Forum Replies Created
- susank wrote:Hi Everyone,
Just wondering if anyone knows any good mortgage brokers in Sydney (happy to travel anywhere within the Sydney area).
My situation is that are looking to purchase a property and our broker has submitted our application to Macquarie however the bank said that due to our age (I am 59 and my husband is 62) we are both working and our incomes are very high. The broker said that our loan was declined due to our age and our exit strategy wasn't adequate even though we have sufficient assets.
Susan
That's very unusual. Selling the property is an acceptable exit strategy under responsible lending rules for an investment property. If you want to PM me details I'd be happy to get the head of Macquarie Mortgages to have a look at your application, the reason given does not sound valid and you may be able to get it turned around if you really want to use that lender. This sort of thing does seem to pop up with loans for PPOR's as sale is not a valid exit strategy, in that case, but it is usually possible to get around that as well.
Freckle wrote:APerry wrote:Whether real estate prices will rise or not is another argument.
So your original statement should have read;
"potential exchange rate losses will only be offset if asset values rise"
Quote:If you can better describe what is happening in the US with regard to QE and its potential implications in 2 lines, please do.There's no limit to posts sizes as far as I know. Is that simply an excuse for a poor description of events.
Perry you're in finance. I would expect a higher level of understanding and a better ability to express yourself in understandable terms for the lay person.
"US is printing money to fund debt. This is a recipe for inflation"
No it's not. Japan has used easing policy for decades and still has inflation below 1%. Inflation is more complicated than just printing money.
"the only reason it hasn't happened already is because the money being printed is not going into circulation,"
I don't know where you get this from. There's billions going into the system weekly through a variety of entry points.
"At some stage all this cash will come come into circulation and there will be massive inflation and potentially a currency crisis in the US."
QE/money printing is a symptom of a failing system not the cause of it. It usually signals the final stage if left unchecked. Massive inflation if it turns into hyperinflation (usually defined as inflation above 50%/pa) is a signal there is no longer any confidence in the monetary system or the controlling authority.
Much of this so called printed money (it's actually not printed simply created by computers on balance sheets all over) is in the form of securities, bonds and shares. There isn't going to be a torrent of money entering the system to cause widespread inflation. If (when) things snap securities, bonds and shares are likely to plunge in value expunging much of the wealth created by QE. Increased inflation is likely to occur because of shortages and currency devaluation raising import prices not more printing.
If the powers that be can't contain the next collapse then you're looking at widespread systemic failure and a liquidity crises which can then lead to a hyperinflationary event (loss of confidence in the system by key sectors and players) and currency collapse.
The idea that somehow huge amounts of cash which don't exist will suddenly find their way into the money supply and cause massive inflation is a stretch to say the least.
Yes Freckle, the losses would only be offset by a rise in asset prices. I think US property prices will rise although it's not a market I chose to play in and have no level of certainty as to what will happen over there.
You are correct in that there is no limit to post size, but i don't intend now or ever on writing an economics thesis. While my description of what is happening is simplistic it is also a pretty accurate picture of what is happening in the US. I also suspect my comments are pretty simple for a lay person to understand, that's the whole point of keeping it brief, apart from the fact that I'm not going to spend hours on a keyboard to write a post on an internet forum.
If you want to have a debate then the rest of your post past this point is far more productive than having pot shots at me. I'm more than happy to back myself against you in a debate on this topic.
The money being printed is certainly not going into is not going into circulation it is in the form of Gov debt and is being paid into the financial systems in the US and overseas and held on the balance sheets of central and private banks.
QE is not an effect, it is also not the initial cause. The initial cause is the US living beyond it means and QE is a way of putting off judgment day so to speak. While there is demand for US Gov debt they can keep printing without any great pain, but they can't keep doing this forever and they have made no moves to indicate that they are going to do anything about getting their economy in order. They will eventually either default on their debt directly by not paying or they will default by proxy by inflating it away.
Much of this so called printed money (it's actually not printed simply created by computers on balance sheets all over) is in the form of securities, bonds and shares. There isn't going to be a torrent of money entering the system to cause widespread inflation. If (when) things snap securities, bonds and shares are likely to plunge in value expunging much of the wealth created by QE.
The US Gov creates money by selling IOU's to the Federal Reserve as bonds and receives money in return, which it spends, the Fed can either keep these or on sell them. You are correct that a lot of the QE is this money being used to buy various securities (ie its not going into general circulation as I stated), but you are forgetting that there is another side to the ledger, the bond holders. These bonds have to be redeemed at some stage by real money and if the Fed can't on sell the bonds then they have no real value and their price will plunge making the money paid to redeem the bonds worth less and so the currency generally worth less.
Increased inflation is likely to occur because of shortages and currency devaluation raising import prices not more printing
Inflation is the devaluation of the currency, and a devalued currency is what makes imports more expensive.
Freckle wrote:APerry wrote:There seems relatively little chance of the US$ improving much against the A$ while the US is printing money to fund debt. This is a recipe for inflation, the only reason it hasn't happened already is because the money being printed is not going into circulation, it is being hoarded. At some stage all this cash will come come into circulation and there will be massive inflation and potentially a currency crisis in the US. If you are leveraging into that market then your potential exchange rate losses will be offset by rising asset prices, in fact if you lock in at low rates now you may do very well in terms of capital growth but i would be very wary of making an investment over there as a play on a relaltive drop in the value of the A$, even if it happens in the short term i doubt there will be a long term swing back to anywhere near where it has been in the past.Much of what you have written is either misleading or simply inaccurate.
"potential exchange rate losses will be offset by rising asset prices"
It mystifies me as to how you can come to this conclusion.
"money being printed is not going into circulation, it is being hoarded. At some stage all this cash will come come into circulation and there will be massive inflation"
A poor description of what's actually occurring and it's implications.
Pretty simple Freckle. If you are leveraged into the market the risk on that investment, in terms of exchange rate , is restricted to only a the capital portion of the investment. As the loan amount is fixed any asset appreciation is upside and an adverse exchange rate swing will only reduce the potential upside. This offsets some of the exchange rate risk on the capital portion of the investment. Whether real estate prices will rise or not is another argument.
If you can better describe what is happening in the US with regard to QE and its potential implications in 2 lines, please do.
There seems relatively little chance of the US$ improving much against the A$ while the US is printing money to fund debt. This is a recipe for inflation, the only reason it hasn't happened already is because the money being printed is not going into circulation, it is being hoarded. At some stage all this cash will come come into circulation and there will be massive inflation and potentially a currency crisis in the US. If you are leveraging into that market then your potential exchange rate losses will be offset by rising asset prices, in fact if you lock in at low rates now you may do very well in terms of capital growth but i would be very wary of making an investment over there as a play on a relaltive drop in the value of the A$, even if it happens in the short term i doubt there will be a long term swing back to anywhere near where it has been in the past.
Qlds007 wrote:Exactly as Alistair says at a lower lvr on a Commercial property but no chance on a residential property.We have done a couple with Unit Trust where the property is self funding and the lender can assign the Lease to cover their repayments.
Cheers
Yours in Finance
Most of the non-recourse (this is the name given to a loan no individual guarantors) loans we have written have been for small syndicates or wealthy individuals. This is because to get the quality of tenant required the property is generally quite expensive. By quality, this refers to the ability of the bank to make a decision as to their quality, which may or may not reflect reality.
Gemma Lea wrote:HiI've tried searching for removing personal guarantees from trust/company loans. Cannot find much information. I was wondering if somebody could tell me if this is possible.
Ie a couple of scenarios
1) personal guarantees made when taking out initial loans. Trust buys several properties. After 2 years has 2 tax returns showing that it has earnt income for those 2 years. Based on this can refinance against just the income of the trust thus removing guarantees?
2) a director of a corporate trustee over the trust. Signs personal guarantees using his income. 2,3,4 loans are accumulated in the trust.
That director then leaves his position as director of the company. Will majority of big banks allow his personal Guarantee to be removed. Providing of course the company/ trust has tax returns of 2 years that would enable the Serviceability of the existing loans.
3) any other possible ways
Thanks Gemma
Hi Gemma,
It is possible at lower LVR for commercial loans, with some lenders, subject to the quality of the property, tenant and lease. It is not possible with residential lenders.
TheFinanceShop wrote:Purely depends on zoning and the council restrictions. Each council conditions vary enormously.Shahin,
This same advice has been given by several posters and it is just not correct. Zoning obviously matters, in all probability the land is Res1 if its in Victoria, but this in itself tells you little. The zoning and overlays dictate which part of the local planning scheme applies to the specific property.
Council doesn't place restrictions, the State Government does, council is supposed to make sure developments are within the confines of what is allowed under the planning scheme, which includes common and local provisions. If they fail to do so they may have their decision overturned in VCAT.
Ross.Poulter wrote:Hi Richard,I have my current property with westpac and have a good relationship with them.
I have spoken to them about using a DT for my future investments and they are fine with that, they will lend to the same LVR as long as I guarantee the loans.
Would westpac do this project for me as a straight forward package?
Or will they require a lot more paperwork?
Obviously I will need, DA, BA, building plans, fully costed and quoted.
But I can do all this after I have had the offer accepted by the vendor, as I can service the property without requiring any additional income from it.
I am also looking at purchasing an industrial property with my business partner through a unit trust and leasing it back to our company. Can you help with financing this?
What is the max LVR for the above type of property?
We are looking at approx $350,000 in Pakenham, Victoria.
We have put a proposal to the vendor that we lease the building off him for the agreed lease rate with an option to buy it for $350,000 within the next 2 years.
If the vendor agrees to this are we better to purchase it asap, or sit on it, hopefully get some capital growth and purchase it towards the end of the 2 year clause?
Basically the lease costs will cover the repayments anyway.
Thanks,
Ross
Hi Ross,
Is the development site in Victoria. If this is the case then you will be able to work out very little by just looking at the zoning. It will almost definitely be Res 1 or Low Density Residential. If its not Res 1 or on of the Business zones that allows residential construction or Mixed Use, then you can't develop. If it is one of these you then need to have a look at whether there are any overlays that might restrict development and also the local planning scheme.
With regard to your comments re Westpac, no customer has a "good relationship" with the credit people in the bank, and these are the ones who make the decisions in the end. Westpac is probably the worst option of the big three, especially if they end up pushing you into the business bank, as the credit will be done in India for a small business deal. I suggest you keep your mind open with regard to lenders.
Hi Jason,
By asking for specific advice without providing supporting information you are asking this broker to breach his responsibilities to you under the responsible lending laws. He is doing the right thing refusing to give advice without that info.
jmsrachel wrote:APerry wrote:On a loan that size you may very well get 8% LVR. With regard to loan term, it will be shorter, but at least 15 years. The much shorter loan terms that are sometimes applicable are more common with much larger loans.Hi Alistair,
I hope you really mean 80% other wise i'm buggered!!
Sorry, wireless keyboard seems to that to me all the time. It would be a difficult market place if you could only get 8% LVR
christianb wrote:Aloha,A few things you may wish to consider:
- Our clients are finding two dwellings much simpler to finance than three
- Make sure your structure suits your sales/retention strategy
- Keep a cash buffer from the start – it's easier to solve problems quickly
- Include all you can in the build contract – little bits outside the contract amount add up
- Engage with a team that can guide you as well as do the work
- Have a plan for the project, then some wriggle room
It always takes longer and costs more, so try to limit overrun with tight documentation and rigorous planning.
Best of luck with the project
Hi Dave,
Two is easier to fund tan three if you are looking to use a residential lender. The number is irrelevant when it comes to commercial development finance. If they are going direct through a bank it is possible that the person they are dealing with is not even aware of this, particularly if they are in the private banking section of that bank, this is the absolute worst place for a property developers relationship to be, in any bank.
On a loan that size you may very well get 8% LVR. With regard to loan term, it will be shorter, but at least 15 years. The much shorter loan terms that are sometimes applicable are more common with much larger loans.
Hi Aloha,
Do you know if you want to do the development under a commercial or residential loan, with three on title you can probably do either. Residential is a little cheaper but there are advantages to using a commercial lender, sometimes you can get more money and there are options such as capitalizing interest, rather than making monthly payments, this is obviously helpful with cashflow, but also means there is no servicing test done by the bank. Have a look a the following youtube video I made a while back, it explains how commercial development loans are assessed.
That article is nothing but great marketing by Mark Bouris. This sort of deal has been Mac Banks strategy for some time, if you go to their offices they have one lot of desks for credit people assessing Mac Bank labeled loans, next to them are a group of people assessing Aussie Home Loans labeled loans, and they used to have a very small and quiet area for Virgin Money loans. Mac Bank also own 20% of Vow Financial, which is a sizeable aggregator with 600 broker groups. Vow do not have a white label product at the moment because they only want something under their brand if it is truly differentiated from what is already in the market. If Mac Bank were going to get really aggressive, in terms of pricing, they could easily get a lot more business providing a discount product through the Vow network than they will get through YBR.
Good on Mark Bouris though, he is a marketing genius.
I've got a small NRAS business I set up to help move some properties in Bundaberg. We don't have specific consortium approval with any of the lenders, but most will fund them. The general rule is that you have to be able to get out of the contract within 90 days with a maximum cost of $1,000. Ours have all been valuing up fine as we haven't used marketing companies to move them, the over pricing of many NRAS properties relate specifically to the cost of selling using project marketers.
Questus, who I think are the largest consortium, cap their commissions at a reasonably low level. I would suspect that their stock is less likely to be overpriced than some others.
Hi Patch,
I strongly suggest you contact Richard, or one of the other great brokers on here and engage them to give you a full run down, not only of the different options available from the various products on the market, but also how to structure your repayments cost effectively. You also should plan for future purchases upfront. In finance its very difficult to reverse mistakes in loan structuring, particularly if you're badly structured in terms of tax efficiency. You will do well with an experienced and knowledgeable broker on your team.
Hi Rob,
One thing you need to understand, if you are looking to maximise your borrowing potential is the difference in the way valuers are instructed depending on whether you ask for a residential loan or a commercial facility. A resi lender will order the valuer to value on an "as is" basis, which means if there is no house you get a lower valuation and the permit or development potential is not taken into account. For a commercial construction loan the lender would order a "Project Specific Site Valuation" this basically takes the end value of the project you are proposing, discounts the costs and what they consider to be a reasonable profit margin (were you to sell the project – note "project" not land). If the project is very profitable you will almost certainly get a higher valuation this way, the lender will use this value as an input cost into the project and will typically lend the lower of 80% of costs and 65% of end value (n.b. the new loan will of course have to be sufficient to pay ouyt the existing loan as well as the construction costs and interest if you are looking to capitalise.
I hope this helps.
Looking forward to it Troy.
I can't add anything here, but this is a very good example of the difference in cost between using a broker who knows what they are doing and a home loan comparison service. The initial mistakes in structuring in this circumstance are not reversible and will result in 000's of dollars in additional tax being payable over the life of these investments.
Having said this, Songrad, don't fret about it, everyone makes mistakes when investing, particularly at the start, your mistakes are relatively small. Just learn from them and get a decent broker for future purchases. Don't make the mistake of thinking that the structural advice you have received in this post is the end of what you need if you want to minimise the cost of your debt.
ygue6072 wrote:If banks are dropping their fixed rates does that mean that they think the RBA will continue to drop the cash rate?Derek — what is SANF? Sorry if this is a silly question.
The RBA will almost certainly be dropping rates in the near future. The money markets suggest it could be up to 1% over the next year, although most economists don't seem to think it will be this far
