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Not Sure About Serviceability Status

Discussion in 'Property Finance' started by Glip, 30th Dec, 2015.

  1. Glip

    Glip Member

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    20th Jul, 2015
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    Hi all,

    My wife and I are in our mid-thirties, don't have kids, and are lucky in that we had help early on from family to purchase our first home. After chipping away at the mortgage as much as we could, we're quite close to paying it off completely, and we want to use our equity to start an investment property portfolio (it took us a while to realise how important it is!).

    Maybe I'm being paranoid, but I'm unsure whether we need to wait a bit longer before approaching a broker because of our employment history. I don't really want to engage one if it will just waste their time.. I've had a reasonably well-paid full time job for 18 months, but in the decade or so before that I was a freelancer, with all the financial ups and downs that comes with being a sole trader. My wife, on the other hand, had consistent full time employment up until about 12 months ago. She now works on a contract-by-contract basis, though she's managed to have consistent work since making the switch.

    In the experience of the members here, would a lender probably want to see a more consistent and stable employment history before taking us seriously? Should we wait another 12 months? Or would the fact that we've got the equity and a good credit history be sufficient?

    Many thanks in advance for any thoughts/advice!
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Depending on your strategy and how disciplined you are with money it may be a better idea to not pay down your mortgage.

    A common strategy amongst investors is to pay interest only and accumulate the principle payments in an offset to use for subsequent investments.

    Additionally, if you want to convert your current owner occupied debt into an investment one day then you will be able to claim a higher amount for negative gearing purposes.

    Re the employment - best to have a broker review your financials as it doesn't sound overly restrictive. There may be a few ways of tackling the proof and use of income.

    More specifically, whats your line of work? When did you register for an ABN and GST? How many years financials do you have?
     
  3. LifesGood

    LifesGood Home Building & Development Consultant Business Member

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    It is going to be judged on your entire scenario but with relation to your employment history, if it has always been the same industry then I am sure there wouldn't be an issue.

    Plus, any good broker will be happy to assess your financial situation. At very least, they can offer help on how to get yourself into the best position possible.

    Good luck!
     
  4. Glip

    Glip Member

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    Thanks Shahin, yes understood re IO payments in an offset account. Though when our loan was established we were so naive that we didn't set this up; just a straight-forward I/P loan with no offset, that we're now less than 10k away from paying down. Worth re-financing at this stage do you think?

    I work in radio, and my wife is in publishing. And I'd say I've got financials (and an ABN) going back 10 years +. But yes, I should really just stop hesitating and talk to a broker!
     
  5. Glip

    Glip Member

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    Hi. Interesting re my employment being in the same industry, which it is. I guess that does show consistency.. cheers!
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Equity releases go off the purpose so its too late to change the fact that the loan has been paid down.

    I would still recommend planning ahead and part of that plan would be to pull out as much equity as you can.

    Re the employment - the actual terms of your self employment is fine but its all going to come down to how much income you have been showing over the past 2 years.
     
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  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Might as well pay the loan off if just $10k is left. Once paid off then you can set up a new loan to use as deposits, and this loan can be secured by the main residence. You should make this loan IO and make sure you have an offset account.

    Then buy the new property and secure it with a IO loan at 80% of the value or purchase price. Consider carefully which name to have this in.

    If you have been full time employee for 18 months then you should not have a problem getting finance - unless you have adverse credit history.
     
  8. Glip

    Glip Member

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    Thanks Terry. Just read your 'Ideal Loan Structure' post, too. Very helpful!
     
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