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Finance Clause - 105%

Discussion in 'Property Finance' started by JohnPropChat, 23rd Nov, 2015.

  1. JohnPropChat

    JohnPropChat Well-Known Member

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    If you need to borrow equity to complete a purchase then do you put 105% as required finance in the contract?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Presumably the equity portion was approved and delivered before you went IP shopping?

    I'd put 80 or 90 or whatever it is on the contract, since this will be the part you're actually applying for.
     
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  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If you still need to apply and be approved for the deposit and costs, yes - 105%.

    If you have the equity portion approved and ready to go, just the balance of the loan is fine.

    I would recommend sorting out the deposit side of things well before signing a contract.
     
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  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Do you need a 105% loan to complete the purchase? Hopefully at this point you'll have the 15% - 25% for the deposit and costs already taken care of via an equity loan against a different and only require another 90% or 80% loan to buy the house.

    A 105% loan doesn't exist on it's own, the only way you'd qualify for one is by cross collateralising the new property with an existing property. Here's a post on the reasons why this is a terrible thing...
    Cross collateralisation - 10 reasons to avoid
     
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  5. JohnPropChat

    JohnPropChat Well-Known Member

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    Thanks for all the replies guys. I found one that I'll putting an offer on. I do have enough deposit to go for a 88%+LMI loan but I want to first try and see if I can cash out to 90% with Westpac. They seem to want to control funds for a LOC for 90% cash out.
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Hi JPC

    The REA may not be too impressed with presenting the offer, so an explanation goes a long way, as does your bankers/brokers mobile number

    ta
    rolf
     
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  7. tobe

    tobe Well-Known Member

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    I recommend the same for land contracts when purchasing land and building a home. The finance clause is a percentage of the land plus house price.
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I could be out of date, but are Westpac doing 90% investment loans again?
     
  9. JohnPropChat

    JohnPropChat Well-Known Member

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    The LVR on my IP is 75% so I want to see if I can get a 15% LOC. Last I checked they said they want to control the funds. Could have changed recently. Have to wait for my broker to get back to me on that.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Pete is right as at today

    WBC still at 80

    ta

    rolf
     
  11. melbournian

    melbournian Well-Known Member

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  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Lenders will do 120 % home loans if you have sufficient equity across other properties..............and income to run it all.

    Stand alone 105s dont think so

    ta
    rolf
     
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  13. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Follow through to the appropriate page, they describe 5 ways to do it...

    1. 105% Guarantor loan - most of us call this a parental guarantee, it's not 105% of the security value.
    2. A gift - not really a 105% loan if you're getting a gift to bring the LVR down.
    3. Personal loan as a deposit - they even admit it's not suitable for all people, in fact it's not suitable for almost anyone.
    4. Equity in another property - again this isn't really a 105% loan, but it is potentially bad advice with cross collateralising.
    5. Use your superannuation - here they even say you can borrow up to 80% of the purchase price; I think they just broke physics because now 80% = 105%.

    105% makes for some nice marketing, but it's rubbish.
     
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  14. melbournian

    melbournian Well-Known Member

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    thanks rolf - not for me (actually for someone else who doesn't have sufficient deposit)
     
    Last edited: 23rd Nov, 2015