Kicked ourselves out of our PPOR! Any hope?

Hey,
Keen to know if anyone has any suggestions for us.

sold PPOR a year ago, with intention of renting short term to find a more suitable property, now can’t get a loan to buy a new PPOR!

own 3 investment properties (1 in process of going on the market)

husband earns over $150k pa, mostly PAYG but $10k ish Defence Force (eligible for top tier DHOAS)

I am self employed, had ABN for 3 years but only one years financials/tax return. Been on Job keeper this year. Income from my work around $23k and is recovering well after covid.

$180k saved for a deposit

3 kids

one $5k credit card (zero on it) but no other debt

Saw a broker a few months ago and our only option was ANZ due to self employment. Initially they rejected us outright but then came back with a pretty average deal that we didn’t take up (would loan us around $400k loan using ALL our deposit ONLY if we refinanced our investment properties through them spending a small fortune on LMI). We didn’t fancy using all our savings on an average property with no $ left for Reno’s!

It’s the mix of investment properties and my self employment income that’s messing things up!

We were trying to wait a few months, to sell one investment property BUT husband is looking at going for a business loan soon, for partnership in the company he currently works for so I feel it’s a race to get approval through before that happens or else we’ll be stuck renting for years!

Is there a lender we could try? Are we missing something? Would an Alt doc loan be something to consider?

any advice would be greatly appreciated as I feel so stuck and frustrated that we worked hard to get us into a good financial position and are considered such a risk!

 

its only 6 more months till the end of the financial year.
what will your financials look like then?

 

Husband will no longer be PAYG but part owner in his own business, although will be paying himself same income

 

We don’t know much about alt doc, but we’re thinking this may be the go. What is the interest rate like with Pepper/Liberty at the moment?

 

generally 2 years tax returns are needed for self employed - or one year with a few lenders.

 

What others look at one year, aside from ANZ?

 

Is that Net or Gross income?
How much of that is made up of Jobkeeper payments (if any)?
Even if your income can be included does it give you enough borrowing capacity? Suggest asking a broker to run the scenario first, so your not wasting time chasing lenders that accept one year financials only to find out you still cant borrow what you need.

 

Gross income
Not including JK (that was an additional $6k last fin yr)
Our broker only gave us option of ANZ
Should I be trying another broker?

 

What is the LVR on the 3 IP's ?
You must have a rather large amount outstanding on the investment loans !

 

$80k (valued same), $220k (valued $245) & $480k (valued ~$560k) and been paying interest only, so you’re right, we haven’t paid them down much.

 

Not a lot of equity in those loans, but they are rather smallish debts. I think you need to see a GOOD broker. Hubby is earning a decent income @ $150k. Are there other issues? Car loan etc.

 

No other debts at all! 1 credit card that we don’t use

it’s me teetering on the edge of being classed as a dependant with 18 mths self employment income (&jobkeeper), 3 kids and the investment properties that tip our serviceability into the red (even though we’re in an incredibly stable financial position )

 

Assuming you have like $12k p/m after tax including husbands income, rental income, your income.
With 3 kids the bank will probably assess like minimum $6k p/m based on Household Expenditure Tables leaving $6k p/m
At a 5.5% floor assessment interest rate if you borrow $1.1m you monthly repayment will be just over $6k.

So $1.1m - $80k - 220k - 480k = $320k is about where it lands.

So ANZ's offer seems more or less on the mark relying on the fact that your self-employment income is accepted.

There are some credit variations between lenders that could be more advantageous but overall I'm not really sure you can do better elsewhere given that your income might not get accepted at all.

About forcing you to refi your other loans, its not usual, but there's possibly 2 reasons i can think of -
1. Restarting a 30 year term which reduces repayments
2. Getting your deal size big enough to get special credit consideration

 

Thanks for your detailed response. That all makes sense to me. flicking off one IP will be beneficial but I think the timeline of that may not line up with the investment in the new business.

Are third tier lenders more generous with their calculations or likely to be same situation?

 

have you considered a substitution of security. you might be able to keep the loan open and buy another property without needing to requalify for a new loan. very tricky tho

 

You'd have to consult a mortgage broker, maybe one with this thread, they havr full access to the credit policies. Non APRA lenders Pepper and the like will probably discount your rental and business income less and use a lower interest assessment rate. Your actual interest rate will probably be well into the 3s though when best market offers are in the 1s

 

Thank you, I haven’t even heard of that ?

 

Thank you.
I guess it’s then a weigh up of whether it would hurt the hip pocket more to buy in 2ish years with increased house prices, + paying rent isn’t the interim vs paying the higher interest rate & buying now (if we can)

crazy thing is, we have income from a hobby (blog) that covers our food bills, we don’t pay a big rent, kids in public schools so our living expenses are relatively modest! We should’ve been concentrating on selling an IP when we were focussing on saving for the deposit