Hi everyone, wonder if someone can help me here.
My wife and I are trying to get pre-approval for a loan for investment property. We haven’t chosen the property yet but it will be somewhere in Ipswich west of Brisbane. We want 90% LVR but almost everyone has told us this is out of the question because although I have a very large income, it is all derived from the UK – I do IT consultancy work over the internet for a company in the UK, and get paid in UK pounds into my UK limited company’s UK bank account. I pay personal and company tax in the UK and although I live in Brisbane again now, have not submitted Aus tax returns since I first left here for the UK 7 years ago.
Anyway, HSBC gave us pre-approval but only up to 70% LVR for investment (80% for owner occupied). But in searching for 90% LVR for investment, almost everyone said the Mortgage Insurers wouldn’t touch it. Except Nationwide Mortgage, who insisted they had ‘verbal approval’ from both their lenders and the Mortgage Insurers, and that we should fill in the application and send it to them with the relevant tax returns, etc. So we did and they rang to say it had been ‘conditionally’ approved. I was told ‘conditionally’ means subject to the valuation of the property, and a letter confirming same would be sent. However when I receive this letter today, it is not a formal pre-approval at all, but in fact says it is an ‘indicative approval letter’ and that our loan application has been “approved in principle, however this is subject to any special conditions, satisfactory valuation of the property/ies to be mortgaged, final acceptance by the lender’s mortgage insurer, you signing loan and mortgage documentation, and providing other related documents (if necessary)”. There is no mention anywhere of the 90% LVR, and it then goes on to say “If you wish to proceed with the loan, please sign the Acceptance Letter as appropriate and return it to us within 7 days together with a credit card authority or cheque for $200 payable to Nationwide Mortgage Co, so that we may order and pay for the valuation report.”
All of which, to me, adds up to the fact that this letter is little more than advertising, and if we do proceed it will cost us $200 to find out that the Lender’s Mortgage Insurers reject it, as everyone else said they would. Is this too cynical? If I press them for a formal pre-approval for 60 days like HSBC gave us, but with 90% LVR, is there any chance I’ll get it?
BTW, I clicked on the little ‘Need Finance’ icon on this site and the company that got back to us was one of those who said the LMIers would not touch us because of the ‘overseas’ nature of my income. We’ve also talked to a number of mortgage brokers and none of them know what to do with our situation, we eventually go in the too hard basket and they stop getting back to us.
Any help any of you could offer would be much appreciated.
Thanks!!
Tony
They should be able to give you a pre-approval that is only subject to valuation so certainly pressure them to confirm the 90% LVR before you pay anything.
To be honest, I don’t think any mortgage insurer will approve this.
No one that is classified as a non-resident can borrow more than 80%. Most of the big banks should lend 80% (e.g. CBA & NAB).
Cheers
Stu
You will find that because you haven’t had a tax return lodged in Australia in 7 years, that the loan would have to be done as a low doc loan. 99.9% of low doc loans are mortgage insured so therefore any indicative letter of approval will have subject to approval by mortgage insurer on it as well as the standard clauses of valuation, providing additional documents and special conditions etc. This is a standard Indicative letter of approval and you won’t get much more than this from the lenders as they are covering their backs.
With 90% lvr for a lowdoc loan you are looking at interest rates starting in around 8.5% plus mortgage insurance will be very costly and there is not many lenders that will do 90% so you are heading towards non-conforming lenders.
I wouldn’t be paying $200- to this company because they say they need it “to order and pay for valuation” especially because you haven’t picked out a property yet. They are just trying to tie you in with them, so you won’t go anywhere else.
Hope this helps.
Feel free to PM me if you need some more help.
Kerri
Financial Wellbeing Coach
W: http://www.pfsfinance.com.au
E:[email protected]
E:[email protected]Development Finance Specialist
Thanks a lot guys. Stu – regarding my being considered a non-resident, I talked to an accountant about this and he said that I can be considered either a resident or a non-resident, it depends which way I want to play it. I have a visa that allows me to work in the UK indefinitely if I want but I was born and raised here, so according to him my resident status depends solely on where my ‘permanent residence’ is. I can make that whichever way I want. So, I can be a resident if this helps. Do you think it would?
Kerri – who are the non-conforming lenders you would recommend I try?
Thanks,
Tony
You could try GE and Liberty. Both are non conforming and can go to 90% lvr with low docs without mortgage insurance. Rates will be high if low doc – maybe 10% plus.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks a lot guys. Stu – regarding my being considered a non-resident, I talked to an accountant about this and he said that I can be considered either a resident or a non-resident, it depends which way I want to play it. I have a visa that allows me to work in the UK indefinitely if I want but I was born and raised here, so according to him my resident status depends solely on where my ‘permanent residence’ is. I can make that whichever way I want. So, I can be a resident if this helps. Do you think it would?Mortgage insurers normally want people back in Aust for at least 12 months. They might look at it if you have been back here for more than 6 months.
Residency classification for tax purposes is irrelevant to the lenders.
Cheers
Stu
Thanks again guys. Stu – I have been back for more than 12 months, about 15 months now actually. Another thing I was thinking is if they don’t like the fact I didn’t put in a Aust tax return last fin.year, I can do so since I was in the country for 7 months of that fin.year – it will show all my non-taxable income from the UK and no tax taken or due in Aust, but if a tax return is what they need to see, I can do it…
Meanwhile I rang Nationwide and told them what they sent me was of no use, and they needed to send me a formal pre-approval letter that said I’d been approved for $400,000 for 90% LVR subject ONLY to the valuation of the property. They said they could do that and it would be in the mail today. We shall see…
Thanks,
Tony
Tony
Goodluck with Nationwide, but beware that somelenders will still pull out despite such letters, so cover youself. This happened to me with a smaller lender whose name begins with a ‘H’!
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry for the heads up – but I don’t get it – how can they pull out? I thought a formal pre-approval was (excuse my ignorance) legally binding in some way? What basis could they use to pull out, and is there anything I could ask for that would cover me? I’m becoming increasing more resentful of these people so I don’t want to pay the $200 to them only for them to reject the 90% LVR like everyone (but them) said they would.
tmcintosh
as long as you don’t buy at auction, why even bother with this pre approval – make your offer (on contract form) subject to finance – if the finance is declined then you walk away.
qld purchase contracts are in a ‘subject to…’ format – unless as previously mentioned, you purchase at auction – auction is the real deal, unconditional contract.
simple.
cheers
brahms
CALL NOW…adults only (boys and girls ask mummy or dad first) ~~ 1900 hot broker ~~Pre aprovals are a marketing tool for the lenders. They are conditional on several things in most cases.
Don’t make the mistake of thinking that they are binding agreements that the lender must honour.
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Understood, thanks everyone. One final question on finance being declined – if we sign the contract subject to finance, and finance is approved for us for 80% LVR but declined for the 90% LVR we want, does that qualify as finance being declined, ie. we can just walk away as Brahms mentions, or are we bound by the contract because it was approved at some level, and it can be seen from our bank statements that we do have the 20% deposit (but we just don’t want to use it all)?
Thanks,
Tony
Tony
You need to put down the name of the lender and the amount. If not, then they could offer you finance with another lender at say 20%, and you may no longer be able to back out.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Okay Terry thanks a lot.
Tony
Clause 3.1 of the terms and conditions of the REIQ contract (QLD only) reads:-
‘ This contract is conditional on the Buyer obtaining approval of a loan for the Finance Amount from the Financier by the Finance Date on terms satisfactory to the Buyer. The Buyer must take all reasonable steps to obtain approval. ‘
You must take care to read all terms of a contract prior to signing anything and preferably obtain independent legal advice as well. You do have the right to decline a finance offer if you do not like the terms offered. Some agents though will complete the finance clause as follows:-
Finance Amount: Sufficient To Complete Purchase
Financier: Any Bank Or Building SocietyIf your contract is filled in as above and the vendors do not believe you have acted ‘reasonably’ in trying to obtain finance you could be in a lot of trouble. I had a client recently who signed a contract, spoke to a Broker who shot down all their dreams of a 97% LVR loan and they just walked away thinking they could call the agent to get their deposit back without even lodging an application for the loan. Things like that can get messy if you’re not careful.
Bottom line here is, pre-approvals are basically good but no indication that anyone will actually lend you any money… do your homework and always keep your solicitor informed of your progress.
Cheers
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