Trouble with re-financing to 80%LVR

Hi there,

I'm in the process of refinancing my PPOR to release equity for a deposit for either a commercial or residential IP and I've hit some snags.

Basically, I've been told that many banks now require some kind of proof of where the funds are going before releasing a significant chunk of equity that it's not enough to say that the funds are for a future IP.

What kind of proof do they want?

Are there any bank or non-bank lenders that are still happy to lend up to 80% LVR without such hassles?

Cheers,
Z.

 

Try Pepper....although they are non deposit taking institution...they have great rates and are very flexible.

Most brokers do not understand their product base well. They now also offer competitive fixed rates..as they have partnered with Adelaide bank. I have used them and they are far superior to banks like CBA and ANZ.

 

The problem is you don't really know what they're asking for. This is one of those times where a broker can really help. We rarely get this problem because we anticipate it and can easily answer the question in a suitable format before the lender even asks.

 

Yes there are plenty of options out there. speak to a broker.

 

Thanks mate, I'll check them out.

 

Plenty of better options out there at that LVR, even with proper banks, Pepper would be my last resort if I was you.
The fact they partnered with Adelaide Bank (who require evidence of funds to be released for anything more that $50K) is more of a concern than a positive thing IMO
Get a decent broker to show you what options you have.

 

While Pepper do have a great investment product for investors & homebuyers with a lot of other properties/debts - they are generally not the best first choice for someone portfolio building in the early stages.

Plenty of lenders don't need to evidence cash out purpose sub 80 - much of this is about presentation to credit and packaging a file correctly. Its an area where the banks need to ask why, but many are comfortable not having the exact details and control exactly where it goes.

 

Good for investors nearing the end of the serviceability ceiling.

This is one of the many unknown benefits of a great broker, we will know close to 99% of the time, which lender and the presentation of the scenario, in bank speak, that it a deal and will get an approvalal, always a 1% unknown factor in property finance you cant predict which is usually not insurmountable.

I hope that is via a broker and not DIY?

 

Yes but they are also suitable in instances where you they value for end of construction.

In my view end of road lenders are Latrobe...Liberty...Bluestone. Pepper to me is pretty much a bank these days. A lot of people will debate this.

In my specific instance I used Pepper for the following:

1. Loan 1 - land 140k....build 215k. They lent me the entire amount as the build was valued at 460k. I paid 4% I/O...but have since gone I/O for 4 more years and currently on 3.49% I/O on a 30 year term.

2. Loan 2 - land 155k....build 240k. They lent me the entire amount as the build was valued at 540k. I paid 3.9% I/O...but have since gone I/O for 4 more years and currently on 3.51% I/O on a 30 year term.

I don't regret this as these properties are worth 680-700k and 750-800k respectively. I bought the land off the plan in mid 2017...and they completed construction in April 2020.

So the moral of the story is know your risk profile...and weigh the reward vs risk and then make a decision based on your risk profile.

My friend also did this...she could not borrow with Pepper/RAMs but went ahead with Latrobe. Land was 132k.....build 200k....end value now is 600k. She did not baulk at the 6.99% I/O rate during construction. She is still with Latrobe..and they have offered here 3.79% PI....which some people are paying on IPs for CBA. Again risk vs return. In her case an easy 268k in equity.....which is much more than an existing property she bought in Brisbane with St George.

 

She understood the bigger picture and realized the opportunity costs were more important than the cheap rates.

 

Absolutely.....no point having a client who is expecting cheap rates when they have not options and does not understand risk vs return!

The fact you are raising this automatically puts you in the top 1% of brokers. Most will just poo poo Latrobe....Pepper...because they are transactional. We also used a fantastic broker...who listened challenged and worked with us.

 

I move and deal a lot with the "non-conforming lenders" who are moving into prime space at a rapid rate and becoming more bank-like, much more so than the Big 4 who have their place, and I'm not a big fan in general for various reasons.

 

He must have been good as I thought you are a broker?

 

The people who are not servicing with majors should have an initial discussion with you quick smart!

 

Nope...even my broker thought I was one....

But hey it helps...if you heard how many times I could not get 100% finance except stamps/legals and if I got paid $1000 in eahc instance.....I would be up 100k.

 

Thank you for your confidence and I concur wholeheartedly

I have many property investors on my books who have hit the serviceability cieling and if they want to keep growing then the alternative and more flexible lenders are the way to go, cheers.

 

That's great but they are also not the only lender that will allow this either.
Pepper have their place for sure, use them a fair bit, but the OP is asking about releasing equity against his PPOR up to 80% LVR cash out, and Pepper are more expensive compared to other options available to the OP (no I'm not talking about the big 4) this thread's gone off the topic a bit.

 

I think we are on topic. The OP asked options as he was not servicing with the majors.

Experiences were shared and Pepper was mentioned as an option with 80% refinance on existing resi. I know a few people who have got 2.84% variable on a refi with pull out of equity based on the valuation.

I shared my experience with Pepper...as not many people here use them. To date it has been fantastic.

 

Nah see that's where you're wrong, OP never said it was a servicing issue, they said they want a lender that can provide cash out upt ot 80% LVR without needing evidence of funds purpose.
So you started off topic
You also failed to mentioned one of many great things about Pepper and their no LMI/LPF to 85% - when you compare fees and rates at 80% Pepper isn't near the top of my list of recommendations for simple scenarios. Anyway let's get back on topic.

 

No. The OP asked questions because the (unspecified) lender was asking for the purpose of cash out and the OP was unable to frame an answer in a manner that was acceptable to the lender. No mention of servicing at all.

Your comments are effectively saying just go straight to the non-conforming lenders. They're getting cheap and they'll do anything. Stated with no actual understanding of the OPs circumstances at all.

Whilst non-conforming lenders are getting cheaper, broadly speaking they're still a very, very long way off the pricing of other more mainstream lenders. The OP may also run into the same original problem as Pepper won't give you a massive amount of cash out without some sort of reasonable explaination as to its purpose. There's plenty of reasons to use non-conforming lenders in the right circumstances and plenty of reasons not to use them.

The solution to the original problem is likely quite simple, but more detail is needed to provide it.