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Ideas to buy more properties while hitting serviceability wall

Discussion in 'Property Finance' started by R.B., 15th Jun, 2016.

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  1. R.B.

    R.B. Well-Known Member

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    Dear PC Gurus,
    We just settled on our IP3, and looking to buy IP4. how my loans are structured is:
    - Created a new loan on PPOR to use for deposits for IP's, Stamp duty,...etc
    - 88% loan for all IP + LMI
    - We have 15% of our total loans in offset account against our PPOR
    - We save around 40% of our income
    - No credit cards, car loans,...etc

    Currently we are with CBA. We are hitting the 1 Mil with CBA with LMI. looking to buy IP4, however my broker said that I have 200K's left because of the LMI cap of 1 mil. Other banks have higher serviceability calculators like bankwest, ANZ. She said as well that banks are more conservative near elections time.

    My Options are:
    1- Pay 20% deposit for IP4 from my offset account to avoid LMI. however I would like to keep my buffer in offset as disaster recovery. Can I put some of this money into my house and borrow against?
    2- Buy a cheaper property between 150-200K
    3- Wait and see (I do not prefer this option)

    What do you guys recommend in my situation, and what are your experiences buying more. I have some options, but not sure which one is better.

    Thanks
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Banks are more conservative during election time? Wowzers who told you that?

    Different lenders will lend different amounts of money so strategically using and selecting lenders is crucial. There are heaps of more generous lenders (NAB, Resimac, Adelaide Bank, Westpac in certain scenarios, Liberty, etc) - bankwest and ANZ are definitely not one of those.

    Why do you want to pay 20% deposit? I 100% agree with you that having a buffer is far more important than saving LMI.

    Talk to some of the brokers here like Jamie and Jess and get them to put you on a plan of not just IP4 but future IP's too.
     
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  3. R.B.

    R.B. Well-Known Member

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    Thanks Shahin,
    That's why I am posting here, I though that there is something not right as well.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    BW and ANZ do not have better servicing at all. And they are not more conservative during elections. What an odd thing to say! :)

    Use a 12% deposit and costs, and use a different lender with better servicing (if that's necessary - it may not be, it may be that you just can't go to CBA for any more LMI deals).

    If you can, use equity rather than cash.

    Are your CBA loans cross collaterilised?
     
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  5. R.B.

    R.B. Well-Known Member

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    Hi Jess,
    My loans are not cross collaterilised. I used the split loan from my PPOR to fund the purchase of the IP's.
     
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  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    CBA is an awesome lender and Marty touched on it in another post that they pretty much do everything but their achilles heel is the $1mil lending and then it off to their mortgage insurers.

    It so important to keep lending below this amount with them and it stresses the point of utilising specific lenders during the accumulation phase of your portfolio.
     
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  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Important to note that rather than using offset cash, you'd be better of paying the amount you need into your PPOR, creating a new split and redrawing for the IP deposit. This will reduce non-deductible debt and allow you to borrow 100% for the IP even without any growth in your properties.
     
  8. R.B.

    R.B. Well-Known Member

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    Hi Jess,
    This is one option I am looking at. This means that if I put 100K into my PPOR, I can borrow up to 80K's aginst it. correct?
     
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  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Nope, the full $100k.

    It's effectively redraw, rather than 'new' borrowings.
     
  10. noone

    noone Member

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    I've been told that with CBA, every new split requires new pricing. Is this true?
     
  11. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Here's some tips for improving your serviceability when you have none:

    1. Increase your income.
    2. Reduce your debt.

    You'll also have a few more options available if you only leverage to 80%.

    In the original scenario however, there are a few lenders who are more generous than the CBA, but that's definitely not BankWest or ANZ.
     
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  12. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    No - if you're currently on a certain discount and not changing products, that discount will be applied to the new split. If you're changing product/fixing etc, you'll get the carded rate unless you get pricing specifically, but that's not an issue - we would do that anyways.
     
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  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Consider different ownership structures too. Including possible restructure of existing ownershiip - but factor in serviceability before changing anything.

    Debt recycling will also help.
     
  14. albanga

    albanga Well-Known Member

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    Also sounds like you have created a little mess by not splitting out your deposits for each IP.

    <inserts link to @Terry_w tax tip about mixing investment loans>
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Perthguy likes this.
  16. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Easy to fix this with CBA if the loans are IO.
     
  17. euro73

    euro73 Well-Known Member Business Member

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    Thats funny - and wrong


    Thats really funny - and worryingly wrong


    By funny, I mean.... Unfortunately it appears by their comments - which are just straight out wrong - that you have a broker who isnt equipped to work with you any more. If I had to guess , I'd suggest the broker typically only ever uses majors or Bankwest and ING, writes O/Occ business almost exclusively, with the occasional investment deal every now and then , and they just havent adjusted to life after APRA and ASIC, at least where someone with your needs is concerned.

    There can be no way a broker who knows the most basic information about servicing calcs could suggest Bankwest or ANZ offer superior servicing to CBA or many others, already listed above .

    Your needs have outgrown what this broker can offer you, so you should move to someone who understands servicing calcs, and will improve your chances of property 4,5, or 6 being within reach....

    Call Jess, as people have suggested.
     
    Last edited: 16th Jun, 2016
  18. r3ckless

    r3ckless Well-Known Member

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    Any lenders allowing interest only servicing on Investment home loans yet? Equity isn't my issue, but servicing is!
     
  19. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    liberty is. But before jumping into that you'll be best of looking at your current loans and making sure your IO periods are sorted as one you need liberty for servicing you'll be stuck in the loans you currently have.
     
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  20. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    There is still - preferably at 80% LVR's. Otherwise there's still a number of lenders which only increase existing repayments by a nominal amount above their actual payment, which is far better than 25 year, principal and interest repayment at 7.xx%.