Big Day This Tuesday

Discussion in 'Loans & Mortgage Brokers' started by kierank, 31st Mar, 2019.

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  1. Jamesaurus

    Jamesaurus Well-Known Member

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    Good luck+ well done to get a "pay rise" in retirement!
     
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  2. Sackie

    Sackie Well-Known Member

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    Kidnap the daughter.
     
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  3. kierank

    kierank Well-Known Member

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    No way, it took me 18 years to get her out of our house :D.
     
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  4. sash

    sash Well-Known Member

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    They are bloody tough at the moment...if you can service you maybe okay.

    But here are some tips:

    1. On your 3.2m of borrowings..if you have an LVR of 35-40% you maybe able to convert some to I/O but not all.

    2. When negotiating with focus on the ones with at least 20 years plus in terms of total time left on the loan.

    3. Do a P&L and explain the details of your exit plan. Even if you don't plan to sell ...set forward a plan on how you will bring down debt over the next 5 years. THIS IS IMPORTANT!

    Good luck...based on what you have posted. and terms left on your loans..you could be sitting with another 45-60k in repayments so it is well worth negotiating.
     
  5. kierank

    kierank Well-Known Member

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    $3.0M of the $3.2M is currently I/O. I would prefer to have the whole $3.2M as I/O with an Offset account attached so we can place our spare cash in it until it is fully chocked.

    Our LVR on just the property portfolio is currently 45%. If one adds in our other assets (shares and cash including Offsets), our current LVR is 30%.

    This will reduce to 14% and 12% respectively when we sell our current PPOR (hopefully, later this year) allowing us to pay back some debt.

    I will definitely be pointing this our to our banker ;).

    Unfortunately, we are on the wrong side of 60 :D.

    It is my feeling that the maximum term we will get approved is probably 12 years. By that time, we will be close to 75 :eek:.

    We have already done that. With our current setup, loans, etc, our property portfolio is slightly negatively cashflow after tax. Currently, $222 per week and reduces to $19 per week in 5 years time (I used PIA).

    As part of our risk analysis/management, I have simulated many, many scenarios including one where all of our loans reverted to P&I, interest at 7.25% and terms set to 12 years. With this scenario, our portfolio become more negatively cashflow after tax by an extra $1,000+ per week.

    This is financially bearable for us although we hope this doesn't occur ;).

    My numbers seem to be in the same ballpark as yours.

    Thanks very much for your input.
     
  6. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    It sounds like it all comes down to that lenders policy around super pension income and how they treat it. I get that you have to take 4% but hey dont necessarily see it that way. Some will look at historical payments others will take a deemed rate of return based on fund size.
     
  7. kierank

    kierank Well-Known Member

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    Can you advise what they take as a deemed rate of return?
     
  8. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    pretty conservative like 3% or less.

    who is your lender
     
  9. kierank

    kierank Well-Known Member

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    3% is very doable ;).

    Once we get down to 2%, it becomes more problematic :eek:.
     
  10. kierank

    kierank Well-Known Member

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    Just heard from the bank. They have offered a rate of 3.99%, fixed for 1 year (an investment loan).

    I was thinking of trying to negotiate to get it down a bit more. In the end, we only needed to sign a form and it was all done. We signed up, path of least resistance ;).
     
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  11. kierank

    kierank Well-Known Member

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    It took a lot longer than I was expecting but the refinancing has all been approved.

    So, now we have six IP loans, ALL of them are I/O (so much for I/O loans being hard to get :D):
    • Two are Variable Rate of 4.09% with fully-chocked Offsets (one of these was refinanced).
    • One is Variable Rate of 3.79% with an Offset waiting to be filled.
    • Two are Fixed Rate of 3.99%, one with 10 months remaining and one was just refinanced with 5 years I/O.
    • One is Fixed Rate of 4.29% with 18 months remaining.
    The two refinanced loans have 25 year terms, so I will be 88 when they expire :eek:. I was surprised they gave us 25 years (I was expecting 12 years).

    Overall, I am pretty happy with the outcome, even though it took a lot of time and negotiation to get it over the line.

    Loan security was never a problem. Serviceability was the issue (surprise!, surprise!!), especially our age (both 63) and both self-funded. The key bullets I was able to fire included:
    1. We developed a strong business case, quoting facts, figures and believable projections.
    2. We had a clear exit strategy, with a property sale this year and another in 2021 to reduce our debt significantly (by about 70%).
    3. We could demonstrate that our property portfolio currently has a negative cashflow of $10,000 per year ($200 per week).
    4. Once we sell the one property this year, our cashflow would be positive to the tune of $52,000 per year ($1,000 per week).
    5. Once we sell the one property this year, even if all of our loans went P&I at 7.25%, our cashflow would be negative to the tune of $65,000 per year ($1,300 per week). Something we could handle within our 4% mandatory SMSF pension.
    6. We could demonstrate the huge increase in our excess cash balance over the last 3 years, even though the wife had some major health issues and costs. This did not include our significant cash buffers in case the **** hit the fan.
    7. We could demonstrate that we could conservatively double our SMSF pension to 8% and we would not be touching our SMSF capital. Over the last 9 years since we have been retired, we could demonstrate that our SMSF has, in reality, had total returns of 12% and the super balances have doubled.
    8. We could demonstrate that we could conservatively triple our SMSF pension to 12% (use income and capital to pay our pension) and our SMSF would only run dry after 25 years, when we would be 88.
    9. We would NOT entertain P&I loans, only I/O loans, some with Offsets.
    I really think the bank struggled with our situation, our setup and our request. We have been with them for over 30 years, we have a very good credit rating and we advised them we would seek another provider if they couldn't satisfy our requirements.
     
    Last edited: 9th Jun, 2019
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  12. Momentum

    Momentum Well-Known Member

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    Good to hear your lender CBA came to the party but good luck if you're retired and seek another lender cos you will have to do a full loan app and that will be near impossible at your age with no pay slips
     
  13. kierank

    kierank Well-Known Member

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    This one was a full application.

    Hopefully, the next one will be in 25 years time when I am 88.

    I will be happy to be alive and healthy. Doing a full app at that time would be something I would be looking forward to.
     
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  14. Blueskies

    Blueskies Well-Known Member

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    Good to hear, sounds like the next refinance will be 88 year old @kierank 's problem!

    Can I ask, was the refinance handled by your local branch home finance manager, or did you need to go through any other channels with CBA? (I.e personal banker or business lending etc?)

    Thanks
     
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  15. kierank

    kierank Well-Known Member

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    Relationship Manager - Professional and Executive Banking
     
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  16. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Concentration risk is one reason why this would have been deliberated over most likely
    ta

    rlf
     
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  17. kierank

    kierank Well-Known Member

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    ... and the risk of losing 9 x transactional accounts, 3 x Offset accounts, 6 x loans and 3 x Insurance policies might have convinced them to grant approval ;).
     
  18. Scott No Mates

    Scott No Mates Well-Known Member

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    Small fish...
     
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  19. kierank

    kierank Well-Known Member

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    ... but very tasty :p.
     
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  20. Momentum

    Momentum Well-Known Member

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    How did you do a full app without any payslips and being employed? Did they just take your rental income into account for servicing?