I was about to hijack the thread asking about the St George loan but I will do the right thing and ask my question here.
I'm interested to know what peoples experiences are with re-valuing thier IPs and accessing the increased equity through LOCs.
Specifically
1. Are there lenders out there who will accept an independant valuation that you comission, without a lot of hassle? My lender (NAB) doesn't want to. I had Herron Todd White do one recently but the NAB weren't interested in seeing it. My fear is that they did some sort of simplistic database lookup or 'desk valuation' rather than a sworn valuation.
2. What is the deal with 'bank value' and how LMI calculated? For example, my IP was recently valued at 260k. The NAB says they value it at 225k. Seems like this is a dodgy way of making me pay LMI when I shouldn't, because to me, if I wanted a LOC to say 210k, that is a 80% LVR (based on my valuation). But to them it is above 95% LVR (based on thier valuation) so the LMI goes through the roof.
They (NAB) have tried to explain the whole concept to me a couple times. They say 'our bank value is different to market value'… which is fine, as long as they are not using that to calculate available equity. I would have no problem if they said (for example) 'market value is 100k, bank value is 80k. we will lend up to 80k (80%) without lmi'. But instead it's more like 'we don't care about market value, bank value is 80k, and we will lend up to 64k (80%) without lmi.' Fundamentally I believe this is flawed because when you go to purchase a property they DO use market value because otherwise you would need a 120% or higher loan!
3. Servicability and IO loans. Talking to my banker trying to get an ambitious pre-approval over the line recently, she said the serviceability was the problem. I asked whether she had worked out the repayments for IO or P+I. She said P+I, IO ends up worse because they assume after a 5 or 10 year IO period you now have a reduced time to pay down the loan on P+I. And of course they assess these increased repayments against your current income. Is this madness, or the way banks work? Wouldn't they like to lend me more money on IO terms and have me paying it back forever for all they care?
Sorry for the rant, can you tell my banker is annoying me. Also tried to talk me about of property investing the other day… 'managed funds are better' etc etc
Any tips/advice?Most lenders will use their panel valuer and not budge from this.
In saying this it is not too difficult to merely work backwards and look at which lender accepts HTW for their valuations in that area and approach them. Your Mortgage Broker should be able to assist in this respect.
We had just this from a client of ours only last week. They had a HTW valuation which they were pleased with and all we did was place the application with a lender who accepted HTW. A matter of getting the report retyped into a format acceptable to the new lender and we were home and hosed.
Richard Taylor | Australia's leading private lender
Hi Moosehead. Yes, some are a pleasure to deal with…..not. As far as calculating your servicability goes, banks will always use P&I on loans you have with them even if IO only….BUT get this. Go to another bank, apply for your next loan, and they will only count your actual loan repayments with the other bank, or sometimes a straight interest value, rather than the P&I rate,( and also loading up the current variable interest rate by 1.5 % or so on all your loans in order to 'assess' you. ) I hope that makes sense?
This is why most seasoned investors and brokers recommend structuring your loans with more than one lender for that reason.
Weird eh?
As an additional sidepoint, one lender in particular will assess you on the current interest rate only (without loading it up) if you take out a fixed interest loan for a minimum of four years. That can make a difference of $20k or so on an average size loan!Bearing in mind all these things may not sound much, but as I guess you are working out now, can definately affect your servicability, and thus borrowing power. And simply put, a lender or bank that only has their own loan product to offer you is not going to explain all that to you. All the best.(Remember, the drones that do most 'bank lending' are nothing like the 'dummy in mouth replacing fashionably dressed' caring models used in bank TV adds!
Thanks for the replies guys, looks like I need to shop around a bit.
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