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Serviceability

Discussion in 'Property Finance' started by Balman, 23rd Sep, 2015.

  1. Balman

    Balman Well-Known Member

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    hello

    Wondering if one could advice on the bank with the best serviceability calculators . my situation is such that i have numerous loans at 80% and have asked my bank to increase these to 90%without lmi (Professional package). However, the bank has come back(through my broker) with an answer that this will not be possible until an offer is accepted on my next purchase and even then it will be subject to serviceability.
    My dilemma is that to purchase the next property (deposit) i will need the funds from the cash out of the existing properties . So i don t know how up to how much i can buy an other property until then.
    Any advice?

    Thanks
     
  2. euro73

    euro73 Well-Known Member Business Member

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    There are many brokers on here - PM one of them :)

    In WA Colin or Jess can assist you.
     
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  3. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Out of the majors - NAB has the best servicing.

    Out of the second tier lenders - its probably St George

    Out of the third tiers lenders its the likes of Firstmac followed by Homeloans Ltd and a string of other lenders.

    The other issue is that some lenders don't have the LMI waiver based on your occupation @ 90% and others don't have strong cash out policy (like Firstmac).
     
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  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Which lender are you trying to get the pro-pack with? And are you accessing equity on all of them, or just one?
    Have they said they need to see end debt servicing on their calculator? If so, you'll be limited to whatever you service with them. If not, you can do servicing based on what the lender for the new property will lend you.
     
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  5. Redom

    Redom Mortgage Broker Business Member

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    It can be very tricky doing high LVR cash outs, there's a lot of uncertainty attached to the process now, so it will be about trying to manage some of that.

    From a lender perspective, a COS for your next property will assist. If you provide one and show you can service with them for your next loan, it may end up working out OK. If not, then perhaps lender choice may assist your chances here.

    Some lenders are better than others, some don't have explicit policies but soft rules. E.g. NAB will likely want evidence, ANZ may not (their assessors often just let it through), although their servicing calculator may hold you back.

    You'd also likely want to skip the insurer out of the process, adding another party adds more risk to an already difficult deal.

    IMO someone like ANZ are more likely to let this go through with less evidence required than others.

    Lenders with better servicing:
    1. NAB are the best of the larger banks.
    2. CBA are decent too.
    3. Westpac are pretty bad. ANZ haven't changed much but have remained conservative.
    4. Smaller funders like FirstMac, Homeloans, will give you more firepower in terms of borrowing power.

    Cheers,
    Redom
     
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  6. Balman

    Balman Well-Known Member

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    Its Westpac. Have a great rate with then 4.13% plus the 0.27% from the 25th. But its more about getting funds then rate at the moment with all the APRA stuff going on.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    AMP - 85% Cash Out without restriction - as long as you are using the PPOR as the security


    Then purchase using Firstmac and Homeloans, to 90%

    Means paying some LMI on the 85% refinance - but that's still better than being snookered by Westpac


    Your other alternative - get a few valuations done with other lenders - you may find that with a higher val than Westpac's, you can refinance AND pull cash out at 80% ...resolving the issue of LMI and resolving the issue of cash out

    Honestly - Westpac is now horrible for servicing . Anyone using Westpac to grow a portfolio needs to seriously consider doing what I've outlined above
     
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  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Has your broker run your servicing with them to see if you can service the top-ups as well as the new property - assuming you have a ball park purchase price?
    @euro73 AMP aren't interested in investment loans at the moment, so unless there's a PPOR it's not going to happen.

    And if everything is with Westpac I'd bet you fifty cents it's all crossed up too - easy to fix, but takes time. It might be worth getting the whole lot reviewed and looking at a few different professional/medico deals to make the deal work.
     
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  9. euro73

    euro73 Well-Known Member Business Member

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    AMP - 85% Cash Out without restriction - as long as you are using the PPOR as the security :)
     
  10. Balman

    Balman Well-Known Member

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    And if everything is with Westpac I'd bet you fifty cents it's all crossed up too - easy to fix, but takes time. It might be worth getting the whole lot reviewed and looking at a few different professional/medico deals to make the deal work.[/QUOTE]


    Hopefully not crossed as i have been very adamant with them that i don t want it cross colleteralised though both the broker and bank has been saying its a better proposition to cross
     
  11. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Haha - reading too fast, must have missed that bit of your post! :)

    @Balman If your broker is pushing for x-coll, that raises a lot of questions about their suitability in my opinion...investing in property is about risk management, and that shows they have no concept of it.
     
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  12. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    The changes have been more than policy changes and increased interest rates. Risk assessment has been hit, but the banks don't talk about this because it's such a grey area and changes from one loan application to the next.

    What we are seeing a lot of is lenders becoming more and more reluctant to give cash out above 80%. It can still be done, but often lenders will want direct control over that cash, hence the, "Show us a purchase contract", comment.

    Last time I looked (a few weeks ago), the ANZ was still a good lender to get cash out with.
     
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  13. Balman

    Balman Well-Known Member

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    Hi Peter, does that mean that want to cross coll hence want to link new purchases to cash out on existing props?
     
  14. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    No, it means they don't want to release cash without having direct control over what you use it for.

    They'll ask to see the purchase contract and then release the equity. They won't release the equity before they see a purchase contract.

    On the other hand, you probably don't want to enter into a contract until you've got the cash for a deposit.
     
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  15. Balman

    Balman Well-Known Member

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    Exactly my thoughts
     
  16. Fungus

    Fungus Well-Known Member

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    Is it really that bad an idea if it's first IP? Isn't it better to get the lenders with the bad servicing out of the way first when building a portfolio?
     
  17. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    No problem at first. When servicing gets tight you look to a different lender for further purchases.

    Then you want to access equity in the first IP because you've run out of money and that's where all the equity is (because it's the first one you bought). At this point you've got a problem because Westpac isn't going to give you the money.

    Hopefully you can refinance away from Westpac at that point, but that costs money and is time consuming. Wouldn't it be better to just start with the right lender from the beginning?

    Simply using a low servicing lender and working your way up isn't planning ahead.
     
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  18. euro73

    euro73 Well-Known Member Business Member

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    +1
     
  19. Redom

    Redom Mortgage Broker Business Member

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    As Peter mentioned, it needs a framework and strategy around it. No point going to ING early and needing to release equity at high LVRs. You'll risk snookering yourself and the costs can be high especially if your in LMI territory and releasing equity.

    Nowadays there isn't so much differential treatment of debt between many of the lenders (i.e. lenders treat debts with OFI's reasonably similar to their own debts). It really places greater importance on flexibility of policy (always important!).

    In terms of ordering, ands its relative importance, the next year with APRA i believe may involve some deck shuffling. If one APRA regulated lender has a better investment policy than its competitors, its quite likely that lender will get the business. However, they're capped by a very strict 10% rule that scares them. So effectively they get back into line very quick. It makes it quite difficult to say its best to leave NAB out till late with much certainty, competitive dynamics of lending policy (rather than price) suggests its a matter of time before they get too much business because of their relative policy advantage.

    Cheers,
    Redom
     
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  20. mcarthur

    mcarthur Well-Known Member

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    Sigh. Which is why I went with WBC at 90% + LMI, but before APRA changes.
    Sounds like equity release is slim in the >80% LVR term, and due to the LMI, refinancing out of WBC will be expensive.
    Shows that you just can't tell what's going to go on, which makes planning rather difficult!