Refinancing 101

From: Rae B


Hi all,

Am currently overseas (E. Timor) and have been asked by alot of potential Property investors about the ins and outs of refinancing IO loans once the initial 5yr period runs out.

As I am yet to experience the joys with my own loans, I am at a loss to what information to provide.

I am really looking for a step by step process of setting up a refinance within the same bank to unlock equity, also is this the same process once the 5yr IO period is over.

Does the Investor have to arrange with a valuer (currently on the banks books) to arrange a revaluation, or do you just apply through the bank itself?

I am also hoping to unsecure a second property on another IP, which has hopefully gone up in value, by using itself as collateral. Unsure as to how to do this.

Any comments will be greately appreciated.

Cheers .......... Rae :)
 
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Reply: 1
From: Rolf Latham


Hi Rae

Get onto a broker to sort this out for you.

Easy to do yourself if local, but a broker can do advance things for you if the deal is with ANZ, like preorder vals to save superfluous CRAA enquries.

If you want to do it yourself its simple. Complete 22 page application form with explanatory 2 page letter. Draw some pictures for the assessor just to make sure they understand your idea of uncross collateralisation. They will order the val and away you go.

Plenty of good brokers work out of Brisbane.

Ta

Rolf
 
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Reply: 1.1
From: Tibor Bode


Hi Rae,

I just would like to confirm what Rolf said. Superfluous CRA enquires can cause some problems as some institutions make multiple enquiries what remains on your file and then you have to fight to take them off, which is pretty time consuming. The most frustrating in the use of the CRA, that once there are many enquiries the onus is on you to explain that the loan has not been taken up. Some institutions take it as gospel. It would be a fairer system if it would be recorded whether you used or not the facility (hence the person who processes the application could make an intelligent decision quickly and efficiently), but I guess it is in the "too hard" basket.

Tibor
 
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Reply: 1.1.1
From: Rae B


Thanks Rolf and Tibor.

I will be back in Brissie next week for a weeks holiday away from Timor before returning for another three months, so hopefully I will be able to square things away whilst I am home.

Thanks again for your valuable comments.

Regards ............ Rae :)
 
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Superfluous CRA enquires

Reply: 1.1.1.1
From: Terry W


Speaking of Superfluous CRA enquires, I bought a few properties last year using ANZ, each property they did a CRA check 3 times. One for pre approval, one when I found a property and it was more than the pre approval and one check by their mortgage lender! Now my CRA looks pretty bad, worse than it is really.

Terryw
 
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Superfluous CRA enquires

Reply: 1.1.1.1.1
From: Glenn Mott


Could someone with lending experience shed some light on whether lending institutions discriminate against those with multiple CRA checks or whether it is the quality of information in the report and not the quantity that is looked at.

Glenn
 
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Superfluous CRA enquires

Reply: 1.1.1.1.1.1
From: Tibor Bode


Glenn,

Rolf might be able to provide the correct insight.
My personal experience varies in this regard. Which bank I don't remember, refused
a $2000 Visa card about 5 or 6 years ago (I was earning several multiples of it) and when I enquired about it absolutely amazed, the reason was given my CRA record "showed too many entries", whatever it meant. At the same time they they also gave a credit card with the same limit who had a "clean" CRA file, but I would not lend 2c. The person went bad debt on them in 6 months (4 more than I estimated). It just showed to me
the infinite wisdom of their lending policies, that is risk assessment. Anyway, it was their loss, as they also lost me for the long term as a potential customer.

Tibor
 
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Superfluous CRA enquires

Reply: 1.1.1.1.1.2
From: Rolf Latham


Hi Glenn

Much depends on the borrowers knowledge of what is actually on his or her file, and how this is then presented to a lender. If its a line ball case due to serviceability or other issues then its make or break.

Activity on the CRAA per say is not an issue for standard lending though if you have 10 enquiries for mortgage loans in recent times you will "fail credit score". In this instance the "assessor" (aka box ticker with an undergrad degree in hamburgerology) will refer the deal to someone in "credit" (aka usually someone with a postgrad degree in hamburgerology).

Many lenders that use the no docs or lo docs process use the CRAA as a basic guideline as to the value of the client. 3 to 6 enquiries in a year or less is best.

I encourage EVERYONE to know what is on their CRAA.

You can obtain this for free on
www. creditadvantage.com.au.
The free service will take a while.

Where a client is not sure of whats on the file and they are a "regular shopper" I always insist on seeing a copy of their CRAA first, before we approach lenders.

In addition note that not all lenders use the CRAA system.

Ta

Rolf
 
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Superfluous CRA enquires

Reply: 1.1.1.1.1.2.1
From: Terry W


I should have added I had 12 CRA entires by ANZ for 5 properties in 8 months or so, then applied for 2 more loans with Westpac who knocked me back with the decision "made wholly on information obtained on (me and wife) from a credit report provided by Credit Advantage".

However, after explanations Westpac then approved me for those 2 loans. Valuable time lost, not to mention a pain in the bottom!

Terryw
 
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Superfluous CRA enquires

Reply: 1.1.1.1.1.2.1.1
From: Rolf Latham


Hi TW

You did well.

Normally the reponse as to why a loan is declined is:

"Coz we dont wanna " and we hold the gold - so go away, but if ever you become good enough for us please do come back to us.

ta

Rolf
 
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