Can a bank refuse a sale due to lack of serviceibility?

Discussion in 'Loans & Mortgage Brokers' started by mmgg, 1st Mar, 2020.

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  1. mmgg

    mmgg Member

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    So we have a portfolio of houses. We want to sell one. But the bank is running a serviceibility on us to see if we can sell and therefore not get the rental income from that house. Things change when we bought the unit, different jobs, people grow families. Could the bank say no your not selling due to lack of rental income...?
     
  2. kierank

    kierank Well-Known Member

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    Which is it?

    The title of the thread:- Can a bank refuse a sale due to lack of serviceibility?

    OR
     
  3. mmgg

    mmgg Member

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    Well isn't the rental income part of the serviceability? Therefore if you don't get that income (rental) as part of the serviceability they will refuse you selling the unit...
     
  4. kierank

    kierank Well-Known Member

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    Your OP ended with the question “Could the bank say no your not selling due to lack of rental income...?”

    The word I underlined made that question the complete opposite to the subject of the thread, IMHO.

    I was confused ...
     
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  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I smell cross coll

    ta

    rolf
     
  6. Trainee

    Trainee Well-Known Member

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    Even if cross colled, would it be more likely that the lender just takes the proceeds of the sale, as opposed to preventing the sale?
     
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  7. kierank

    kierank Well-Known Member

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    Maybe it is really badly x-col?
     
  8. Alex Pushkin

    Alex Pushkin Member

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    I’ve had this happen to a friend.

    This is assuming it is all cross-collateralised as everyone above has said.

    In their case about a decade ago, their LVR was through the roof 90+,so their only option was to pay down without selling because the sale proceeds wouldn’t wipe enough debt but would wipe their highest earning asset.

    If you’re in a better position in terms of how much debt the sale will remove vs income lost you’ll be fine. As in, so long as you’re not disposing of a highly positively geared property. Especially that whatever rent you are going to lose, only 80% ever made it into the banks consideration in the first place.
     
  9. Trainee

    Trainee Well-Known Member

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    Brokers would have a better view of this, but if the borrower had built a large portfolio >5 years ago and would never qualify for the same loans now. Would selling one trigger a full assessment of everything, resulting in the lender demanding more than the net proceeds of the sale?

    Is this is a risk with cross col and changes in lending criteria.
     
  10. Mark F

    Mark F Well-Known Member

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    I doubt the bank could stop you selling but may demand additional payments/additional security to bring cross-collateralised properties into line with current lending standards. If the additional measures were not delivered then you could end up with the forced sale of other cross-collateralised properties.
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I think the question is this:
    Can a bank refuse to discharge a mortgage if the borrower cannot demonstrate they can service the remaining loans?

    I have never seen or heard of this happening. I have seen a bank only agree if the proceeds of the sale are used to pay down any remaining debt secured by the remaining properties that aren't sold.

    Can they refuse? You would have to read your loan agreement with them.
     
  12. Alex Pushkin

    Alex Pushkin Member

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    @Terry_w

    Hi Terry,

    I’ve tried contacting you directly and haven’t had any luck. Is there a way to engage your services?

    Alex
     
  13. Lindsay_W

    Lindsay_W Well-Known Member

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    A classic example of why you shouldn't cross collateralise your portfolio
     
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  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Email only for me
     
  15. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Yes they can if the deal is cross secured. Some lenders will reassess for every little thing - ING will, for eg. Which lender are you with?
     
  16. Archaon

    Archaon Well-Known Member

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    Another point to add to the tally of never X-coll'ing.
     
  17. Perthguy

    Perthguy Well-Known Member

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    I wouldn't say that. I have done it for a purpose and it worked out well. You just need a good broker, an entry strategy and an exit strategy. I would never x-coll without all 3.
     
  18. albanga

    albanga Well-Known Member

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    Surely not prevent the sale.
    I know we are talking cross coll here but it doesn’t make any logical sense how they could or want to stop a sale.

    Their are countless reasons a persons serviceability could change and not be able to service the end debt. But with rental shading they will be able to afford it more after the sale regardless (We can all agree they can make the proceeds pay down debt).

    I just couldn’t see a bank doing this. Like above their could be endless reasons for a person NEEDING to sell. So what? The banks are going to say “nah too bad, keep going until your bankrupt”...I don’t see it.
     
  19. Brady

    Brady Well-Known Member

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    I've have seen servicing assessment now for security substitutions also.
    Wouldn't surprise if see it with a partial discharge (when x-coll) as vary the contract.
    Again another reason not to x-coll...
     
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  20. Archaon

    Archaon Well-Known Member

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    Alot stacking up in the Con column.