Serviceability short

G'day all,

I'm trying to refinance and unfortunately I'm coming up short in the serviceability department by about $500/month.

I have heard (somewhere) there is a strategy used by investors where you give an amount to the government, and they give you the money back in installments and these installments can then be used as "income" as it is government guaranteed for however long you signed up for.

Firstly, does anyone know the "correct" name for this, and secondly, am I correct in how it works? For me, if this is all true and all I need is $500/month "extra income" I could simply sign up for $6000 over 1 year, meaning I'd be getting back $500/month for that period and bang, away we go.

The thing is, I have a couple of offset accounts with quite a bit of money in
Sounds to me like you're mixing metaphors.
In part, what you describe sounds like the "Cash Bond" strategy discussed by Rixter on this forum.
You pay a lump sum to an annuity provider (Challenger, for example) and they pay an annuity stream consisting of your capital and an interest component each month (or whatever frequency you nominate).
This can be seen by lenders as an income stream for serviceability purposes.
It's essentially a loss making investment in that the return is a lower % than the cost of the funds, but that's not the point (a point many just don't "get"). It's about buying assets using the income for serviceability, not about getting a return on the annuity investment.
Search for "Cash Bond" on the forum and you should find discussions on the strategy.
Hi andrew

Each lender has a different serviceability model and you would be suprised of the diffrence between the best and worst in regards to affordability.

Of course without further information it is difficult to comment.

Thanks for the answer - yes "Cashbonds" was what I was thinking about, so now I'll just have to find out where I can get these and the rules associated with them.

Annuity based income can work..............its just as RT said many lenders wont accept it because most of them have seen through what it actually is, return of capital in arationed way with a poor income component.

You may be able to restructure borrowings or as RT said look at diff lenders than whom u have alrready looked at

how much have you shopped around? servicability can vary dramatically.

Our best servicability model at the moment is with IMB, and then followed by ME - much more servicable then any of the BIG4 or even many smaller institutions.
most of them have seen through what it actually is, return of capital in arationed way with a poor income component.
I thought that would be the case....maybe the credit dept squirrels go to all of these property guru courses and take copious notes.
I'm amazed they ever fell for it! (Though I certainly admire Rixter and others who've taken advantage of it. :D)