Refinance challenge

My daughter (in WA) currently has a BankWest Loan for $462k which included a construction loan for renovations which were 50% carried out by her partner, a carpenter. The renovations are pretty much completed and the house values conservatively at $670-$690k. They are looking to refinance for $525k to complete some additional work on their house. They have no other debts.

Their first child was born last year, so her income as a permanent leading teacher in the WA Dept of Ed has dropped from around $100k to partime $30k. She has a guaranteed position back in her old school at any time, and will be back fulltime Jan 2020. Her partners' income was similarly impacted last 18 months as he was workin on their house. Prior to that his previous tax return income levels were also 100K. he is self-employed. So you can see where this is heading.

In the medium to long term they are incredibly well set, but currently banks are runnind scared and dare I say completely family unfriendly. They are in the ludicrous position of being frugal in their finanical managment, but because of the manner in which they did their renovations and family planning, the Big Four are quick to lump them into the 'why bother' category. So far they have tried BankWest, NAB,BoQ and Westpac which I thought given all the chatter their former CEO made about gender equality, migth have had a more serious look at their situation.

With all due respect, I don't think they should have to go to lenders like Liberty because their situation is comparatively very conservative.

I'd really appreciate any advice on what their next steps should be.

Bruce

 

Get them to speak to a broker - Jess and Colin are in WA and can assist.

There could be several options - lo doc lending or using a lender that requires one years financials (Westpac, ANZ, St George, etc).

Its really going to come down to the numbers which is why you need to engage a broker and get them to run different scenarios and see what works and how to best structure the application.

I don't think they need to go with Liberty and Liberty works more for client with heavy existing IO debt and need a lender that takes actuals.

 

Congratulations on your grand daughter and your children's new home. It sounds like lenders are not wanting to extend finance with a drop in income. I'm not convinced this has anything to do with gender. The reality is that your daughter and son in law, particularly with the costs of raising a child, may find themselves better off if they save for further renovations. Other than that, I guess they need to engage a broker.

 

I strongly suggest not going direct to any more lenders - they may have trashed their credit file to the point where it's going to add another unnecessary hurdle to their application. Low doc sounds like the go in this case, but it will depend on Hubby's income and potential add-backs.

Is your daughter permanent part time, or doing relief?

 

Best to avoid more shopping around and approach a decent broker - some great ones have already responded above.

Some of the lenders they've already approached are usually quite good with mat leave - however, I think it's the return to work date of 2020 that may have scared them off. If the return to work date was within 12 months and there's no LMI involved then it shouldn't be too difficult.

Cheers

Jamie

 

Relief Jess.

 

They should have seen a broker who has done mat leave deals first up. Son in law would be needing 2017 tax returns now so below may not work but worth considering.

@brucead Could you lend them (short term) the equivalent of their repayments shortfall? ie if the required loan is failing by $3000 / month in the banks calcs and she is going back in Jan 2020 then the shortfall is 21 months x $3000 = $63,000.

If they have that in the bank and apply for a loan utlilising the mat leave policy it may work. Then once approved they give your funds back.

You would want comfort of course that they could really meet the higher repayments on current income levels as this may be beyond their capacity.

 

Lending on future income when higher than current income is lower virtually unheard off.... as they need to service the loan now, not just in the future. There really are no mitigants to support anything other.

Once concern reading it is if they have $60k in renos to go, then valuations are liklely to be valued downward accordingly and take this into LMI territory (additional costs) - and if he is the one doing the work, then the foreseability of his income decreasing further I expect to be a heightened concern, as well as the owner builder element.

If they can't source money from the Bank of Mum and Dad...then really they would just need to save...

 

Its called alternative servicing and is common for mat leave scenarios and some bridging finance scenarios.

 

thanx Marty appreciate the advice

 

Thanx for the feedback from everyone, much appreciated