Help getting a 4th Loan - Advice needed.

Discussion in 'Loans & Mortgage Brokers' started by Zyzz, 6th Jun, 2017.

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  1. Zyzz

    Zyzz Well-Known Member

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    Hey guys I am new to investing but have already hit a wall. The bank is refusing to give me another loan even if I go Interest Only as they claim they calculate the borrowing power from your principle and interest serviceability.

    My current portfolio is as follows.
    House1 - Mortgage 240k Value 500k
    House2 - Mortgage 240k Value 500k
    House3 - Mortgage 299k Value 325k

    Each house is rented out for $320 per week for a total income of $50,000 per year.

    My expenses are close to $0 as I still live at home with mum, my only expenses are my rates, insurance and agent fees, I have a petrol card from work and eat food at home.

    All my loans are currently running as principle and interest and my before tax income is 60k per year.

    Are you guys able to please offer any suggestions on how I can move forward as I already have a deposit of 30k ready for my next place but the bank wont give me any more money.

    It's worth noting all my loans are with the one bank.

    Thanks in advance!

    -Zyzz
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Lenders assess principal & interest loans more favourably than interest only. If you're not servicing on P&I with your current lender, they're probably not going to let you switch to I/O and it's not going to help anyway.

    There's not enough information to assess your borrowing capacity, but a couple of observations:
    * At least some of your loans appear cross collateralised. Repairing this may help you to move forward, but you may need to refinance some of your loans to achieve this before being in a position to purchase again.
    * Different lenders have different affordability criteria. If you want to gauge what a broader cross section of lenders can offer, you need to speak with an investment savvy broker - there are several of us that regularly contribute here.
     
  3. teetotal

    teetotal Well-Known Member

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    You can also easily check borrowing power by inputting all this information into the online calculators of various banks. See which one provides you with a result you are after.

    Cheers
     
  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It seems that you've been told no by one bank - is that correct? If so - you might have more success with a decent broker with access to many lenders.

    The trick these days is coming up with a 20% deposit and purchase costs. If you only need to borrow at 80% LVR then you might still have options. Anything above 80% and it's becoming exceedingly difficult for those with multiple properties - and IO repayments above 80% are slowly becoming a feature of the past.

    Cheers

    Jamie
     
  5. albanga

    albanga Well-Known Member

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    The online calculators wil tell you nothing. They are in no way a representation of what someone can actually borrow but purely a marketing tool.
    Even if they were accurate, most people without the knowledge on how these calculators actually work would be able to get a definitive result.
     
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  6. euro73

    euro73 Well-Known Member Business Member

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    This is a great example of exactly why equity doesnt equal borrowing power

    780K of debt against 1.325 value is an LVR of under 60%. On the face of it you have @ 280K of equity available at 80% LVR. But even with a strong equity position, it comes down to the question of lender servicing calcs.

    Every dollar you owe is going to be assessed by most lenders at 7.25% + , over 20 or 25 years P&I , if you are utilising 5 or 10 years I/O.

    So look at it like this... 780K @ 7.25% P&I = X. Although your rental yields of 6.4% are good, they are assessed by most lenders at 80% of that, so really @ 5% .... That "gap" is where your borrowing capacity is getting hurt.

    You havent detailed your income or other liabilities so making any informed recommendation isnt possible, but I would suggest that a chat with a broker would be well worth your while. On the face of it, assuming even a median level of income and little or no other debt, a refinance + cash out with a lender with a more generous servicing policy may allow you to make 1 or 2 more purchases. If it were me advising you, I would recommend you either consider switching all your existing loans to P&I, or start paying off one of the 3 loans as aggressively as possible. It appears the rental yields would allow you to do that, and it would certainly aid borrowing capacity a little bit. Pay rises aside, debt reduction is the single most powerful tool investors should be utilising now
     
    Last edited: 6th Jun, 2017
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  7. Martin73

    Martin73 Well-Known Member

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    I'd echo and support the posts above about seeking advice from a broker, really helped me in breaking through a road block with the banks.

    I'd also query your strategy - why do you think you need another property?

    3 properties under your belt with good equity paydown so far is not a bad result.
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    That will generally provide further confusion, and risk to the Credit file if subsequently relied upon.

    The actual service calc vs the online version can be moderately relied upon as a guide for a single PPOR purchase.

    For every further property, the relevance and more importantly , the precision of the online tools gets progressively lower.

    Spend the time with a banker/broker Id suggest.


    ta
    rolf
     
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  9. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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    @zzzzz I have a model I use to plan out future borrowing power with clients, and based on the limited information you have included above it's indicating an additional property purchase is possible.

    You might even be in a position to release equity to fund the deposit if we do it in the right order!

    Definitely not the time to despair it looks like you may have some options open you.
     
    Last edited: 6th Jun, 2017
  10. Jess Peletier

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

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    You've come to the right place :)

    There's a very good chance you're not actually stuck, just your one lender will no longer help. Lenders do vary quite considerably in what they'll lend to different people.

    As Peter mentioned , it looks like you'd benefit from restructuring your loans also so you'd definitely benefit from a thorough review before buying again. It becomes harder to fix the more properties you have, so get it sorted now.
     
  11. Phantom

    Phantom Well-Known Member

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    Your predicament does come up often. After all, the same lender can't lend to you indefinitely. But, there may be options for you. Some great brokers have given tips above. Get in touch with one and find out what's possible. :)
     
  12. Piston_Broke

    Piston_Broke Well-Known Member

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    It's always tough being an asset rich income poor investor.
    But you've done great on 60k income so far.

    You may have to look into refinancing the loans as interest only.
    On a low income it may be difficult to refinance only one, and your cashflow position will improve a lot be doing them all for the next loan.

    Ideally I would not want to have all my loans with only one bank, but sometimes there's not much choice. But you can always refinance later.

    Keep in mind that for the std banking and broker practice forms and calculators, your borrowing power is bugger all.
    Try telling a broker you make 60k and want to borrow 780k.

    My best results have been talking directly to the banks and lending managers.
    Not the bottom rung but the the branch lending managers.
    Try asking family and relos if they can recommend someone they deal with.
    Your accountant may also have some connections.
    It's good to have an investor accountant with long term investor accounts and family ties.

    Add to that the tighter regulation on lending and years of dodgy no doc loan apps put through.
    Banks are being told to be harder on investors.

    If you do use a broker be very careful and vigilant as to what they do.
    They seem to like rearranging things and you only see it on the loan app or approval letter from the bank which doesn't leave much time.

    All the best
     
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  13. Jess Peletier

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

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    By law, brokers have to provide a proposal and quote that shows the loan that's being applied for. If they rearrange without confirmation from you that's actually a breach and a serious issue.

    That said, errors can and do happen - I've had credit change things without my knowledge and did not find out until after settlement. Did you raise the issue with your broker?

    Believe it or not, not all brokers are completely unethical.
     
  14. euro73

    euro73 Well-Known Member Business Member

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    Classic. Another Monday morning expert... Yes, be very careful of brokers. All scoundrels , out to stitch you up, rearrange things and leave you penniless and desperate - the lot of them

    Bankers on the the hand - absolutely no culture of overselling. No compensation for doing so. No "targets" ... just salt of the earth...

    What a load of .....
     
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  15. Piston_Broke

    Piston_Broke Well-Known Member

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    Tried to use a broker (only because it was recommended) last 3 times.
    Every time the same story:
    Broker: "I thought you wanted to get the loan, that's what we have to do to get the loan".
    My reply always the same:
    "That's not what i want to do, I specifically made that clear."
    Dismissed

    Yes I do state what I'm looking for and will and won't do upfront first conversation.
     
  16. albanga

    albanga Well-Known Member

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    What!!!
    Are you telling me you actually put in the work checking clients servicing across several lenders calculators and you don't doctor payslips to get someone's loan across the line?

    Are you telling me you put your clients into the right lenders for their circumstances and don't only choose lenders that pay the highest commission?

    Are you telling me you keep clients with lenders ongoing and use equity releases and LMI and don't refinance your clients immediately after claw back regardless if they paid 30k in LMI?

    Are you telling me you check clients risk and future plans and don't just fix loans for 5 years?

    Are you telling me you advise risks in OTP purchases and don't also offer OTP purchases through your developer buddies?

    How do you even make money in this industry? :p.
     
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  17. Piston_Broke

    Piston_Broke Well-Known Member

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    Yes indeed that is what many brokers are.
    You can do a course over the weekend or two, pay your fees and you're get your cert IV or diploma.
     
  18. euro73

    euro73 Well-Known Member Business Member

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    Oh my. You should move along quickly, before you find yourself well out of your depth.

    The brokers on this forum haven't developed their sterling reputations by chance.

    Run along now...
     
    Last edited: 6th Jun, 2017
  19. Zyzz

    Zyzz Well-Known Member

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    Thank you all for your help so far.

    I will definitely engage a broker to assist.

    Do any of you have a suggestions as to who I could see, any names?

    @Martin73 3 is not enough for me, i want about 30 or 40 investment properties, Why stop at 3 when I can have more.
     
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  20. Anthony Brew

    Anthony Brew Well-Known Member

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    I've found both Colin Rice and Redom to both be excellent. I am a customer and not affiliated with them in any way.
     
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