Hi Guys
I am in the process of a equity cash out and the lender has requested a “statement of advice” from a financial planner to approve the loan.
I know lending is tightening but we are combined 150k income 1 PPOR 470k, 1 cf+ IP 280k 5.5k CC debt.
Anyone have experience / advice on this? I can’t shop lenders as the IP is IO with LVR of 88% so would lose IO.
Same lender I borrowed with 9 months ago, noticeable increase in requested documentation.
This is slowing me down. (angry face)
Cheers all.
S
Edit 280k not 380k
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This topic was modified 6 years, 11 months ago by
Simon.
Hi Simon
No not uncommon and is merely because of the “cash out” component.
You have obviously declared the funds are for “future investment” and the lender wants to see where they are going to be invested.Had to sign off on 2 this week alone for a couple of our clients both who were doing a larger “cash out equity” deal.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard I appreciate your response.
It took me by surprise as it was not a requirement last time I cashed out an equity split. This is smaller than the last as well, only 45k.
What can I expect this to cost and what is involved? A quick trip to a FP or is there a bit more to it than that?
Regards
S
A FP will need to generate a full statement of advice, which can cost a few thousand, require a full analysis of your financial situation etc.
As to the lender asking for this information – effectively borrowing above an 80% LVR without having a property under contract to show the purpose of funds is going to trigger these kinds of requests. There are some lenders which *may* allow it without an FP statement of advice, but it all comes down to the discretion of the assessor as to what they will request.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thanks Corey.
Not really the news I wanted to hear, especially the outlay.
You implied a contract could assist the situation? So it is more to do with assurance as to the use of the funds rather than me proving I am across my financial situation? Would borrowing with the same lender for the buy potentially help?Cheers
S
Hi Corey and Richard,
Could a Stat Dec to the effect of “I undertake to only use these funds for investment purposes” go some way toward satisfying the lender? As I understand it, a Stat Dec is not something to swear to lightly – but would one be enough to cover the lender’s needs (especially since it is an existing lender, and not one where Simon is a new borrower).If not a Stat Dec, is there some other possible “out-of-the-square” option? What about Simon’s own Business Plan that lays out his roadmap for his future investments?
It sounds a bit silly to be having to pay thousands to get a “financial statement” over such a small loan…
Benny
Hi Corey and Richard,
Could a Stat Dec to the effect of “I undertake to only use these funds for investment purposes” go some way toward satisfying the lender? As I understand it, a Stat Dec is not something to swear to lightly – but would one be enough to cover the lender’s needs (especially since it is an existing lender, and not one where Simon is a new borrower).
If not a Stat Dec, is there some other possible “out-of-the-square” option? What about Simon’s own Business Plan that lays out his roadmap for his future investments?
It sounds a bit silly to be having to pay thousands to get a “financial statement” over such a small loan…
BennyA stat dec used to work fine in the past – these days they have a lot less weighting and in this scenario I’d suggest there is not much chance getting it approved with it after they’ve asked for something more substantial. Once an assessor gets something in their head it’s not likely to be budged.
Yes Simon – this is 100% to do with the purpose of funds being verified, if you have a property purchase lined up and signed they’d approve and release funds. You don’t need to use the same lender, however they will check your borrowing capacity to make sure you can actually support the purpose on their borrowing rules.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thanks Corey. And back to you, Simon – are these extra funds planned to be simply a Deposit on a future property? If yes, then maybe take a look at a Bank Guarantee or a Deposit Bond instead – the equity withdrawal can then be left until the actual transaction is due to go ahead, when the equity can then become the Deposit at settlement.
Or maybe consider if you are holding any savings aside for a Deposit, and a Deposit Bond can do the trick, then that frees up the Savings for “other purposes” perhaps preventing you from jumping through hoops this time !!
Benny
Thanks Corey & Benny
Hopefully I hear back from the lenders today re options. Benny we will put your suggestions forward thank you. Yes, at this stage the funds will be only used for a deposit. Any lurking notions I had of throwing some at crypto are now well and truly gone.
I realize now my last equity split was under 80% so no drama hat time.
I spoke to a FP this morning he seemed surprised at the request for such a small cash out and said he normally only gets requests for these from people working with SMSF.
Another good learning experience.
Thanks all, I appreciate the guidance.
Regards
S
They lender may alternatively want to control the payment of the funds. So you could be approved without access to the funds until the point when you find a property and have entered the contract of sale. The new property may not be used as security but they will want to make sure the funds are used for this.
Cash out over about $50k is a problem these days
Terryw | 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
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This topic was modified 6 years, 11 months ago by
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