Borrowing Capacity

Discussion in 'Loans & Mortgage Brokers' started by Catherine IP, 27th Jun, 2017.

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  1. Catherine IP

    Catherine IP Active Member

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    Hi all.

    I am completely new to this forum and the property investment scene so hoping if I can gather some very opinions about financing for investment property.

    We have just applied for an extension of loan with ANZ to 90% lvr to get some surplus money for deposit of our possible IP. Our borrowing capacity seems to be signifcantly different between two brokers. Is there any reason for this? Is there still such thing as an IO loan to 90% lvr for IP? We are very tight with our borrowing capacity but really want to get started, any advice would be greatly appreciated
     
  2. Weaver

    Weaver Well-Known Member

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    Different brokers will be using different bank calculators. But all brokers have access to a range of lenders (and their complex non -uniform calculating machines... think Dr Suess!) so you only need one broker to look at a range of lenders for you to borrow from.

    PS - do lots of reading here! I've saved myself a few questions searching for relevant threads - and then keep asking questions!
     
  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Are the two brokers comparing the same lender? Borrowing capacity varies quite a bit between different lenders.

    Are both brokers using the same information?

    Are they using the lenders calculator directly or third party software that emulates the lenders calculator (the second is quite unreliable)?
     
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Secondary question. As you're new to investing I assume you're extending the loan on your home?
    * Are you simply increasing the existing loan
    - or -
    * are you setting up a separate loan to access the equity? (You'd end up with two loan accounts).

    If it is your own home and you're extending the existing loan, this is likely to contaminate the tax deductibility of the equity release.


    It is possible to get an IO loan to 90%, but not with the major lenders.
     
  5. Catherine IP

    Catherine IP Active Member

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    Thank you so kindly for both of your prompt response. We ended up getting a separate loan but its at a much higher interest rate for that component with P and I instead of IO. LMI would also be deducted from the loan and my broker told me to pay back the LMI as soon as the loan is settled due to the higher interest ( meaning transfering the other surplus funds from the other offset acc) would this contaminate the loan? as with lenders for io 90% loan, who would be the best lender to go with? I am just worried that, with the constant changing rule and the tightening of io loan, if i am to bid at auction I may not get the final approval through. The thought of this kills me but the area i want to buy appear to only have auction. Maybe property investing is just not for me
     
  6. Catherine IP

    Catherine IP Active Member

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    Two brokers not the same lender but both with major banks abt 100k difference in borrowing power
     
  7. Gockie

    Gockie Life is good ☺️ Premium Member

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    I'm thinking getting a written preapproval would be helpful in this case. For peace of mind.
     
  8. Catherine IP

    Catherine IP Active Member

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    Definitely, it just appears from other posts i read that preapproval dont seem to mean much to the lenders
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Definitely- if you're buying at auction please get a full pre-approval before bidding.
     
  10. Gockie

    Gockie Life is good ☺️ Premium Member

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    I think if you have a specific property in mind, it could be helpful. Note that I'm not a broker or lender though.
     
  11. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    It depends on whether it's been fully assessed or not, and also what the security is. Chat to your broker to make sure.

    If your not confident in your broker, hit up one from here, we all live and breathe investment lending and will make sure everything is as it should be.
     
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  12. Catherine IP

    Catherine IP Active Member

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    Yes I am also considering a second opinon too. But i will wait for my broker about the pre approval. I think my broker is really good just not sure abt his knowledge in the investment lending world. Thx so much for all the responses. One more question, my current loan with my oo is IO and due to expire next year, can I apply for an extension with anz direct or do i have to go through my broker?
     
  13. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hiya

    That's normal - different banks have different ways of calculating max borrowing.

    Cheers

    Jamie
     
  14. Angel

    Angel Well-Known Member

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    Wouldn't your broker already be onto this for you?
     
  15. Mogul

    Mogul Active Member

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    Same issue here. I also received a 100k difference in borrowing power. I am looking to by 2nd IP. Have a deposit and plenty of emergency funds - wanting to show my financial status in the best light for a loan.

    To achieve this:

    Broker 1 advised to remove my extra salary sacrifice and pay splitting into different savings accounts
    Broker 1 advised calculation on actual current IP loan rate and expected repayments. ( ignoring monies currently in offset making this loan cheaper right now)

    Broker 2 advised what I salary sacrifice makes no difference, the banks know that you can stop extra sacrifice.
    Broker 2 advised calculation on actual current IP loan rate and actual repayments (considerably lower because of excess funds in offset) , but now seems to be changing this to broker 1 calcs...??

    Broker 2 originally came in 100k higher than broker 1 in lending affordability.


    Who is right? I don't want to lose out because of a simple payslip change I could make.
     
  16. tobe

    tobe Well-Known Member

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    Deductions on payslips need to be explained. If the salary sacrifice is voluntary it'll be treated as gross, taxable, income.
    Repayment is based on limit of loan, and depending on the lender is at actual P&I repayments over the remaining term (and behind the scnes the calculator takes another bite for buffer) or the limit at 7 to 8%.
    Perhaps the broker using the offset balance was planning on recommending you repay this loan? In which case it makes sense.
     
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  17. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Broker 2 made an error regarding the repayments - the offset funds are ignored. They may or may not be right regarding the sal sac, it depends what it is. And also which lender to a degree.
     
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  18. miximitosis

    miximitosis Well-Known Member

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    This bit concerns me. I'm not sure if I am simply misunderstanding, or your broker is recommending you to pay off the tax deductable LMI cost from funds offsetting your owner occupied property.

    If I were you, I would chat to one of the brokers experienced in investment on this forum close to where you live. Although everything can be done online now, having a face to face relationship tends be more effective in developing mutual understanding in my opinion.
     
  19. Mogul

    Mogul Active Member

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    Thanks Jess. The salary sacrifice is to super, which I can increase/decrease at any time throughout the year.
     
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