short term Finance for OTP / bridging?

Anyone banking/ finance savvy? I've flipped properties in Sydney for 20 years and for 10 years flipped OTP.
I've now reached the point where noone will loan me any more money, and I've kept my most recent purchases and have a lot of equity. Over 5 million, with very small loan.

But no loan capacity. (not helped by the new laws tightening loans a few years ago). My broker is tired of me!! Husband and I both earn a lot too. But anyway, we've established noones loaning nothin to us!

What i'm wondering is: if I buy an OTP flat for 1.5 with a 10% deposit, then sell it in several years before it settles, or just after it settles, is there a banking product to bridge that period?

Like - what if it settled in July 2024, and I couldn;t get any finance, and I didn;t find a buyer until September? Is that me dishonouring the contract...would the devloper take the unit and refund me the 150k deposit? Just curious what would happen.

 

A short term funding solution could be private funding but do you have the cash to make up the difference between loan and purchase price? Because most private lenders will not give you a 90% LVR - more like 65%, some go to 80% but rate is super high.
Why can't you borrow if you only have a small loan and both of you earn lot's of money?

I think the second part to your question is more of a legal question than a banking/finance question
I'm not a legal expert but my understanding is if you don't settle when it's due, that's a breach of contract.
Good luck getting your 10% back from the developer, they typically have every right to keep it and re-sell the property - there could be potential for them to charge you more if they end up selling the property for less than the amount you originally agreed to buy it for - best to seek specific legal advice on that from your solicitor/conveyancer.

 

I don't know. My broker and a loan guy with CBA both said "no". Maybe our children? Then they also said if we earn 50k more we could get 500k loan apprvl - but we have that in cash so that seems silly. Possibly Sydney living costs are being overestimated for us? I have no idea.

 

Recommend you get clarity on what exactly it is that's stopping you from being able borrow, that would be my first step.
Use a broker don't go direct to bank, you might fail with CBA but pass with another lender.

The statement 'you need to earn an extra $50K to be able to borrow $500K' is confusing and sounds like you might have a lot of debt relative to your income. When you say that you and your husband 'earn a lot' what does that mean? more than $200K p.a. each?
'Small existing loan amount' is how much $?

 

No they would keep the deposit and may sue for a loss if they cant sell for the same price. Hey, you have assets and make a ideal candidate to sue. Just because your property assets arent liquid doesnt provide a cent of protection. If they sniff that out they will pursue it. Breach of contract. Surely in all these years you know a contract is not a choice. Its a binding and enforceable commitment.

Have you considered selling anything ?...yeah I know you will want to avoid tax. Thats bad luck.

There are lenders of last resort (LLOR) out there but you would be paying credit card rates (not 8.5% low rate cards either) and major fees for a short term loan. Brokers are of little help with short term loans as they wont get paid if you take on a loan that is promptly paid out. They would face clawback. They may consider a upfront fee.

A cash rich investor could be a white knight and offer finance but they will want a mortgage and push all costs onto you. These costs will be less than losing $150K of course. Other cases I have seen are rates in the 20% range. BUT short term. Some solicitors may assist with first mortgage loans on these sorts of terms. But will be limited in the LVR as they want absolute assurance they can sell it if you default and cant sell. That can be a danger issue too since they may exercise a mortgage early and throw you under a bus. Default rates may be 30% and be a incentive to them. LLOR are finance sharks.

 

thank you this is all very valuable advice and helpful insights. We are in a great positon but I am just looking for creative ways to invest - I think overextending on $1 mill+ OTP apartments is probably not the best way to go....I cannot replicate what I've done in the past.
I'll stick to situations where I have the cash to get out. Thanks.

 

You could potentially get private funding pretty easily if you had an exit plan and the purchaser was a company.

 

I have seen issues where lender will lend to a company which then needs to onlends through a legally drafted loan agreement to the buyer. All to bypass consumer credit laws. A issue a broker better understands than me.

 

That should be avoided for tax and legal reasons. Broker involved in such risks losing their licence and being fined

 

A Private lender with an ACL could also assist on a Coded basis under NCCP.

 

I am aware of plenty of non-bank lenders out there who would be willing to give you a bridging loan, some of which are Chinese private credit funds chasing good return overseas. The interest rate, for an unsecured loan, could be over 10%, so not sure if this is a viable option.

 

Can get private lending based in Australia for 8.5% p.a.
There is a gap in the market these private lenders fill, not sure if it's viable for the OP's situation.

 

or a lot less depending on the term of the facility required.

 

Well I should clarify the rate I mentioned is per annum, charged monthly, (terms of 1 month up to 2 years) if you can get *short term* private funding for less than 1% per month that's good IME, pays to check other fees and charges the lender may add on top too.

 

Yes exactly. Most Private lenders quote Non Coded loans as "an interest rate per month" whilst they quote Coded loan as "interest rate per annum".

Our 2nd mortgage rates start at less than 1% per month on both Coded or Non Coded loans.

 

Can you do better than 0.70% per month?

 

How long is a piece of string.

Did one today for 4.95% per annum borrower needed it for 3 weeks.

Depends on a 101 factors as you would be aware.

Happy to quote for you if you want to shoot me the scenario.

By the way we are the lender.