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Income Not Enough?

Discussion in 'Property Finance' started by York, 1st Jul, 2015.

  1. York

    York Finance Broker Business Member

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    I'm in a situation where I have some equity available to make a purchase on IP2. I'm looking at about $300k loan.

    Lender says no problem as far as equity goes but income seems to be the problem. It was fine with IP1 while I was earning the same salary. Now I have the addition of rental income from IP1 on top of my salary but they seem to be wanting way more than before. Something like 20% more. Obviously getting a 20% pay rise is out of the question.

    I know this is a result of the APRA tightening. Has anyone else experienced this set back and where do you go from here?
    How can we as property investors continue using the same models as before? ie: Buy 1. Wait...equity increases, use equity for another loan...and rental income...buy number 2 etc?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Is it the same lender as IP 1 saying no?

    If so - that's the problem. You just need to look at other banks.

    Cheers

    Jamie
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Jamie's right - there are so many banks and they all have different ways of assessing income. Especially if you're with ANZ, Bankwest, ING or Suncorp - you're only at the very beginning of your adventure.

    Rather than going from bank to bank, hit up a broker - I bet you $5 bucks it's not the end of the road for you. ;)
     
  4. jaybean

    jaybean Well-Known Member

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    And if other banks still reject you then it truly is APRA at fault.
     
  5. York

    York Finance Broker Business Member

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    Yes it is the same lender. Problem is the LVR is 80 with 20% coming from the equity from other properties. No deposit.
    If I seek another lender won't they also want the guarantor properties?

     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Not if you structure it correctly.

    You should be able to access the equity from IP1 in a separate loan split, and use those funds for the 20% plus costs on IP2.

    The balance (80%) of IP2 can then be with whichever bank you choose, and secured only by IP2.
     
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  7. York

    York Finance Broker Business Member

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    Ok. Thank you for the clarification.

     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi York

    Any decent broker should be able to assist.

    You just need to:

    1. Release equity from current IP
    2. Set up new loan with different lender

    Just need to find a lender that has a more generous method of calculating borrowing capacity compared to your current.

    If your current lender won't release the equity - then you'll need to refinance to a lender that will.

    Cheers

    Jamie
     
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  9. York

    York Finance Broker Business Member

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    Thanks Jamie.
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    It's worth noting that Jamie is a 'decent broker' who happens to be in your area :)
     
  11. devank

    devank Look, lets just get on with this, ok? Premium Member

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    York,
    Find a good broker. A good broker can make a world of difference.
    @Rixter always say that IP is a vehicle to reach your goal. Similarly, brokers are vehicles to your IPs. Find a good & valuable vehicle. They would know multiple routes to get your destination in the most efficient way.
    Many on this forum would be just fine... even though I like some over others :cool:
     
    Last edited: 1st Jul, 2015
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  12. York

    York Finance Broker Business Member

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    Thanks Devank. Yes I have spoken to Rixter. He told me about 'the vehicle'. I didn't understand at first. But I get it now.
    I'm in the process of finding a broker that is IP minded. I have discovered that it makes a big difference. I think when your broker has a few themselves, it is safe to say they are practicing what they preach. So my next broker will have experience personally with IPs. Thanks for your input. It's great advice. I am taking it onboard.
     
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  13. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    I'm not so sure of any employment contract you may have, but is there no chance of any increase in your salary?
     
  14. York

    York Finance Broker Business Member

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    Thanks Jess. I'll take that onboard. I think he might have preferred a more enticing adjective than 'decent', but I get what you mean. ;););)
     
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  15. York

    York Finance Broker Business Member

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    I dont have a contract. It's a small business and that is family run. They owners are close to retirement and therefore not likely to give anyone a payrise in their final years before retirement. It sucks for me, because I am only relatively young and probably should have moved on by now. But I was employed in circumstances that were very favorable to me, so I don't want to turn my back on them at a time where they are coming to an end of their business careers. It would sour our relationship and I'm not prepared to do that.
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Haha - they were his words, not mine! :D
     
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  17. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    If that's the case, 20% should be easy.
    I'm pretty much in your employers position, family, (wife & I) run business looking for retirement soon.
    I would love a proactive staff member to come up to me with a proposal on how they want to earn more, and are willing to add value to the business in a variety of ways.
    If the proposal was convincing, I'd have no problem with giving them an instant 20% pay rise on the spot, pending performance.
    The thing is, this never happens because employees don't think like business owners...you gotta take responsibility.
    Improvements in small business are easy.
    If you can come up with ideas on how the business can make more money and let the owners work less, you'll get your 20%, provided the owners are reasonable people.
    If they aren't, then you may as well take your services elsewhere where you will be paid asking price.
     
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  18. Redom

    Redom Mortgage Broker Business Member

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    APRA tightening isn't really targeting those with 1 IP (unless that IP is over a million bucks).

    There's plenty of ways to get around it, as others have said, structuring finances well can stretch you much much further.

    Alternatively, as Ace creatively mentioned, increasing income gives the 'vehicle' much more fuel to play with.

    Cheers,
    Redom
     
  19. Hodge

    Hodge Well-Known Member

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    OP get a decent broker on your team. I am in your situation but my broker was still able to get me finance (Still don't know how he did it)

    The APRA regulations will sort out the wheat from the chaff.
     
  20. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    All good - I've been called worse :)

    Thanks for the kind words Jess.

    Cheers

    Jamie