Loan Servicing: Many cannot Qualify for what they have

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 30th Mar, 2016.

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  1. Johann_

    Johann_ Well-Known Member

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    I have said this in the past, this is a great time to reduce debt not increase debt anyway.
     
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  2. Barny

    Barny Well-Known Member

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    Great time to max out your borrowing capacity in a loc, before things become harder again, whilst paying down debt.
     
  3. Sonamic

    Sonamic Well-Known Member

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    Pay down debt now in offsets. Get cashed up for the looming 2020 fire sale prices when everyone's pre APRA Approved Loans @ 5 year IO terms run out and they realise they can't service P&I.
     
  4. Blacky

    Blacky Well-Known Member

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    This may well turn out to be one of those times you see x-col really biting.

    There will be cases where people are x-col'd and move to sell a property, just to find the remaining debt still exceeds the banks servicing requirements, and the bank requesting additional loan reduction.
    Add to this they won't be able to refinance for the same reasons. knock on effect.
    Things from there get very messy.

    X-col is fine....until its not.

    Blacky
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Good point Blacky - banks may insist on paying down loans with the proceeds of the sale.
     
  6. tobe

    tobe Well-Known Member

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    Important to remember fixing an interest only loan realigns the interest only term. So at approval you got 10 years i/o, then a year or two in decide to fix for a year. At the end of that year with most lenders you will roll back to p&i and a variable rate.
     
  7. Angel

    Angel Well-Known Member

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    Tell me about it!

    All our new loans are now variable P& I but because we used to pay extra anyway, the repayments wont be any different (I think). I also got them at a lower interest rate than the IO loans we had previously. It was still hell qualifying even though all our old loans were paid in advance.
     
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  8. Fargo

    Fargo Well-Known Member

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    To the contrary I have found being crossed has helped. Serviceability limits how much new debt you can acquire, but I found by having properties Xed I could sell a property,keep the same loan and not need a new financial assesment by substituting another property and have 250k to put in my pocket. On another loan I sold 2 properties and had 780k to put in my pocket but the loan was reduced by 200k, 250 k was used to purchase the property that was used as a substitute for the other loan. If the properties weren't crossed the proceeds would have had to been used to repay the loans.
     
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  9. Connor

    Connor Well-Known Member

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    A few years ago I had CBA convert my 2 of my IO loans to LOC with just a quick visit to their branch. No new application was needed as the outstanding loan amount became my credit limit. Not sure if this can still be done, but it's worth asking before your IO time is up.
    Especially if your at risk of not qualifying for a refinance under the new servicabitly requirements.
     
  10. Drgonzo

    Drgonzo Well-Known Member

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    And great news for everyone else wanting to get into the market to have a go. Maybe those who are living off property will have to get a real job and contribute to the economy to improve their "serviceability"
     
  11. Jess Peletier

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

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    This could most likely have also been done with no x-coll.
     
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  12. albanga

    albanga Well-Known Member

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    Is this trolling?
    Or are you actually in a property investment forum having a go at people who are trying to set themselves up for retirement via property?

    How do you think almost every person here has been able to obtain property?
    And what's your alternative? Everyone work until they are 75 putting there hard earned into a 1% interest bearing savings account and living off the pension?
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    SUbstitution of security is possible whether crossed or not.
     
  14. Drgonzo

    Drgonzo Well-Known Member

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    I don't think everyone here is investing with the view that it's their only source of income - it's a nice hobby to supplement an income but it's hardly a career.
     
  15. kierank

    kierank Well-Known Member

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    What!!! You gotta be kidding.

    For me, property investing is a SERIOUS business with SERIOUS ramifications if I get it wrong and SERIOUS benefits when I get it right.

    I am now retired and I can tell you property investing is a SERIOUS source of income, not a supplement.

    I would guess for most people on PC, property investing is NOT a hobby.
     
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  16. RiMo

    RiMo Well-Known Member

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    What do you define as a career, Drgonzo? Do you think those with a "proper" career are superior than those who use less conventional method of earning an income?

    This is from Gail Kelly, former CEO of Westpac:

    "I very often come across people who are at the pinnacle of their career, they are immensely successful, they've climbed the mountain, they are the best they can be in their job or their profession and yet they are deeply unhappy.

    If you get to an environment where that gets talked about, these people cry: grown men my age and more, in tears. Because of what they have lost along the way: a relationship, a partnership, they may not be connected to their children, maybe they've lost their health, maybe they've got no friends. They have no interests, they've lost sight of who they are, their spirituality, their inner person.

    Do not let this happen to you. You need to make sure you live a whole life, which means be really clear on the priorities in your life and invest in them all the way."

    Who wants to be another sucker who slaves away their precious life to climb the ever-demanding corporate ladder which gives you a lot less than what you give? For what? So you can say you're a good citizen making a "productive" contribution to the society? Who are you trying to please? What are you trying to prove?

    Property has provided us with far more security, time, happiness (and income!) than a corporate career ever could. We won't be where we are today if we didn't work smart and hard.
     
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  17. charpj

    charpj Well-Known Member

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    Have been doing a fair bit of work with First Home Buyers, the servicing stings. Not just at the multiple portfolio end, but at the guys trying to get into their first home.

    Because most listened to their parents, they graduated from Uni with a HECS debt that will follow them until their early to mid 30's. Treated as a personal loan repayment, it chews away at their max borrowings. Add in a car loan and a small credit limit and they are priced out of most of Metro Melbourne. I will whip up a servicing post for first home buyers to show the impact of the above.
     
  18. Daniel007

    Daniel007 Well-Known Member

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    Looking forward to it.
     
  19. jaybean

    jaybean Well-Known Member

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    Me too. Will be an interesting counter point to those that say this helps first home buyers so it somewhat balances things out.
     
  20. Blacky

    Blacky Well-Known Member

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    The contrary would be the exception.

    For any generalization it's possible to identify single examples where the opposite is true. However it doesn't mean that in general (i.e. The vast majority of the time) x-col will have a detrimental effect on portfolio growth. Especially when the market environment changes (eg now).
    We also witnessed it during the GFC.

    Again x-col is fine... Until it's not.

    Blacky
     
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