Banks who ask less questions for equity release

I had a quick question for the finance gurus here...

I am self employed and have a few properties I want to take to a bank to refinance to release some equity. I have financials for FY14 (high income) and FY15 (lower income by about half), but I do not have financials for FY16. In fact, I did not generate any income in FY16.

Are there any banks that would do a equity release without asking for FY16 financials? (Either full financials or interim docs such as quarterly BAS statements, etc).

 

If you have no income, how are you proposing to service the debt?

 

Most lenders want the previous years financials starting the first of January. There are a few that will give you another 3 months grace period beyond that.

However you've just stated that you didn't earn an income in the 2016 financial year. There might be a number of legitimate reasons for this that would be acceptable, but the absence of even BAS statements suggests that there was no income at all.

Without an income, it would be wrong to apply for finance, even if you could sneak it through by not disclosing the change. You'd need a very, very good reason to convince a lender otherwise.

Another problem is the documents you've got suggest a steeply declining income. This will be a big alarm bell for lenders. There's a high probability that trying for finance on the 2014 & 2015 financials would fail even if the time period is acceptable.

 

The broker is the first person you have to convince. They cannot put you in a loan that you cannot afford or they would be breaching the NCCP.

 

Therefore serviceability is the issue, not equity. Yes?

 

You need both.

 

Of course. OP mentioned "few properties" which would likely indicate equity is in place.

OP may be in a similar situation as myself. Plenty of equity. However serviceability is my current handbrake. Either that or brokers / banks.

 

Plenty of equity. Plenty of rental income as well (which I believe the banks discount quite a bit).

Serviceability shouldn't be an issue based on FY16 income.

2015-16 was a transitional year.

 

In that case you need to give the lenders the bigger picture. Making a few assumptions here, but you'd show them the declining income, and explain how 2016 FY was transitional. You then show them the BAS statements for the last 2 quarters (or more if it helps) as an indication that this has set things back on track. If the LVR is fairly low, that could work nicely.

The other option is a lo doc loan on the strength of an accountants letter or similar.

 

Hhmmmm... When I say transitional, I meant transitioned into no longer working. So for FY16 and current FY there is no income from normal line of work. Only income is passive through rental income.

Does No Doc lending require a letter from accountant?

 

No such thing anymore for loans coming under the NCCP.

You might be able to use a low doc loan such as RAMS.

 

Thanks Terry. What is required for low doc?
What kind of rates are we looking at for equity release for low doc?

 

I haven't written a low doc loan since 2009 - too many issues.

 

Lo doc loans still require some sort of income verification. Depending on the lender it's usually one or more of 12 months BAS statements, business trading account statements or an accountants letter.

Like Terry, I haven't written one in years. I've generally found that those that could legitimately qualify also tend to qualify for a full doc loan (using tax returns) if they do their tax returns properly.

Unfortunately this probably isn't going to be a solution if you're transitioning into not working. It sounds likely you'll have to rely on your rental income.

Keep in mind that lenders only take 80% of the income from rent as the other 20% is for holding costs. The rest is income. If you're living off your rental income with a surplus to service more lending, then there shouldn't be a problem. Realistically though, I've rarely seen this situation. Most people need to sell of properties over time in their retirement to enjoy a really good lifestyle.

 

Mmmm. First world problem. I'd pay a pro.

Of course i'd be interested in how this pans out. Like to have this problem myself.

 

The pitfalls of property investing is indeed a first world problem!

 

RAMS lo doc, accountants sign off.

pm me if you want more details, easy peasy .

 

Looks like that may be the only option!

What rates are you paying with them MTR?

 

last time I looked I think a nudge over 5%, fees are comparable to the big 4, its a means to an end, an interim if you like. IMO possibly the best lo doc on the market, very happy with their service. Please pm me for my contact, he is amazing.

 

Thanks. That's not toooo bad... For the purpose of releasing contingency funds.