Loan Tip: Applying for more loans before other approved loans settle

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 8th Jan, 2021.

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  1. Terry_w

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

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    There is no need to wait for a loan to settle before applying for another loan. There is no reason to even wait for a property purchase to settle.


    Example

    Bart has just been approved to refinance his loans from ABC Bank to DEF Bank.

    He also wants to refinance some other loans to GHI Bank.

    There is no need to wait on the settlement with DEF Bank.

    Even if there was an increase in borrowings with DEF bank Bart could still proceed to apply for further finance but should just let the new lender know he has applied for finance and it hasn’t settled yet.


    Example 2

    Lisa is purchasing a property and has a loan approved with DEF Bank (they don’t hear anything you tell them).

    Settlement is 1 Oct, but she wants to refinance other loans with ABC bank.

    Lisa technically doesn’t owe any debt for the new property as the loan h asn’t settled. But soon after settlement her financial situation will change so she has an obligation to declare to ABC Bank that She will be borrowing $XX from DEF bank and will settle soon.
     
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  2. Jess Peletier

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

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    In theory yes - in reality, watch assessors tie themselves in knots trying to cover off things that haven't happened yet with appropriate 'evidence'. :rolleyes:
     
  3. OzziMelbourne

    OzziMelbourne Well-Known Member

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    Thanks Terry

    okay, I have a question regarding the above.
    I have several IPs with tenders and am currently building one more IP. For this IP, an expected rental return is 400 a week and it is expected to start in several months because the house is under construction.

    At the same time, a have a decent deposit /15 percent plus stamp duty/ for one more IP.

    when/if I go to the bank to try getting a loan pre-approval for the last one, how will the bank assess my IP under construction? Specifically, will they just look at the loan amount with no rental return or will they take into account a letter from the agent that an expected return is 400 a week & include this hypothetical return in their calculation?

    thanks
     
  4. Terry_w

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

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    If the property is under construction it will have no income and it is unlikely they will take a notional income amount unless they are the mortgagee.
     
  5. Terry_w

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

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    We haven't had any issues. Just provide the full approval letter to the new bank. If not yet approved will have to go for a pre-app subject to it.
     
  6. OzziMelbourne

    OzziMelbourne Well-Known Member

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    So sad...
     
  7. Terry_w

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

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    but only sad for a few months perhaps?
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Mostly right

    Depends a bit.

    Some lenders are ok with this if.............

    1. Clear completion point - for example the Slab is down and expected completion is within 6 to 12 mths
    2. The lender will accept a market rental appraisal - some wont and ask for a full val from their panel valuer for the TBE rental income.


    This is one of those scenarios where the borrowers that prefer DYI will do it much harder than letting a broker do the research

    ta
    rolf
     
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  9. starfish_99

    starfish_99 Well-Known Member

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    What happens when you try this: one of the two banks will auto-decline because their automated credit scoring rules don't like seeing recent credit enquiries, and both loan apps will definitely generate an enquiry (each) to your file. Australia has a credit scoring system that is at caveman levels of intelligence.
     
  10. Terry_w

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

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    Having 2 loan hits won't mean an auto decline.
     
  11. starfish_99

    starfish_99 Well-Known Member

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    oh yes it will with any of the big 5. I've been explicitly told this by the banks I've had system declines from (Bankwest, Macquarie, NAB).
     
    Last edited: 12th Jan, 2021
  12. Terry_w

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

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    I disagree.
     
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  13. starfish_99

    starfish_99 Well-Known Member

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    It's a bit of theme here for me on this forum. My experience with banks is completely different to what brokers here swear up and down to being the case.
     
  14. Terry_w

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

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    who would have more experience?
     
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  15. starfish_99

    starfish_99 Well-Known Member

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    Correction: my experience with banks - mediated via brokers - is completely different to what brokers here swear up and down to being the case.
     
  16. OzziMelbourne

    OzziMelbourne Well-Known Member

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    I’m not sure about NAB etc but in 2018 and 2019 I had 2 loans per year and 2 enquiries per annum and all successful. However, they were with CUA plus loans.com.au and similar lending institutions