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Renovate then pay on sale finance?

Discussion in 'Property Finance' started by NewySteve, 13th Aug, 2015.

  1. NewySteve

    NewySteve Member

    Joined:
    13th Aug, 2015
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    Location:
    Newcastle
    Hi guys - first post on the new forum!

    Cut a long story short - have 5 properties with one in SMSF in our portfolio. We have one older house that was inherited that we have decided to sell during the summer - current value $360,000 with a $100,000 loan on it now. We reckon with some sensible work we can get the value up over $450,000 for sale and get rid of it quickly (it's close to the beach etc). My other properties are at 80% LVR or near enough.

    Problem - due to doing that silly thing of leaving a PAYG job and starting a business less than two years ago, bank has already knocked back a request to borrow the funds to renovate the property, citing serviceability, even though the rent is $360pw now.

    We simply want to borrow some funds, renovate, sell and clear the debts, credit cards and another mortgage - common sense I thought.

    I have seen one company advertise renovate then pay on sale which seems the perfect solution, however they only operate in Melbourne. Does anyone know of similar schemes or of a finance strategy to get this reno happening? Thanks in advance.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Perth WA
    How long have you had an abn? There might be options for you with other lenders.
     
  3. NewySteve

    NewySteve Member

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    Had the ABN for two years now, just about to prepare next ITR which would be the second since starting business. Business hasn't been great, but I expect to pay tax this year which is a good thing in a way!
     
  4. tobe

    tobe Well-Known Member

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    You might qualify for a low doc loan. Make sure you let the broker know your intentions to sell, their comm gets clawed back of you sell within 2 years. If possible you should secure it against another property, so on the sale you still have access to the loan for the next purchase.
     
  5. NewySteve

    NewySteve Member

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    Didn't know about that 2 year sale clawback with brokers. Just some further info that will help - I own the house 50/50 with my brother - he took out the $100,000 loan for his own renovations etc. I am guarantor, the simple thing seemed to be to go for a 2nd mortgage of about $70,000 for me to get the work done, clear a personal loan and get the property on the market. Once sold all those debts cleared and then I can renovate one of my other properties.

    CBA who have the original $100,000 loan said no, entirely due to servicibility - this despite having combined PAYG income of my brother, wife and my wife as well. Also told us that because of my status they could only lend 48% LVR, so totally stumped. Pretty maxed out with other loans so loathe to borrow against them short of getting up to date valuations. Another option would be to completely refinance the $170,000 total with another lender and pay out on sale?

    I know you can look at caveat or private loans but would rather avoid the expense - it just seems a simple concept to borrow money that is guaranteed to be repaid within 6 months. Frustrating.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Perth WA
    I'd suggest getting a broker to look at your full circumstances and see what they can do. They may charge an upfront fee due to the clawback, but if you're happy to pay they'll at least be able to give you a second opinion.
     
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    its Aug 2015

    if your business has decent real taxable income for 2015 perhaps find a lender that will work off the one year financials and borrow against those.

    ta
    rolf
     
  8. Richard Taylor

    Richard Taylor Mortgage Broker & Brisbane Buyers Agent

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    20th Jun, 2015
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    Location:
    Brisbane
    Why not work off a coded no doc loan with capitalised interest.

    Sure the interest might cost you a few dollars but it is all relative compared to how much you are making from the sale.