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Loan for bad credit

Discussion in 'Property Finance' started by HomeMinister, 23rd Sep, 2015.

  1. HomeMinister

    HomeMinister Well-Known Member

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    a special hi for Brokers!

    i have a friend who is willing to invest together with me which boosts our buying power.

    he is very trust worthy and I like to deal with him. however he has bad credit due to divorce.

    can you finance geeks advice me if he can borrow money for a home loan or land? where and how?

    he hasnt cleared the credit cards that went default. is there any chance? he could clear the debts

    but this could eat up our deposit straight up.
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Firstly don't purchase property in joint names - it affects your borrowing capacity moving forward. There are heaps of threads on PC that you can read up on.

    Re the bad credit - if you want to use a mainstream lender then the defaults would need to cleared and even then it depends on the default itself. If its under $500 and a telco default then this can be managed.

    However if its a financial services default over $1,000 then you are toast.

    If you don't want to pay the defaults then you need to start considering third tier lenders like Pepper and the like. Warning though as these guys will take on the risk but charge you accordingly by way of the interest rate and the fees. It hurts.

    I really don't think that having defaults on your credit file is a good thing and my number one focus would be to clear these before doing anything.
     
  3. HomeMinister

    HomeMinister Well-Known Member

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    thanks for the insight Afarin. We are not a sit and wait strategists and would be happy dig a little more in interest over no loan at all. other than interest are there any other crazy claws to be wary about? like can't exit before x years OR 5% in 1 yr, 4% in 2 yrs kind of craziness?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There are many ways to go in together without actually buying in 2 names.

    One way would be for him to lend you the money and stay off both loan and title.
     
    Shahin_Afarin likes this.
  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    There isn't clawbacks or restrictions on exiting the loan but there are huge entry costs which covers the lender appropriately.
     
  6. HomeMinister

    HomeMinister Well-Known Member

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    buying on single name and that too on me is distant matter due to low to no borrowing power left with my existing portfolio.

    Afrin: could you give me a rough estimate on how much upfront cost could be? lets assume the property is worth 330k and i have 10% deposit + stamps.
     
  7. tobe

    tobe Well-Known Member

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    trouble is most non conforming lenders like pepper don't do vacant land or construction. Latrobe may be an option. the upfront costs are going to vary substantially depending on the structure. Are you using equity from existing properties, or do you have a cash deposit, etc etc
     
  8. HomeMinister

    HomeMinister Well-Known Member

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    hi Tobe 5% is already in the land as deposit the remaining 5% + stamps is cash of course.

    can you estimate how substantial the cost is?
     
  9. JohnPropChat

    JohnPropChat Well-Known Member

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    Sorry to hijack the thread but how would that work with capital gains and such? Can the loan be such that Person A lends(a deposit) to Person B to buy a house but Person A sets loan terms as 5% interest(deferred) + 30% of Capital gains (if any). I was wondering if something like this can be used to help a family member to buy their own place but at the same time not loose out on investing the funds oneself?
     
  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Was told by my Pepper BDM this morning over coffee that construction is being implemented and should be available in December. She then admitted that she's skeptical of this date, but it is in the pipeline.
     
  11. HomeMinister

    HomeMinister Well-Known Member

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    peter: which post are you replying to?
     
  12. tobe

    tobe Well-Known Member

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    Latrobe wont go to 95% I'm afraid, they will go to max 75% of the completed valuation or purchase price for construction, 80% otherwise. Another 2%ish for their risk fee and maybe $2000 in upfront fees like legals valuation etc. Rate is 6.99%.
     
  13. tobe

    tobe Well-Known Member

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    December which year? lol.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    CGT applies to the ownership of property. But interest payments to family members could assist with saving tax - in certain situations if set up right.
     
  15. HomeMinister

    HomeMinister Well-Known Member

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    Tobe: does Latrobe fund construction of house as well or just Land value? i am only looking for Land Finance for now. with construction this could become ripper.
     
  16. tobe

    tobe Well-Known Member

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    Land isn't as good a security to a lender. It makes the application weaker. I usually suggest not buying the land seperately. It's very unlikely the capital growth in a new estate will outweigh the holding costs. It's also risky without a finance approval for the build. Who is to say apra won't tighten investment lending further in the future?
     
  17. HomeMinister

    HomeMinister Well-Known Member

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    Thanks Tobe. looks to me a no return investment if i go by home and land finance. let me ping you when days come close to settle..
     
  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    On a differrent note

    Id look to clear the file

    amazing what "impossibles" can be done when collectors and lenders get money in exchange for clearing defaults.

    One mistake I see peopel make is to simply pay the default. Often thats not the best outcome

    ta
    rolf
     
    Terry_w likes this.