Guarantor has 2 properties in 1 loan

Discussion in 'Loans & Mortgage Brokers' started by JoshSA22, 14th Feb, 2022.

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  1. JoshSA22

    JoshSA22 Member

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    Hi, been lurking around here a while and seems to be a LOT of valuable info here so thought I’d pose a question. Just signed a contract for a property in Qld, 600k, we were pre-approved on our own merit for 585k with ~70k deposit but parents said they can help guarantor to secure a place so we bumped it up a bit, (assuming guarantor process was fairly easy).

    But their properties are setup as follows (i’ll use rough values to help define);

    - An ~800k property and a ~500k are on a single loan with around 385k left owing on the mortgage
    - A business property with unknown current value is on a single loan with 185k left owing on it (value 10 years ago was around 285k), but it services itself with rent etc

    Our broker is saying they need to refinance the 2 joined properties seperately before any lender will approve, is this true?

    Problem is, is that it will take way too long from what she’s saying, longer than our 21 days finance.

    Based on online value calculators the business property needs to be at least 385k value, does that sound right? How do we get a valuation sorted? Will our lender need to do it or my parents lender?

    Broker is sounding a little stressed and stressing us out because of that, so just thought I’d ask on here for some clarification before I make any decisions.

    Tia!
     
  2. momentum26

    momentum26 Well-Known Member

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    Can you get the loan of $480k at 80% LVR, based on your purchase price of 600k on your merits? If yes then you don’t need the guarantor loan and hence no refinance of your parents property. Not advice.
     
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  3. Terry_w

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

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    No. but it could depend on what you mean, you are confusing loans and mortgages. What is security for the existing loan?

    What do you mean by 'business property'?
     
  4. JoshSA22

    JoshSA22 Member

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    Hm I think I am, I believe they have a consolidated Mortgage.

    I used the term “business property” because it’s purely to run a business out of, not a house and doesn’t seem to register under any rough valuation sites like a typical house would.
     
  5. JoshSA22

    JoshSA22 Member

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    Not in 21 days
     
  6. momentum26

    momentum26 Well-Known Member

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    21 days is sufficient for a lot of lenders as long as your are meeting their servicing requirements on your own merits & all your paperwork is ready to go.
     
  7. Lindsay_W

    Lindsay_W Well-Known Member

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    $600k purchase price, with a 70k deposit, a loan of $480k at 80% LVR... your numbers don't add up do they? :confused:
     
    Last edited: 15th Feb, 2022
  8. JoshSA22

    JoshSA22 Member

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    Yeah It was around 92% LVR on the pre-approval, including LMI
     
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  9. Lindsay_W

    Lindsay_W Well-Known Member

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    Why don't you just do that then?
    The parents cross secured properties seems messy
     
  10. JoshSA22

    JoshSA22 Member

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    That was for 585k, purchase price was 600k, it pushes right on 95%, and if bank valuation comes in lower we won’t have much left for the shortfall. At 585k it was safer with that little bit of wiggle room according to the broker.

    And yeah they did it so long ago too, 10 years ago now I think, told them they should really re-finance regardless of what happens here.
     
  11. Lindsay_W

    Lindsay_W Well-Known Member

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    Hang on, you said you have $70k deposit?
    $600k purchase price
    + $15k state charges approx. (stamp duty etc)
    = $615,000
    - $70,000
    = $545k loan required (LMI not included)
    That's a 90.8% base LVR
    Add LMI onto that and you're still under 95%LVR ...
    *assumed its owner occupied purchase and in QLD as your profile says you're from Brisbane*

    Why are you worried about the valuation coming in low? If it did (rare) then would you really still want to buy it? You have a finance clause to enable you to not complete the purchase if that's the case, with no loss of deposit.

    Your parents should clean up their loans yes, cross secured resi property with commercial by the sounds of it, uncross them asap if possible.
    Your broker is correct that they need to sort that out first before they can provide security guarantee for your purchase.
    But you can do it without the guarantee anyway so what do you want to do?
     
    Last edited: 15th Feb, 2022
  12. JoshSA22

    JoshSA22 Member

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    Worried because of those “instant” online valuations showing less (I know they’re not accurate but still concerning), and broker is saying lots of valuations come in 20-30k less in this climate, but lender just accepts it’s ‘close enough’ because LVR has wiggle room anyway. If right on 95% LVR she is worried they won’t be as forgiving about it.

    I’ll ask her to go ahead with the valuation and hopefully it comes back ok, and in the mean time also try get parents commercial property value as a back up, and also see if they want to start re-financing their combined mortgage issue.
     
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  13. Terry_w

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

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    This doesn't make sense. What is a consolidated mortgage? Are 2 properties mortgaged for one loan? What is the values of the property and the amount owing.

    A loan is a debt a mortgage is security for the loan, 2 different things
     
  14. Lindsay_W

    Lindsay_W Well-Known Member

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    I haven't been seeing that personally, maybe if it's a brand new build?

    That just isn't true

    This should be done asap so you know where you stand.

    Costs $$$ and can take up to 2 weeks or more at the moment, so just be aware of that.
     
  15. JoshSA22

    JoshSA22 Member

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    Ok yep I got it backwards again, sorry, one loan is being paid off that covers 2 properties.
     
  16. JoshSA22

    JoshSA22 Member

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    She has ordered the valuation, through Nab as that's who our pre-approval was.

    It's not a new build, but all data is lagging, There has been comparable sales in the area above what we are paying, but many aren't settled yet (hot market in Brisbane). We have been searching for months every weekend and know this price isn't high, but worried value-er may think otherwise.

    We also know there was an equivalent offer of the same amount, but our conditions won it, (flexible settlement mainly) to allow seller time to find a new place.
     
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  17. Terry_w

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

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    I can't help you if you won't answer the question.
     
  18. JoshSA22

    JoshSA22 Member

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    The 2 properties are mortgaged for one loan.

    The total loan owing is 385k, total property value is around 1.3mil based on online insight data (very low based of neighbour sales). The split is not known - I believe this is the issue and I think I understand why they want it separate now.
     
  19. Terry_w

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

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    They can simply substitute security, keep loan as is secured against one property, assuming it is worth more than about $480,000 and then the other property will be unencumbered and can be used as additional security for your loan.
     
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  20. Lindsay_W

    Lindsay_W Well-Known Member

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    I think you'll be fine, Valuers use comparable sales but it's not the ONLY factor they use to determine the value.

    I would be more concerned with the fact that you're going with NAB with an LVR >90% (if you are not using the guarantor option) NAB are notoriously bad for high LVR's due to their auto-decisioning system, particularly if you're not an existing NAB client and have any kind of personal debts (personal loans/car loans, credit cards etc.)