When to start organising finance...

[DJPom]

Hi All,

New to the forum, but it appears there are some very knowledgable people here so thought I'd post my questions. Thanks for looking.

Back in June 2010 I bought a 2 bed/2 bath apartment Off Plan in Port Melbourne for $789k (79sq interior 49sq exterior). I thought the size of the balcony (3rd floor) to be fairly unique in apartments in this day and age and its in a small development of 37.

Paid 10% deposit and have tried to save a further 10% since then but we won't quite make that - I think between 80-85% LVR.

As with the risks of OP purchase, the development was been delayed and it was a good year before it even got out of the ground - very frustrating! So it's over a year delayed, but thankfully has progressed vastly the last 6 months and is due for completion May 2013.

Q's

- Concerned I may have overpaid. Should I have a valuation for my own piece of mind? Would this go towards a mortgage appraisal?
- Buying for living in, not IP. Think most important req is Offset. Is it worth talking to a broker for ideas and options though... Haven't really thought about IPs...
- When should I get the ball rolling re finance - wait till the three months out?
- Want to avoid LMI and understand that only Citibank currently offer non-LMI up to 85% LVR... Or are other options available?

Cheers and Merry Christmas!

 

[Aaron_C]

DJPom,

You should be getting finance organised at least 3-4 months out because you need to get the application early as it takes time to do valuations etc as the property is new and getting access is difficult. Plus you need time to adjust to new information.

You will not be eligible for Citibank's 85% no LMI policy because it is a new development. So your best bet is paying LMI for a 85-90% lend. You may have to go higher if the valuation doesn't stack up. Best speak to a broker about your options so you can get an offset account etc.

 

[tvadera]

Hi All,

New to the forum, but it appears there are some very knowledgable people here so thought I'd post my questions. Thanks for looking.

Back in June 2010 I bought a 2 bed/2 bath apartment Off Plan in Port Melbourne for $789k (79sq interior 49sq exterior). I thought the size of the balcony (3rd floor) to be fairly unique in apartments in this day and age and its in a small development of 37.

Paid 10% deposit and have tried to save a further 10% since then but we won't quite make that - I think between 80-85% LVR.

As with the risks of OP purchase, the development was been delayed and it was a good year before it even got out of the ground - very frustrating! So it's over a year delayed, but thankfully has progressed vastly the last 6 months and is due for completion May 2013.

Q's

- Concerned I may have overpaid. Should I have a valuation for my own piece of mind? Would this go towards a mortgage appraisal?
- Buying for living in, not IP. Think most important req is Offset. Is it worth talking to a broker for ideas and options though... Haven't really thought about IPs...
- When should I get the ball rolling re finance - wait till the three months out?
- Want to avoid LMI and understand that only Citibank currently offer non-LMI up to 85% LVR... Or are other options available?

Cheers and Merry Christmas!

hi,

If you are concerned that you have paid a lot to start with and market has come down in last year or so, whats your back up plan? I know a client, who had paid 880K for an apartment in Essendon and valuation came at 680K (200K less), they were able to go ahead because their PPOR was paid off and they could redraw equity from it, if their PPOR was not paid off or they didnt had other sources, they would have lost their 10% deposit , which was 88K

If you go ahead and get valuation done independent of banks valuation, I dont think that would be considered ok from banks point of view. Banks would order their own valuation, but you can get 1 done if you want for your own peace of mind.

OTP has their own risks, however you still have time to get things in order prior to May 2013 deadline

Regards,
TV

 

[Rolf Latham]

at the very least see, if you can get some up front vals done etc

I expect the least of your worries will be saving on LMI..........

cost of finance in these scenarios is sometimes less important than the availability of the cash

once u complete the purchase, then you may be able to clean things up down the track


ta
rolf

 

[Shahin_Afarin]

Hi All,

New to the forum, but it appears there are some very knowledgable people here so thought I'd post my questions. Thanks for looking.

Back in June 2010 I bought a 2 bed/2 bath apartment Off Plan in Port Melbourne for $789k (79sq interior 49sq exterior). I thought the size of the balcony (3rd floor) to be fairly unique in apartments in this day and age and its in a small development of 37.

Paid 10% deposit and have tried to save a further 10% since then but we won't quite make that - I think between 80-85% LVR.

As with the risks of OP purchase, the development was been delayed and it was a good year before it even got out of the ground - very frustrating! So it's over a year delayed, but thankfully has progressed vastly the last 6 months and is due for completion May 2013.

Q's

- Concerned I may have overpaid. Should I have a valuation for my own piece of mind? Would this go towards a mortgage appraisal?
- Buying for living in, not IP. Think most important req is Offset. Is it worth talking to a broker for ideas and options though... Haven't really thought about IPs...
- When should I get the ball rolling re finance - wait till the three months out?
- Want to avoid LMI and understand that only Citibank currently offer non-LMI up to 85% LVR... Or are other options available?

Cheers and Merry Christmas!

1. Start the finance process in January and if possible order an upfront valuation.
2. Do the Cashflow numbers for IP vs PPOR. That is, factor in the negative gearing and depreciation benefits which you will lose if used as a PPOR.
3. If you are using the property as an IP then LMI is tax deductible for the first 5 years.
4. Congratulations and Good Luck

 

[DJPom]

Thanks for everyone's quick replies! Especially on Christmas Eve... Although somewhat reluctant now that I posted!

If there is a consensus (seemingly) that we've over paid... Well we have no backup plan currently.

And it would feel a real waste of time having waited this long not to move in, just so we can recoup tax savings etc. and make it financially feasible...

So, concern then is valuation and getting the ball rolling.

Will get onto it in Jan and consult someone for advice, especially for the worst case scenario.

Can an indicative valuation be undertaken at such an early stage (i.e. now) though?

Cheers

 

[Shahin_Afarin]

I don't think that anyone is saying that you have overpaid - I think everyone is saying that there is always a risk associated with the valuation amount on OTP properties. This in turn could cause major issues when it comes to finance for any number of reasons, i.e. valuation amount has decreased thus loan amount has increased and you cannot afford the increased loan amount, etc.

Tackle the valuation issue first and in January/February so you can start focusing on the IP vs PPOR question.

 

[matto_]

OTP - great when market is moving the right direction.

Have you seen any other sales in either your block or other blocks close by?

 

[georgie1]

Be prepared to lose some money...


Firstly, you paid way too much for that unit. Looking at rentals there are only 6 units available out of 142 asking for rental amounts in that suburb that would give you a standard 5.25% rental return (gross).

I seriously hope you did not buy with any incentives. They will automatically be deducted via the valuation.

Funding can only commence 3 months from settlement as a valuers valuation expires after 3 months. Don't listen to the people above, they have no clue. Getting a valuation yourself means nothing unless its for mortgage purposes and that valuation company is on the banks panel. Settlement will most likely be delayed judging by the developers track record. I know ANZ offers to give finance on valuations completed 6 months out from completion but the loan is riddled with extra fee's.

37 is not a small block and your 49sqm external won't save you.

You speculated and now you have lost. Enjoy the negative equity.


Edit: Vacancies over 3.3% and rising, lots of new OTP stock for sale in the area, might be best to take a hit and sell it with a local agent and pay the 3.3% commission, thats if the developer lets you do that.

 

[jim1964]

Don't listen to the people above, they have no clue

Thats a very BOLD statement.

 

[Rolf Latham]

Be prepared to lose some money...


Firstly, you paid way too much for that unit. Looking at rentals there are only 6 units available out of 142 asking for rental amounts in that suburb that would give you a standard 5.25% rental return (gross).

I seriously hope you did not buy with any incentives. They will automatically be deducted via the valuation.

Funding can only commence 3 months from settlement as a valuers valuation expires after 3 months. Don't listen to the people above, they have no clue. Getting a valuation yourself means nothing unless its for mortgage purposes and that valuation company is on the banks panel. Settlement will most likely be delayed judging by the developers track record. I know ANZ offers to give finance on valuations completed 6 months out from completion but the loan is riddled with extra fee's.

37 is not a small block and your 49sqm external won't save you.

You speculated and now you have lost. Enjoy the negative equity.

dems some strict ideas there ............


Some lenders will rely on vals up to a year old,


We did vals in the last week upfront for

NAB and Homeside
CBA
WBC
ING (Commercial)
ANZ
AMP
Advantedge
Various Mortgage Managers

All of course acceptable to the lender concerned.

90 days out, most valuers wont provide a report anyways, unless its a TOC report which isnt that useful.

The idealogy is that the OP may have enough issues aside from the val and applying to a lender BLIND, without knowing what their panel valuer will come back is not prudent practice. In my view it is actually a form of negligence.

Its exactly in scenarios such as this where sensible use of existing resources and tools via a broker with 66 % of a clue will usually come out with a better result

I agree that 37 isnt a small block and will be High Density for some lenders and the floor size isnt ideal, but not insurmountable.

ta
rolf

 

[georgie1]

Thats a very BOLD statement.

Valuations expire after three months. Getting finance complete 4-5 months out from settlement is ridiculous and a waste of time and money.

 

[Aaron_C]

Valuations expire after three months. Getting finance complete 4-5 months out from settlement is ridiculous and a waste of time and money.

You're right that most valuations last for 3 months. However, that isn't the point. The point is getting the application / loan assessed 4-5 months out because in most cases the valuation will not be done until about 2-4 weeks prior to settlement in many cases as the building will not be finished at that stage. So your point is moot.

 

[georgie1]

You're right that most valuations last for 3 months. However, that isn't the point. The point is getting the application / loan assessed 4-5 months out because in most cases the valuation will not be done until about 2-4 weeks prior to settlement in many cases as the building will not be finished at that stage. So your point is moot.

If you need 4-5 months to organise finance then your broker is not a good broker. Yes, its great to be prepared but for the OP he shouldn't worry about finance until March 2013.

 

[westminster]

Georgie - the valuation he is thinking about getting is really to see what situation he/she is in and decide on strategy for when the time comes - this may be exit, put in extra funds, convert to IP or keep as PPOR.

No one knows if the price paid stacks up until a value is done.

Waiting until the last minute then having to make important decisions in a rushed manner is terrible.

AND there is no need to be so horrible about it.

 

[Aaron_C]

If you need 4-5 months to organise finance then your broker is not a good broker.

I think you misunderstand. It doesn't take that long to get an application through but to get all the conditional approval in place prior to valuation since the only thing that hold up an application is valuation for OTP.

 

[georgie1]

AND there is no need to be so horrible about it.

I wasn't horrible, I was telling the truth.

Putting yourself into over $500k worth of debt because it socially normal is not right. Any monkey can see that an OTP purchase in Melbourne will end in tears. 25% of OTP contracts crash in Melbourne's fringe estates because people are over paying true value because they believe property only ever goes up in value, property's perceived low risk will be the undoing of the Australian economy.

Lehman Brother's CEO said things would be fine because property prices always go up, they have too. We all know how that ended.

I feel terribly sorry for anyone who has bought OTP in the past year. They are about to be burnt in the next 12-24 months badly.

 

[Qlds007]

Settled an OTP Melbourne deal Xmas eve where the property was valued back in June at 5K more than the purchase price.

Valuers was comments was that the property wasn't ready yet and he recommended an update valuation when the property was complete.

Lender ordered a check valuation on completion without telling us and by mistake used a separate firm of valuers.

Valuation now came in at $50K less than purchase price making it mortgage insured.

We jumped and down and the lender admitted they should have used the same firm so waived the LMI at 86% and ran off the original contract price.

Just a matter of choosing the right lender as has been mentioned by others.

Not sure which part of the UK you come from originally DJ but i am here in the UK for Xmas and it is bloody cold and wet. Can't wait to get back to Brissie.

Still there are some excellent property bargains over here at the moment.