Utilising Pepper/Liberty type lender to expand portfolio

Hi all,

I am just hoping to ascertain whether we would have enough borrowing capacity for a purchase my wife and I are considering. We suspect we would have to go with a 3rd tier lender such as Pepper or Liberty given the current tight lending conditions. We have never used Pepper or Liberty before, so I want to check whether our required lending is remotely feasible before going through the process of engaging a broker.

We are both in our early 30's and have one child who is under 5. I have outlined our current financial situation below:

• We are looking to move to be closer to our aging families and are looking to spend about $600k - $700k on a PPOR.
• We currently have a household gross income of $310k ($96k me, $116k wife, $98k gross rent).
• We have enough cash in the bank for at least a 20% deposit.
  
• Our total combined expenses are approximately $4,900/month.
• We currently own three capital city IP's with a total current valuation of $1.93million.
• We currently have approximately $1.38million of debt which is all on P&I. All debt is with a major bank.

Ultimately looking to hold onto our 3 IP's while allowing us to buy closer to our families. We will likely refinance in the future so can tolerate a higher interest rate for now if it gets us the lending.

Your insight and assistance is much appreciated.

 

Do it. Better to make money from these lenders even if less than mainstreams than it is to not be making any additional money.

 

Engage a broker or banker and get them to run the numbers and see if there are any ways to implement any changes to the existing structure in order to maximise your borrowing capacity with the mainstream lenders, i.e. reducing credit card limits, resetting loan terms, etc.

Liberty and co are ok lenders but you want to ensure that all possible avenues have been exhausted before using them. Also have an exist strategy for the medium term, this may be refinancing to a mainstream lender later under their 1% buffer rule, using a lender like Granite, increased income, etc.

 

Could try firstmac before going to Pepper and liberty

3rd tiers generally only works when existing loans are structured correctly, thus those lenders may not even be suitable for you.

 

Backwards thinking, engage a good Broker to show you your options, you're in the ballpark based on figures provided, you probably don't need to go to Pepper or Liberty either.
A restructure of the existing debts (refi back to 30 year terms and potentially reduced LVR's) will assist your borrowing capacity further.
Having all lending with one lender is also a risk that should be avoided where possible, hopefully they're not cross secured.
A good Broker on your team will assist you now and with regards to your future plans.

 

I think this is achieveable at high level, may need to work with a non-bank to begin with.

Map out how you could refinance back to mainstream under current conditions and what rate environment you need to get it back there too. This bit should help you plan out period ahead and pathway back.

Overall ~$215k salary household income with a ~$550k OO debt and 3 IPs with ~$500k+ wealth in them is a good position to be in and in the longer term 'GREEN' category of financial health.

TODAYs lending environment is nasty - particularly for investors. But its quite abnormal - it hasnt been this bad, or even close to this bad, for 10+ years. The reason why i say this is you may be in 'orange' zone in calculator land, but thats not really a reality of your financial health - its just 10% assessment rates on INV debt being thrown about at the moment.

 

I feel like I've spoken about this strategy a fair bit in recent times with light to possible future changes which may enhance servicing.

The most important part of this more aggressive/advanced strategy is to ensure that you have a structured exit plan out of these lenders and back into the mainstream.

Make sure you work with a good broker who knows the tips and tricks involved - any of the above are at the top of the game!

 

THIS.

Unfortunately there's still a bit of stigma with tier-3 lenders, when in reality they're a blessing (if used correctly). In my particular case, they were the difference between getting all the way up to 6 IPs or stopping at 3, and I see the same thing happen all the time with my clients.

Just make sure you engage a good broker. Lots of legends have posted above, just go with any of them and you'll be in good hands.

 

I have loans with Pepper and Liberty, they were great when I needed to refinance as they were generous with their loans. I'm a few years in with them now and can honestly say it's been an OK experience. I find Pepper more challenging than Liberty in terms of customer service and willing to budge on interest rates.