not getting a loan when you have more cash than the loan?

I want to buy 1-2 IPs in the new few years. What I need to know is, can anyone - any bank - give me a loan if I have cash of the same value.

IE -- Can I get a loan for 400k and give the bank 400k cash that they keep in an offset? My reason is to take adv of tax deds. And because noone will loan us anything. Even though the equity in our properties is at least 3.5mil.

I want to buy a new IP in a week worth 400...but getting approval is a real challenge and I don't fully understand why. IE noone will give us a cent for years. We are both post grad/working/ make money well average income. comb income of over 150k.

We have PPR $3.5 mil, with a loan of only 800k, that's the max we could get. WE have $450k in that redraw. WE also have an IP $1.7 mil with loan of $1.1m, rented for 1500 pw. Never a vacancy.

When I tried to get more equity, by revaluing the places which the banks don't realise are so high (we purchased the PPR for 2.5 with a loan of 800k and had 400k cash leftover) - no luck from banks.

any help, tips appreciated!

 

You will still need to qualify to borrow even if you have the cash to pay out the loan. being post grad is irrelevant, never any vacancy doesn't mater - all that matters is that you have enough income to pass serviceability, deposit and good history.

You could have millions in equity but not qualify if your income isn't enough

 

Lenders assess your borrowing capacity based on cash flow not assets, $1.9M worth of loans with $150K combined income likely means you're debt to income ratio is at the higher end of the scale.
Can you use the $450K redraw to purchase the IP? Ideally you would split that loan so the redraw becomes it's own tax deductible loan split*
*I'm not a Tax Adviser or accountant so seek your own specific tax advice on this*

 

That's the solution. You will have no more debt for servicing purposes but another income so this could probably improve your chances of borrowing for the next one too.

 

Also worth mentioning these two things if the loan is fully offset then

A) There aren't any tax deductions regarding loan interest that you can claim and
B) The bank will be loosing money if your loan is fully offset. So they won't be bending over backwards trying to help you

 

Yes I was asking from you loan pros, is there a product where you can provide the capital and take a loan for same amount?! The idea was indeed to "Capital needs to be held aside at the loan limit"....our income is clearly too low for more borrowing so trying to find out other options.

 

Yes - but you will have to qualify for it still. - need to service.

Considered rated party loans as a temporary solution perhaps?

 

I get this all the time. People cant get their head around the difference between equity and income.

For example say someone had +$5M in net assets but meager income. Assuming they had other assets besides just their own home would you lend them $400,000 fully secured with a < 50% LVR? The man on the street says hell yes. ASIC and the banks say no.

Bring back Macquarie no doc!! "Yes I can afford it"

 

The good old days when all you needed was equity and a pulse.
60% LVR with no income needed.

 

...and it's this sort of loan that people complained about. First introducing responsible lending, cumulating in a Royal Commission with a whole lot of pain in between.

Would you believe I got a general enquiry a few months ago. Someone wanted to understand what a particular lender's policies were back in 2007 because they were suing the lender for giving them a loan they couldn't afford and ruining their lives. Never mind that they would have signed documents stating that they could afford it. (BTW I had nothing to do with the loan, this was someone just wanting info to support their case).

People want easy money but they don't want to take responsibility for not being able to pay it back.

/endrant

 

Interesting to note in another thread you say you're a casual teacher who lost your income due to Covid - I'd say that's having a significant impact on borrowing capacity as well...
Only lending I know of based on security only is private lending, high interest rates very short terms, not worth it.

 

Comb income of over 150k.
PPR $3.5 mil, with a loan of only 800k. $450k in that redraw.
IP $1.7 mil with loan of $1.1m.

Combined income doesn't match the asset figures.

Anyways, is it possible to buy bonds or similar with that $450K and use that income for the assessment? Do you need the 2-year evidence even if it is a long term bond?

 

In short, no it wouldn't be classed as income for servicing purposes.
Better to use the $450K available as redraw to buy the IP - make it a separate loan split so interest is deductible, no need to apply to the bank.

 

Not an advice and DYR.
In the past, when I maxed out my loans and had xxxK in offset, I just called my accountant to ask few questions, and went to auction to buy a yyyK house. Please ring your accountant on this.

 

Not sure how this would help you borrow more?

If you have cash in offsets you can pay cash for a property potentially.

 

Did your accountant loan you the money or did you just draw the money out of the offset accounts?

 

I am a bit lost in all this. But if you have fully offset the loan then there is no interest payable and so no tax deduction other than the fees and charges on maintaining the mortgage.