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So I just finished talking to NAB for 2 hours ...

Discussion in 'Property Finance' started by Dudechi, 14th Dec, 2015.

  1. Dudechi

    Dudechi Member

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    Hi everyone,

    I am new to this so I hope you all can help and lead me in the right direction.

    I currently own an investment property - I bought it 2 years ago for 440 K , now its worth around 500-520 K
    it is negatively geared but after tax, it is positive.
    I am looking to buy a second investment property.
    I had a meeting with NAB who I have my loan with and my reason for the meeting today was to get a pre-approval, to see how much I can spend on the next one.

    I have 115K saved
    I am on around 60K a year but it ends up being 80 K due to bonuses and travel allowances.
    I live with my parents so I don't have many expenses.

    After 2 hours, the bank says "we can only loan you 450K"

    Basically they said that there are stricter lending criterias now due to APRA or something. They also said that even though the loan I have is I/O and so will be the next one, they still look at it as if it is a PI and reckon that more than 450K will make it hard for me to afford repayments.

    I am so confused, I thought I did a good job saving up that money in 2 years.
    What should I do, should I access my equity ? What should be my next step. I would was hoping to buy my next investment around the 550K mark.

    Give me your advise please

    Thank you in advance.
     
  2. tobe

    tobe Well-Known Member

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    What you have been told is true, the lending environment has changed over the past 6 months or so. $450k is pretty good for what you have said about your finances, however there may be another lender who is slightly more generous. Contact a broker and have them run your numbers through a couple of lender calculators and see if you can get closer to $550k..
     
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  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Did they include the potential rental income in the servicing? As Tobe says, it would be worth seeing a broker as there 'may' be more generous lenders. That said, NAB is one of the more generous lenders.

    Importantly I would not go direct to NAB for your loan as they will structure it incorrectly, guaranteed.
    They will take both properties as security for your loans which can cause huge problems for you down the track.
     
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  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Agree with Tobe - get a second opinion.

    You could probably borrow more with a different lender - even Nab owned Choicelend will probably throw more cash at you.

    On another note - look at your own household budget and work out what YOU can afford rather than relying on the bank to suggest what they can provide.

    Cheers

    Jamie
     
  5. larrylarry

    larrylarry Well-Known Member

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    Five words. Speak to a broker now.
     
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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    NAB servicing used to be one of the better and still is.

    where they may be giving you a hard time is on the allowance side of things.

    There are likely other options

    2 hours is a looooooooooong time for a loan chat with a bank................

    ta
    rolf
     
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  7. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Mortgagee Broker time.
     
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  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I agree with Rolf, the travel allowances probably aren't being accepted (their purpose is to cover the extra costs incurred whilst travelling, not to service debt). Bonus' are at the discretion of the employer so the NAB (and others) are limiting those to about 80% of what you actually get.

    They've also made changes to their living expenses calculations which will have a significant effect on borrowing capacity. The scenario I worked through on the weekend had living expenses for a client increase by 30% over what used to be acceptable.

    I've already had discussions with the NAB about the flaws in their new calculator which became effective today, but I doubt my comments will have any traction. Despite all this, the NAB are still one of the more generous lenders when you've already got other debts.

    Speaking with a broker might find alternatives, but the reality is today people simply can't borrow as much as they could 6 months ago. The reality is that you simply may have to revise your price point.
     
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  9. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    A good broker is a wonderful thing (and hard to come by)

    I have been trying to refinance since Feb and have been through 2 brokers a bank and a credit union.

    I found one a broker just prior to joining PC a weeks or so ago that looks promosing. She has run my figures and believes she can get me around $600k on a rent of $650 p.w. The last Credit Union I dealt with wouldn't give me another cent and the bank was only willing to lend another $30k (not taking into account the $650 rent of course)
     
  10. Dudechi

    Dudechi Member

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    Thanks for the reply fellow investors,

    A good broker is something I need to do. One of my questions is, lets say the IP I already have comes back with valuation of 520 K for example. How can I utilise that ? I've read about Cross something in regards to using that equity...What is the best way to use that equity to finance the next investment ?

    Thank you
     
  11. larrylarry

    larrylarry Well-Known Member

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    You really need to speak to a broker quick smart. The lending policies keep changing and you need a broker who knows what he or she is doing and not cross collateralise. Do a search on this forum. Like @Peter_Tersteeg said you can't borrow as much after APRA changes and it will be even more difficult as time passes. So don't muck around and speak to a broker ASAP.
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    What ever you do DON'T cross anything to access that equity! You'll hear it from people who don't know what they don't know. There's much better ways to structure the loan.

    The best thing to do is get a valuation done - from various lenders if necessary - and create a new loan or Line of Credit which you can then use to invest further, either as a deposit for the next IP or to invest in shares, debt recycle or whatever your meeting with your broker determines is the best way forward.

    The main thing to remember is to not just make your current loan bigger, you need to have separate splits for each purpose or you risk stuffing up your tax deductions.
     
  13. dabbler

    dabbler Well-Known Member

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    Yes, that APRA or something is what we all have to deal with......even people I know not into investing been talking about APRA
     
  14. JacM

    JacM VIC Buyer's Agent Business Member

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    Do not try to sort out a new loan with NAB by yourself. Their processes are presently a disaster and things run insanely overtime which is bad when you are under contract to buy a property. If you must go with NAB, do it thru a broker as it will then be thru broker channel.
     
  15. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Don't. Please don't cross-collateralise your properties.

    As everyone has unanimously said, talk to a broker–a bunch of great ones are on Property Chat can run through your options based on your exact circumstances, risk profile, goals etc–but essentially this would make sense given the information you've supplied:

    • Top up the existing loan or set up LOC with NAB e.g. to 80% OR refinance the existing loan to a new lender e.g. to 85%. This may come down to your current loan balance, whether you paid LMI on the original loan etc.
    • As Jess mentions, the new amount should be a new loan split to keep things clean for tax.
    • Use some of these new funds as the deposit for an additional purchase, and make the purchase, probably through a different lender to the one you've just topped up with.
     
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  16. 3am

    3am Active Member

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    Whats the hurry if you are going to buy. Wait a bit you might get what you want for the price u can afford now.

    Go to another NAB branch and talk to another manager. I went to two Comm bank manager both told me different stories. First one was very generous, but i doubt him i went to another one he was very strict for fear of losing his job.

    I went to another bank and told he could structure the loan to meet my needs. Now i have solved my problem ... Yet to confirm this in a few months time.
     
  17. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    3am... simply go to a broker. Going directly to banks may not be in your interests.

    Also its not a bad idea for Dudechi to have his finance ready for the next one. You never know when or where you might find the deal you want to pounce on...
     
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  18. THX

    THX Well-Known Member

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    Talk to a broker. It's really that simple, because there's one thing a broker will do that even if you ignore all the benefits of their experience, advice and nous is the work. They do the work for you, so let them :D
    Plenty of great ones here too to boot. I won't recommend one (as for some reason none of them will pay me)
     
  19. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I would not trust a bank to structure a loan to your needs - they tend to structure them to their own needs.

    Also, they will have no idea about the tax implications so best to use an investment savvy broker. There are heaps of Sydney based ones on the forum.
     
  20. larrylarry

    larrylarry Well-Known Member

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    i think the responses re seeing a broker is overwhelming. If you have the time, knowledge and experience, you can go get loans without a broker but the most important thing I want with an experienced broker is his or her ability to help me access as much finance as possible (subject to lending policies) with the view that I want to expand my portfolio. Their relationships with banks cannot be underestimated also. If your broker is a proven property investor, he or she would be your asset.