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Borrowing/ Refinancing for low income

Discussion in 'Property Finance' started by Mirafeli, 2nd Jan, 2017.

  1. Mirafeli

    Mirafeli Member

    Joined:
    27th Jul, 2015
    Posts:
    11
    Location:
    VIC
    Hi all,

    2016 was a quiet year for me since hitting serviceability wall and leaving the rat race to setup a company in design and construction industry. We are low income couple (approx. 70k pa) with 2 kids. I haven't received any wage from the startup yet, but can start paying myself a little bit from this year.

    Our current portfolio is below.

    IP1: Sunshine VIC - current value 600k, loan 325k with CBA, rent $1,4k per month

    IP2: Essendon VIC - current value 700k, loan 500k with CBA, rent $2,2k per month

    IP3: Brunswick VIC - current value 800k, loan 620k with NAB, rent $2k per month

    IP4: Preston VIC - under JV and trust structure with 1/3 share - 24 townhouse development site - approx value 4.5M after DA, purchase price 3M and need 1M for settlement in Oct 2017.

    PPOR: Kensington VIC - current value 950k, loan 650k with Firstmac

    All above site is developable with 2-4 units and under personal names except IP4. We have some decent amount of cash buffer sitting on offset account for later development anyway.

    My goal is refinancing to release some equity for investing in our construction business that will build those development. We may sale some off plan unit to reduce debt if it brings back our borrowing capacity to fund the settlement of IP4.

    Is there any chance for topping up in this climate? As business is under 12 months, it may be hard to go through self employed route, but I can provide couple suitable payslips as employee.

    Any thought is greatly appreciated.
     
  2. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    13,300
    Location:
    Remote
    to be blunt - no.

    Not unless you went out and got a job perhaps.
     
  3. Mirafeli

    Mirafeli Member

    Joined:
    27th Jul, 2015
    Posts:
    11
    Location:
    VIC
    Thanks Terry, I'm director of a small company with 5 employees, does it consider a job?
     
  4. Terry_w

    Terry_w Well-Known Member Business Member

    Joined:
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    No - you are self employed.
     
  5. Mortgage Capital Australia

    Mortgage Capital Australia Mortgage Broker & Private Lender Business Member

    Joined:
    20th Jun, 2015
    Posts:
    265
    Location:
    Brisbane
    Might be possible under a Nodoc loan but rate isn't going to be the cheapest and on a P & I basis.

    Would be a 2nd mortgage and borrowing would be need to be in a Company name.

    All depends on how much you are wanting to release. Assume CBA loans are not cross collateralised.
     
    Terry_w likes this.
  6. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,779
    Location:
    Adelaide, SA
    You're self employed. Saying you're not paying yourself much and could possibly only pay yourself a small wage infers there isn't a huge amount of retained earnings floating around either.

    Being self employed the lenders look at it as revenue - costs (if costs include paying a wage to the owner it is added back as revenue) = total income. So unless they're some serious net income within the business it's unlikely you will be able to borrow from traditional means.

    Being under 12 months in the business adds an additional layer of complexity as most lenders want to see 24+ months of trading, so you would be reliant on low/no doc lending and it's commensurate higher rates and costs.

    In reality you're at ~69% LVR, with a meagre income and also noted you need to come up with $1mil in 11 months - that sounds like a hurdle I would be more concerned about reaching than trying to take on more debt to do a development.
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,820
    Location:
    Perth WA