Serviceability requirements

[DonG]

Hi Everyone,

I am currently looking to buy another investment property but keep running into serviceability problems when applying for a loan.

At the moment, I have more than enough equity to use as a deposit and my total income after tax and interest repayments is around $1000 per week. I think this is more than enough to service another loan (my wife and I are also quite tight) but for some reason most lenders don't think so.

Are there any lenders out there whose serviceability requirements are more lenient? Would a MB be able to present my details to a potential lender in a way that makes it more appealing?

Your responses would be appreciated.

 

[Rob Williams]

If i were you, I'd find a mortgage broker.
I was in the same position as you. Lots of equity, but hitting the serviceability wall with the banks.
One suggestion I would make - don't go with the bank with the best service model first. If you can, get your next loan with one that is more difficult and requires you to be a bit more proactive (eg. reducing credit card limits etc).
That way, when you need another loan for your next IP, you can use the bank with the better service model.
Doing it the other way around reduces your options moving forward.

 

[quoll]

Unfortunately lenders have there own criteria or formula to decide if you can service the loan, it doesn't matter your budget or how you live. It's their criteria, you need to work out how to tick their boxes / fill in their form so that you meet their criteria.

Different lenders use different formula's so a MB is a good start.

The other option is to look at your income and debt. Can you decrease your debt? or Increase your income?

Sometimes sell 1 take a profit pay some tax and you can then buy 2. Other times you just end with none. A spreadsheet is good to see what if.

Have a look for cash flow positive.
Have a look at cash bonds.
Can you reval and pull out some equity?
Are you talking with a different bank to your first loan?

Sometimes if you just wait time/inflation takes care of it.

Cheers
Graeme

 

[Peter_Tersteeg]

If serviceability is the problem then there are a number of strategies to get around this, but as has been suggested, every lender has different policies on how they calculate serviceability.

A lender with the best serviceability for person A is probably not the lender with the best serviceability for person B.

Most of the lenders with lots of branches (big 4, BankWest, St George, etc) have only 'average' to 'good' serviceability. These a few lenders who do things a bit differently who have far better servicing in many cases.

If you trying to figure this all out by using a lenders online calculator or calling their inquiries phone number, you won't even get close. These tools are little more than a sales funnel and rarely reflects what that lender will actually do as the give almost no consideration to your actual circumstances and other relevant information such as gearing benefits.

 

[rugrat]

for some reason ME bank will service myself double what the CBA will. with many of the other lenders falling somewhere in between.

 

[Rixter]

Don, this is how I have used a Cashbond Structure to increase my serviceability & keep purchasing IPs.

Hope this helps.

 

[sanjayag]

Hi Everyone,

I am currently looking to buy another investment property but keep running into serviceability problems when applying for a loan.

At the moment, I have more than enough equity to use as a deposit and my total income after tax and interest repayments is around $1000 per week. I think this is more than enough to service another loan (my wife and I are also quite tight) but for some reason most lenders don't think so.

Are there any lenders out there whose serviceability requirements are more lenient? Would a MB be able to present my details to a potential lender in a way that makes it more appealing?

Your responses would be appreciated.

Hi DonG,

My MB told the bank about the potential rental income from the property for which I was asking for a loan. So if you add the potential rental income to your own $1000pw income....that will enhance the service ablity.

 

[tobe]

and depending on the lender, they can also include your potential negative gearing cashflow.
Beware however overestimating the rent, some lenders will only use the rental amount from their valuation, rather than what the local property manager says.

 

[Terryw]

I have found ST G to be pretty good for those with a few IPs because of the interest and depreciation add backs.

 

[Bradsdad]

Different lenders will suit different clients so there's no easy answer. Who have you tried so far?

Regards
Steve

 

[DonG]

Thanks for your responses.

At the moments, I only really need $150K to settle the new PPOR (the rest I will pay with cash) and there is not problems getting that amount.
I also want to establish a LOC of at least $200K against the existing equity to use as a deposit in the future. This is where I am running into problems.

I have tried my usual person from the Westpac and then tried CBA. Both said the same - the first loan is okay but the second loan can't be done. I then tried bidmyloan.com.au and they put me in touch with another person from Westpac. So now I am awaiting a response from this person.

If this fails, then I will look into getting a MB and cashbonds. What are typical rates for cash bonds currently and which lenders are okay with this sort of income?

 

[Rolf Latham]

Hiya DG

Be careful with your credit file .

If these are formal applications you are making, then asking a broker to help you is like trying to obtain car insurance AFTER the crash.

Speak with a decent experience IP Savvy broker. There are at least 2 Melb based ones that have posted in this thread, and there are others

ta
rolf

 

[Bradsdad]

Not sure a CB is your answer DG. This is your 1st IP purchase?

 

[DonG]

Bradsdad: I already have a couple of IPs but this will be my first PPOR. Because the loan I actually need will only be 30% LVR (the rest will come from cash), I also want to set up a LOC against the existing equity for further investing later on.

Rolf: I agree. As things start to get more complicated, I am starting to recognise the need for more professional help in most areas, including arranging finance.

 

[Kristine..]

G'Don

30%LVR?

If you are wanting a loan as low as that, and don't want to access more than, say, 60%LVR for the equity drawdown 'for no particular purpose' (aka Cash Out) then you may want to consider a Self Certified (low doc) loan with a lender which offers discounted rates (depending on the value of the loan).

There is always a way to move forward and from what you have described, this should be a relatively simple deal to structure and to fund.

Especially if you are only looking at 30%LVR!!

Cheers
Kristine