What happens if current lender no longer likes my serviceability?

[CAMI]

Hi, Am in a pickle and need some help.
I want a partial discharge for a block of land held by Homeside as security (we subdivided a property). One other security would remain with them, leaving a short fall of about $11,000 required to bring LVR back to 89.5%.
I had planned to refinance this $11,000 shortfall to another lender as cashflow is tight right now. But now Homeside want me to fill out a Customer Position Statement and provide updated income/asset info. As my income has reduced slightly, and it was tough enough last time getting over the line for a 90% loan, I don't want them to do another serviceability check on me, and another hit on my credit file (It is quite clean, just don't want unnecessary hits).
2 Questions are raised:
1. Can I avoid a serviceability check by NOT REFINANCING, but instead reducing the limit on loan by $11,000 and getting a partial discharge. Cash is short at the moment, but if necessary I could scrounge up $11,000. Will they still insist on checking my serviceability and credit file if no refinance is involved?
2. If I cannot avoid a serviceability check, OR if I stick with Refinance Plan, and they decide my serviceability is NOT good enough to maintain the existing 90% loan, WHAT CAN THEY DO??? Not recall the loan, surely??. I have never missed a payment. Maybe they would refuse to release my security - but how can they justify this if the remaining security they hold is enough to cover a 90% LVR after I pay the shortfall??
Can the Banking Ombudsman help?
Normally one could take this to their broker, but our Homeside broker has been pretty useless to be honest, Was quite helpful and interested when getting the loan, but since then it all seems to hard, so am loathe to seek his help. Am also loathe to ask the Homeside Discharge Section these questions.
Another option is to refinance the whole darn lot to another lender, but I think I signed something to pay the broker's claw back fee and the loan is still under 1 year old, so would prefer to avoid that too (would also have wasted the LMI already paid). Not a pleasant option at all.
HELP. This should have been simple, but its turning into a tin of worms.
I really need some advice from an impartial expert.
Thanks
CAMI

 

[Shahin_Afarin]

You actually have a few options depending on a few things. The first thing is to determine your servicing upfront - you do not need to submit an application to determine this. Your broker can do this for you.

Regards

Shahin

 

[tobe]

Lets take it back a step. Why do you want to partially release this second title?

If its to sell, that's fine, get a contract, and at settlement home side will use part or all the proceeds to reduce your current loan.

if its to build on, then not having serviceability will hold you back after the partial release as well. Unless you have a build contract use it to add the likely rental to your servicing.

In this case, I wouldn't approach home side for the release until I had the build contract. No doubt at this point your existing broker will also get re interested again.

 

[CAMI]

Yeah, once I can track down the broker, I then have to wait several days while he tries to work it all out and often gives me conflicting/confusing/just plain WRONG info. Please don't tell me to complain and get a new broker.
I am running out of time. I need to know asap if:
## Homeside routinely check serviceability for a limit reduction and partial discharge for a loan with 90% LVR
## If Homeside don't like my serviceability what can they do i.e. recall my loan/refuse to release extra security/other nasty things?
Thanks

 

[Shahin_Afarin]

No to both questions but they will order a valuation. This is actually not very complex but it can be if you take the wrong steps. You can order a val upfront, do the servicing upfront so do this before taking formal steps. I know you are in a hurry but a) these steps wont take long and b) do it properly so save heartache later.

Regards

Shahin

 

[CAMI]

Valuation was done by Homeside already. That is why we know there is a shortfall of $11000 required to release security and maintain LVR> I had NOT counted on them doing another serviceability check.
So to clarify:
# you are saying if I avoid the Refinance Option, they WONT check serviceability.
# also if they don't like my serviceability they can't/won't recall loan/refuse to release security/other nasty stuff? What is point of them checking security, surely there is some thing they could do?
Thanks

 

[CAMI]

OOPS, I meant, what is point of them checking SERVICEABILITY then, if they can't/won't do anything if it is not up to scratch?

 

[Shahin_Afarin]

Lets get this straight - you have a property which is at 90% LVR. You have subdivided this property so you have 2 titles? Homeside has valued the first property and its $11k over the 90% - is that correct?

Regards

Shahin

 

[Aaron_C]

CAMI - please calm down and answer Shahin and tobe's questions....then we can help you with the next step. Otherwise it is just incoherent and we can't assist.

 

[CAMI]

Yes, Shahin, you are correct. $11000 needed to reduce LVR on remaining security to 90% original LVR.
We have put in an application TODAY with another lender (Bank loan officer, not a broker) for a construction loan to refinance and build on the soon to be unencumbered block. Of course that application will spend quite a while with their estimator. We also planned to apply for an equity loan to pay out the Personal Loan taken out with same lender to cover IP costs etc. Soooh, this is all post Homeside's last serviceability check, and given how twitchy they were last time, am horrified to have them poking around my serviceability when such complicated variables are flying around.
This mess is probably the price you pay for continuing with a broker who is not the best, but it is hard to get rid of one, once you have started with them. (Sorry to all you capable brokers)
Do NOT want to do this construction with Homeside. We just want our block of land released without them doing a serviceability check/
And we want to know if they do one, and don't like the result, what can they do?
Feel quite calm, but a bit frustrated in that I would love the above 2 questions answered definitively.Ta

 

[Rolf Latham]

## Homeside routinely check serviceability for a limit reduction and partial discharge for a loan with 90% LVR

not routine NO, serviceability no usually

Vals yes

ta
rolf

 

[Shahin_Afarin]

Yes, Shahin, you are correct. $11000 needed to reduce LVR on remaining security to 90% original LVR.
We have put in an application TODAY with another lender (Bank loan officer, not a broker) for a construction loan to refinance and build on the soon to be unencumbered block. Of course that application will spend quite a while with their estimator. We also planned to apply for an equity loan to pay out the Personal Loan taken out with same lender to cover IP costs etc. Soooh, this is all post Homeside's last serviceability check, and given how twitchy they were last time, am horrified to have them poking around my serviceability when such complicated variables are flying around.
This mess is probably the price you pay for continuing with a broker who is not the best, but it is hard to get rid of one, once you have started with them. (Sorry to all you capable brokers)
Do NOT want to do this construction with Homeside. We just want our block of land released without them doing a serviceability check/
And we want to know if they do one, and don't like the result, what can they do?
Feel quite calm, but a bit frustrated in that I would love the above 2 questions answered definitively.Ta

I hear you. Really easy solution.

Step 1: Refinance as a land loan only. Doing the refi as a construction is just pointless and going to take longer than you need to spend. Draw upon the equity for $11k and repay Homeside.

Step 2: When refi kicks in Homeside will tak the $11k and release the title.

Homeside will not do a servicing check if you are reducing the balance which you are (note this is not the case with every lender).

Regards

Shahin

 

[CAMI]

Thanks guys for bearing with me on this.
Shahin, that sounds great but we DID tell Homeside we only want a land refinance, and they said "as you are doing a partial refinance with another lender, we need to be sure you can continue to service the remaining loans with us, so fill out the attached Customer Position Statement and send us all your recent payslips, rent statements etc etc." Sounds very much like they want to do a serviceability check..... I assume it is because of the Refinance.
It is still not too late to tell Homeside we want to just reduce the limit and not refinance. Though THAT IS A PAIN TOO, would probably increase our personal loan to do that. Very annoying. New lender is aware of this possibility, and it is possible. Before you ask, new lender is Westpac (I know a lot of you don't like them, but have longstanding good history with them and deal services fine).
ALSO would still like to know if they did not like our serviceability what could they do?
Thanks Rolf for input too. Of course, tomorrow will try to get updated serviceability check done (if I can find our broker, good luck with that - after all he is busy playing guitar in a rock band a lot these days...... do I need to say more%^&&*#$%)
Ta

 

[Shahin_Afarin]

That is very strange that they are asking for this information. Whether you refinance the land or not does not have any bearing on your ability to service the loan. Westpac is fine and their servicing is good. You should be able to get the loan turned around in 2 working days with them. Re servicing - Homeside cannot not release the vacant land because you do not meet servicing.

Regards

Shahin

 

[tobe]

Sorry, what's the plan?

All I can see is you have subdivided without doing any research or running likely scenarios, your not happy with your broker, and now your applying with another lender for a refinance.

Why is this time going to be any different?

There's a lot of shared knowledge you can utilise on this forum, but we really can't give you the right answers without the right info upfront

What's the point of doing a partial release? Why is the new lenders serviceability better than home side? What is going to be different at the next step, build or sell etc.

 

[CAMI]

Sorry, what's the plan? HAVE CREATED 120,000 EQUITY. WHEN DID YOU LAST DO THAT MY FRIEND?

All I can see is you have subdivided without doing any research or running likely scenarios (A BIG ASSUMPTION THAT IS NOT CORRECT), your not happy with your broker (TRUE), and now your applying with another lender for a refinance. (CORRECT - WHAT IS WRONT WITH THAT - YOU GUYS ARE ALWAYS SAYING NOT TO PUT ALL EGGS IN ONE BASKET)
Why is this time going to be any different? CEH?

There's a lot of shared knowledge you can utilise on this forum, but we really can't give you the right answers without the right info upfront. I WOULD BE JUST HAPPY IF YOU ANSWERED MY 2 QUESTIONS REPEATED SEVERAL TIMES. .....JUST HUMOUR ME NOW AND IMPRESS ME WITH YOUR OWN DEPTH OF KNOWLEDGE: WHAT CAN HOMESIDE DO IF THEY DON'T LIKE MY SERVICEABILITY?????

What's the point of doing a partial release? Why is the new lenders serviceability better than home side? DON'T KNOW - IT JUST IS. What is going to be different at the next step, build or sell etc. PROBABLY DO IT ALL OVER AGAIN, AND CREATE ANOTHER $100,000 OF EQUITY TO FUND THE NEXT DEAL, AS I HAVE DONE MANY SEVERAL TIMES BEFORE. (THAT DOES NOT MEAN CASHFLOW IS STILL NOT TIGHT, COS IT IS FOR VARIOUS REASONS)
CHEERS
CAMI

 

[Aaron_C]

I am doing my own partial discharge with Homeside right now. They do not need to reassess the loan - just make sure the LVRs are in check. Looks like you've told them a bit too much. I still don't really understand what is going on...

Break down the numbers for me so I can work it out for you.

 

[tobe]

Wow, impressive. $120k in just one year. Is that gross or net? After cgt or before? Is that off your estate agents valuation, your valuation or the banks valuation.

I personally have made similar numbers over my years of investing, and i have made lots of mistakes along the way, and have spent a fair bit of time worrying about banks and my serviceability etc.

If I knew then what I know now, I would have had a clearer idea of what my end goals were.

I was just interested in why you are wanting to do the partial discharge. In the end if there is a problem with home side, the new lender can take over that debt, an you can write off the Lmi to experience.

Good luck.

 

[tobe]

And when I say similar numbers, I mean I have about a mil of equity, built over 11 years of investing in property. So pretty comparable I reckon, but nothing special on this forum.

 

[Shahin_Afarin]

Sorry, what's the plan? HAVE CREATED 120,000 EQUITY. WHEN DID YOU LAST DO THAT MY FRIEND?

All I can see is you have subdivided without doing any research or running likely scenarios (A BIG ASSUMPTION THAT IS NOT CORRECT), your not happy with your broker (TRUE), and now your applying with another lender for a refinance. (CORRECT - WHAT IS WRONT WITH THAT - YOU GUYS ARE ALWAYS SAYING NOT TO PUT ALL EGGS IN ONE BASKET)
Why is this time going to be any different? CEH?

There's a lot of shared knowledge you can utilise on this forum, but we really can't give you the right answers without the right info upfront. I WOULD BE JUST HAPPY IF YOU ANSWERED MY 2 QUESTIONS REPEATED SEVERAL TIMES. .....JUST HUMOUR ME NOW AND IMPRESS ME WITH YOUR OWN DEPTH OF KNOWLEDGE: WHAT CAN HOMESIDE DO IF THEY DON'T LIKE MY SERVICEABILITY?????

What's the point of doing a partial release? Why is the new lenders serviceability better than home side? DON'T KNOW - IT JUST IS. What is going to be different at the next step, build or sell etc. PROBABLY DO IT ALL OVER AGAIN, AND CREATE ANOTHER $100,000 OF EQUITY TO FUND THE NEXT DEAL, AS I HAVE DONE MANY SEVERAL TIMES BEFORE. (THAT DOES NOT MEAN CASHFLOW IS STILL NOT TIGHT, COS IT IS FOR VARIOUS REASONS)
CHEERS
CAMI

Your plan is good and Westpac is a good lender. I am unsure as to why Homeside are asking for this information but it must have been something you said to set it off. They cannot do anything if servicing is an issue as you are not increasing the limit of the liability.

Westpac's servicing is stronger than Homeside but again I would do a basic land loan refi and then do the construction afterwards. It will make sure the process is quicker and smoother. You are on the right track though.

Regards

Shahin