Strange bank logic

Just got off the phone with a lender (which bank you may ask?), they're about to give the final approval on a loan that's extremely tight in the servicing calculations.

We negotiated a fairly good discount on this application, but in a twist of irony, I was told that due to the lower actual interest rate, the negative gearing addback is now a lower amount, thus the borrower can't afford quite as much.

I'm checking my calendar to verify that it's not April 1. It appears that a more affordable home loan reduces your borrowing capacity...

 

It all about the negative gearing benefits. Isnt that why we all buy property?

 

You have to laugh sometimes, or you'll go mad really.
Some of the logic I don't understand.

 

Forget the discount, negotiate on settlement?

 

@Peter_Tersteeg - Servicing especially with the big banks is become a joke sometimes...they asking a lot more questions and def combing the file multiple times..

The good old days of tick and flick. Now it's like " ok where can i possibly have an issue with this file"

 

Not which bank are having an issue pigeonholeing me - too many income streams but nether self employed nor employee

 

Ah yes.

Earlier this year, I spoke to my MB about the possibility of restructuring our loans in the hope of possibly achieving some reduced fees, a lesser interest rate etc across the whole bunch - due to the workshop going so badly....try to free up some cashflow somehow.

I might add that we were still servicing our loans, but could not reduce debt and struggled from month to month...

We met with him, and after a few hours and a few wines decided that a trimming of interest in the 5 figures was possible.

That is a significant amount of improvement given our overall situation...$10k+ decrease in costs.

So, fast forward a month or so after I've gotten the accountant to sign off on interim figures for the business etc,

He (the MB) then has an informal chat with our Personal Account Manager before official presentation to the Bank for suggested changes to loan structures, and the result is; "Don't even consider presenting any figures to the Bank".

WTF? I'm going to be LESS of a risk, and they won't do it??

Frackwits; so now; we will be debt free, and the Which Bank will be receiving approx ZERO income from us - a drop of $60k+ per year.

Small pickings for them, of course, but it's still someone's wage flown out the window.

 

Having the same issue not to mention whether they work out whether I part time or full time.

 

In terms of the policy, the math and how this washes through the servicing calculator I certainly understand the logic. I put it in the same basket as multiple properties creates the risk of rental reliance. I joked with the assessor that this is a great example of irony, he agreed. Personally I think if they're going to use an assessment rate, that same rate should also apply to the gearing calculations.

Best time to get a discount is when you're applying. Once you've settled (and in this case paid LMI), they don't negotiate so well. I definitely didn't want to give up this result, 1.15% on a 90% investment loan. Not bad in the current market.

 

Can people really survive on incomes like that?

 

Bank logic leads to grey hairs.

Is it an IO loan? Reduce the IO period for a year and see if it flies.

 

Is that because negative gearing is assessed at the actual rate and the interest rate for repayments is 7.xx for assessment across the board regardless of the actual rate?

 

That's exactly why. The bank has a minimum assessment rate for existing and proposed debt repayments, but they assess negative gearing at the actual rate. If they were consistent, they'd assess the negative gearing at the assessment rate.

Already P&I, that one already came up. The loan was approved an hour after the conversation with the assessor.

I hear they're hiring air traffic controllers. The pay's good and it's probably less stressful than this gig.

 

That is very silly, probably highlights the benefits of working on a sensitivity margin above the interest rate paid than a floor rate. To tighten, increase the margin.

Would likely get around stupid quirks like this one.

I feel as though brokers could come up with threads like this most days now! There have been some strange ones of late.

 

I went to an interview at Suncorp last week for the fun of it. Our IO period expires in a couple of weeks and the local home loans boy wanted to offer us a new deal.
I told him I was only there to see the look on his face when his computer told him that we cant afford the loan we already have with them, let alone the other $950k mortgages with two other lenders.

He didn't believe me.

20 minutes later he assured me that we are -$8000 a month on serviceability. I then reminded him that his bank doesn't want our $1.2m business, stood up, went to shake his hand and leave, but he wanted to chat on about coming back to see them when we are in a better position.

I thought 73% lvr is a good position.

 

Nope. Didn't you know; everyone is on six figures now.

 

Geez @Bayview I'm going for 7 digits and struggling.

 

Don't you hate it when the only decent boat for sale is $500k?

 

Yeah. It's a hard decision feed the family or upgrade the weekend runabout.

 

Known about this since the rate changes, funny that the increased rate for IHL increasing the interest repayment actually increased the servicing for investors allowing them to borrow more. Surprised it's only come up for discussion now or that you weren't over this earlier.