NAB Being Difficult with $152,000 Granny Flat Loan... ideas? Other banks for 81% LVR?

Hi,

I'm building a $152,000 granny flat out the back of my PPOR (LOGAN, QLD). 11% yield - seems like a no-brainer to get funding for it....

I have PPOR + four other investment properties with Nab - currently about $1.1million in lending at just under 80% LVR. My portfolio is cash flow positive.

I've got the DA approved in June, and a builder lined up for March 2019.

In July, I put in an application through NAB, only to get knocked back - they'd only lend up to 80% LVR which was about $120,000 ($20-$30k short of what I need).... full build is about 81% LVR across my portfolio. To make up the cash is difficult as I'm a teacher (low-ish salary) so I need (/prefer for lifestyle reasons) to rely on equity.

Plan was to wait to November (now) and re-look about the application, but NAB is just screwing me around. So stupid, as it's around a $25k issue or a 1% LVR issue!

Even if the loan does go through, I'd probably be best to change banks due for future investment considerations - I'm looking for a bank who DOES allow >80% investment loans, considering my investments are cash flow positive.

I get that the findings of the Royal Commission are responsible for these difficulties - what are my options?

 

Banks allow > 80% investment loans.

It may just be the borrowing capacity.

You will find some banks may cap the rental return as well (e.g. CBA allows a max of 6%).

Best speak to a broker who can review the entire portfolio to determine how to maximise your borrowing.

 

Hello!

It sounds like NAB have you all crossed up so you're probably actually way better off going elsewhere - the LMI will be huge compared to if the securities are all separate. It sounds like NAB stuffing you around is actually a blessing in disguise.

Without knowing much more about your situation it's difficult to give advice, but if it's a 'close but no cigar' scenario, you're very likely to have options elsewhere. It would be worth speaking to a broker to go through everything and let you know some other options.

 

Fresh valuation for properties are becoming very conservative even in non frothy belt, won't this limit OPs ability to switch loan provider without new LMI if his position is already close to 80 lvr based on past favourable valuations? not questioning....just asking

 

A few points that may help clarify how lenders look at your situation:

- Even though you're only seeking a small additional debt that will more than cover itself (and buffered assessment rates), they will look at your overall picture & retest servicing across your portfolio. That means they're effectively reexamining whether you can service the existing debt position on their new calculators.

- It sounds like servicing/equity may be an issue. If your at an 81% LVR, you can likely get it done with a different valuation and a very small difference. Servicing may work, will just need to retest the figures.

 

You're looking at this deal in isolation, probably because the 11% yield on the investment will make for a nice cash cow. The problem is the banks are looking at a holistic situation (especially since the NAB appears to hold everything anyway). They can't just look at this deal, they need to look at everything.

Borrowing capacity has reduced significantly for everyone over the last few years, the Royal Commission is only the most recent challenge.

Most likely you need to be applying to a lender that is more generous to your circumstances than the NAB. Problem is that the NAB is actually one of the better ones in many cases. Also if they're telling you the portfolio is at 81% there may be some bad structuring involved which could make things more difficult.

This sort of situation really calls for specific advice from a broker.

 

I've been in a similar situation a few years ago where I was putting in 19% actual cash, not equity and the bank said no go. I negotiated with the local bank manager at the time and had my first 6 months repayments a bit higher to get to the 80% LVR. Not sure how much discretion local bank managers have these days but that's what I did. Crazy thing is that when I got home I received a letter from the bank wanting to increase my credit card limit. They were willing to give me more unsecured credit at a high interest rate rather than secured loan at lower interest rate.

PS. I'm assuming serviceability and all other aspects are OK.

 

Thanks for this! Any suggestions re brokers southside BNE or Logan?

I think you are right - From memory one of the big issues last time is that they are only considering a certain % of the property values in their rental estimates, so even though the granny flat will bring in $16k they will only consider maybe $8K.... so while I am cash flow positive and can prove it.... they won't change their lending rules.

 

You've had a heap of great brokers answer you above - all of them will likely help you remotely. If you really prefer to sit in an office with someone, @Rolf Latham is around there.

 

Yikes, NAB might simply not want to lend anymore to you due to your total exposure to them. As mentioned by others above, definitely speak to a broker, sounds like your whole portfolio is cross-secured with NAB.

Most, if not all, lenders only use 80% of the total annual rental income per property (some 75%) so this will have an affect yes, there are also limits on what % of the property value they will accept eg. some lenders will only allow 6% of the property value per annum in rental income even if you can show it's making 8%.

I would also recommend @Rolf Latham as a mortgage broker close to you

 

As Jess said a number of them have responded, location should not matter.

If you would like to have someone nearby, I would recommend you speak with @Rolf Latham