Yet another question for Mortgage brokers

[LeeF]

Hi all,

Just recently came across a post which suggested that as a way of lowering spendings/costs, one could consolidate personal debt into their PPOP mortgage.
I was wondering if lenders in general would allow the following:
Lets assume a house is advertised at 350k (we'll assume market value is also 350k). If I managed to negotiate it down to 320K, would lenders lend the full 350k, or would I have just contributed to a lower market value of this property?
The reason i'm looking for the extra 30k is to consolidate personal debt into this mortgage...(therfore improving my serviceability...)

I guess the bottom line question is, would lenders lend only up to the lower of the contract/valuation price?

Any feedback will be appreciated.

 

[Kristine..]

Hi LeeF

In the example you have given you have asked two main questions:

(Q1) Will the lender lend to valuation or to the purchase amount as written in the Contract of Sale

(A) Depends: If you buy and settle within the 'same market' - deemed to be within about 90 days and twelve months, it would take extraordinary circumstances, for example, a 'favourable purchase' for the lender to accept the higher amount as the value of the security

(Q2) Can you borrow more than the value of the property

(A) Depends: For most lenders (well, those which offer 100% loans), 100% is the absolute maximum.

Some lenders will lend to 106% of the purchase price but will not allow consolidation of debt in that extra 6% as that is for stamp duties and usual purchase costs only.

If you have another security or a family guarantee situation whereby another property (not owned by you) is also available, those lenders which offer family guarantee lending will often allow some debt consolidation up to a maximum of 100%, or up to 105% to allow for stamps etc.


However, if what you are really asking is 'how do I increase serviceability' then save up cash reserves but do not pay more than you are contracted to do on your consumer loans.

That way, you will be accumulating Genuine Savings (which belong to you, anyway) and when you are ready to apply for a home loan you will be able to have your cake and eat it, too!

Plus, your Genuine Savings wins you a better mortgage insurance rate, so it's a win-win situation!

Cheers

Kristine

 

[Qlds007]

There are 1 or 2 Commercial style lenders who do still advance on residential securities and lend against valuation rather than purchase price.

In saying this you have to ask yourself I am better off with 106% of purchase price or 80% of valuation.

Guess it all depends on the market but i think PP will win out every day.

 

[LeeF]

Thanks Kristine & Richard for your replies.

I may not have been clear enough, thus implying that I was trying to improve my serviceability...
I am currently renting. My original plan is to save up a deposit for the next 8-12 months and purchase an IP. The reason I posted my question was, I thought I might be able to purchase a PPOR soon rather than an IP and perhaps consolidate my existing consumer debt into that PPOR loan (using the above scenario). That way I thought the X amount of dollars could go into the PPOR mortgage rather than to a separate loan (and take some pressure off the cashflow). Otherwise the original plan is to buy IP and hold, build equity, refinance and repeat. Somewhere down the line (probably 5-7 year) buy my PPOR.

Thanks anyway for your input.

Cheers
Lee

 

[Qlds007]

Aware of 1 lender that will do 100% loan & 10K unsecured on a visa card charged at home loan rates.

Also 1st March is the new shared equity scheme being released.

80% loan and 20% with NO interest charged whatsover but you share some of the profit or loss when you sell.