high. One thing to watch out for though is whether it would be neg-geared or not. Again something to weigh up.

Well that's one idea, I'm sure others on the forum could give you more.

What say you peoples, I've given one idea, would would like to match it with another?

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Reply: 1.1
From: Gary Plotzza

Hi FatBoy,
Michael gave a good summary on lenders criteria.
There can be some variables within each lenders criteria.

For example in your liabilities column,credit card debt can be 3% or 5% of your limit as a monthly repayment.

Disposable income after liabilities can be a certain percentage or as little as $1.
There are a lot of small variables that can mean the difference to an approval or a decline.


Gary P/ Flexible Mortgages
If you need any more feedback email me at
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