Forum Replies Created
- thecrest wrote:Hi Banker
Sounds fast. What Valuation did you do in 2 hours ?RP Data e.g. computer based valuation. If the estimated value is within reason based on the size of the land, and supported by recent sales data – RP data is acceptable. For owners estimate or deals with a Contract of Sale. The computer takes approx 30 seconds to make a decision whether or not a val is required. Most deals under 80% don’t need vals.
Ah yes, cross collateralisation. My topic. I knew I’d ruffle a few feathers. Yes yes yes. Stand by my claim that you can settle a deal with no supporting paperwork through relationship management Chanels – customers can even get their docs printed while they wait at the first appointment – if rp data vL stacks up. – Like to see you try and settle a deal wihin a dew days when equity is spread between a bunch of non banks…
Cba do 95% plus lmi to a max of 97% total: if you’ve had a credit facility for more than 6 months with good conduct. Credit card is the easiest qualifier – even if you havnt used it …
Must be owner occupied transaction – investment is 90%
You don’t need to let your property now for a record of the income. If you let it at the time you just give the bank a copy of the lease.
We knew what you meant
Yes Richard – using someone in the uk is far cheaper in this example. Just explaining how it works, the critera and cost to expect to do it in oz. Gives readers the ability to strike a line through the Aussie option – and understand why it’s not viable.
Worth pointing out for a larger client with trade relationships already establised (preferably an importer or exporter) – an LC can be as cheap as a few hundred dollars. Therefore this select group of people have the advantage of being able to invest offshore through an Aussie bank.
There are similar advantages to clients that do business in US dollars . E.g. If you have a $US dollar account with your Aussie bank you can get a loan or Overdraft at US rates.
Moral of the the storey – you have 40 properties. Find something to import Or export to or from the US. If you can generate significant income or expense in $US you can get you loans switched to US currency ( a trade finance banker will understand there is logic in having your loans in the currentcy you get paid in).
This is the overseas investment part of the forum isn’t it –
Banker
Worth pointing out that the 80% restriction for personal investment relates to 'not property' transactions. E.g. if purpose is selected as 'purchase an investment property' then you are fine at 90% plus LMI.
CBA still has no cash out policy for lines of credit at 80% and lends 95% plus LMI for existing customers buying owner occupied properties. They are almost writing 50% of all loans in Australia at the moment –
Terryw wrote:1. Tax benefits depend on the use of the property and not the security.The property is the security. I think he means the purpose of funds
e.g. if the purpose of the property is investment – and the purpose of funds in personal – the later is the more important.
NAB or ANZ; private / business banking. One lender takes the security and issues a standby LC (bank to bank guarantee) in favor of the other bank. e.g. bank in UK takes the property as security and guarantees the Australia bank.
The bank in Australia then has the guarantee as security. This is often as good as a Term Deposit. If the standby LC and the loan are in the same currency you can borrow up to 100%. If the currency is different you will have a lower LVR and potential margin calls.
Min loan $1.0M
Min net income $250k
Min net assets $2.0MMore common in the Asian markets e.g. ANZ Singaporeans buying Aust property. If they are different banks you will need to convince the overseas bank that you can service their debt if the guarantee is called upon. ANZ to ANZ not a problem however they specialise in asian markets – not sure about the UK.
In the current market – good luck but I would look for something else. If you meet the 3 bullet points above you will need to put down approx $25,000 as a fee for credit assessment – not refundable if declined.
JAY BURSLE wrote:There are two blocks of 8, with minimal work required up front, but plenty of opportunity to improve (little bit shoddy looking). And all the units are titled, so opportunity to sell off individually in the future if needed.Hi Jay – most comments above are due to people thinking they are on one title. You could split the titles between lenders at 80% LVR. If you were lucky you might get 90% on a few.
Banker
I know you guys are not keen on majors but I just approved a deal, did rp data Val and printed contracts within 2 hours. If you can’t get a deal done with Westpac or Cba wihin 7 days you don’t have the right contact.
Terryw,
Your spot on with regard to a couple of the downsides –
When a client is going bust, has properties reducing in value and cannot service their debt, the bank has more control if crossed. This is why I say to keep the owner occupied out of the mix and to manage which properties you cross and don’t cross. Read the security schedules. Don’t link more that 2 or 3 together.
Here is an example where split banking can work against a client.
Exiting Facilities
Bank 1 – Property 350k Loan at 200k
Bank 2 – Property 250k Loan at 150k
Bank 3 – Property 400k Loan at 300kTotal Property $1.0M and total loans 650k – 65% LVR
Client buyers another two properties for 600k and borrows 80% (480k)
The client needs 120k from the existing properties plus costs – say total 150k (I’m in VIC)Borrowing the 150k would take the existing 3 properties to 80% however you've shot yourself in the foot in terms of speed to market. You have to either lodge 3 applications for increases or refinance your portfolio – expensive and time consuming.
YES there a lot of downsides to cross-collateralising however an advisor should point out the pros and cons of each structure to their clients. Speed to market is important to a lot of my clients. We use cross-collateralising however in a limited capacity. To disregard the benefits in their entirety would be like a builder throwing away a hammer cause he was scarred of hitting his thumb.
Banker
quote=Terryw Hi Banker
All valid points thank you. But what about the major downsides of CC?
such as1) bank may have more security than needed
If you move security around it is the same amount of security offered. Just to different lenders.
2) bank may have a choice on which property to repossessNot if you don’t cross everything. Keep your PPOR out of the security schedule of investment debt. Bundle in groups of no more than 2-3 properties. You can still keep it with one bank.
3) bank may not release security for a sale if remaining security is not enough
Yes, some times a client borrows 110% of a property and then wants to get another title that is collateral security back without reducing the debt. If the debts were stand alone the other property would have 30% secured against it – therefore you wont get the title back either way. Examples like this provide other financiers and brokers an opportunity to sell the "don’t cross" argument where in reality both properties are required to sustain the debt. Crossed or not!
4) harder to untangle when more properties come alongEasier and faster to apply – take the positive with the negative
5) harder to refinance into another lender if need be (eg hit borrowing capacity)Once again understand your security schedule and you wont have a problem – don’t link more than 2 or 3 securities per loan
Qlds007 wrote:To throw in my 6 pence worth i actually phoned the local branch of each of the big 5 banks this morning to be told:1) 4 out of the 5 told me that a formal application would still be required and I would need to come in with my income.
Even as a customer i would need to verify income especially being self employed or employed and my pay went into a
difference banks account.Only 1 of the Banks told me that as an existing customer i could be approved for a given amount on the spot.
Anyone with a good banker will be able to confirm. If they can see you wage deposits in your account that is sufficient income verification. If you are self employed you WILL still need to supply tax returns however if they are already on file you dont need them – e.g. they already have them. Westpac and CBA even scan your financials on to your profile
Qlds007 wrote:2) Course Positive point number 2 only works now there is no mortgage stamp duty in most states but is it really a selling point. I agree with Terry if i had C/C loans over my 40 properties i think my Accountant would have a fit.Richard – you would be mad to cross all 40. As I said you can select the ones that are crossed and the ones that are not. I would personally never cross more than three in a bundle. I would also only cross security in the same state – not just due to stamping issues but it also makes it easier for the banks to attend discharge settlements
Qlds007 wrote:3) When with most lenders you have to lodge a new application merely to roll over again from the expiry of an interest only period to a further interest only period and that takes time i cannot see any difficulty in having to make 5 separate loan applications.thats fine if you are not applying to get equity out. I would not want a new purchase to be reliant of 5 different lenders that are all sharing my equity – what happens if one or two do not come to the party?
Qlds007 wrote:Maybe time consuming but this is also a customer service orientated industry. We dont always get paid for the level of work we do.All in all whilst i agree there are times (slim that they maybe) that you would want to C/C your loans in the main i prefer to keep mine and a clients separate.
This is my point – there are some times where there are advantages – but it is not for everyone.
I know plenty of people – and have had plenty of clients, that can call their banker on a Friday and not only have approval for an Saturday auction – but also an advance for the depoist.
I am talking about people with private bankers, relatinship managers etc – not clients dealing with a branch network.
Terryw wrote:As to bankers points.
1. I am not sure why CC would save you proving your incomes??? If this would apply to CC why not to stand alone?Standalone is fine. If your bank has history of your deposits in their account this is sufficient income verification – all 4 majors.
Terryw wrote:2. Having 10 loans as opposed to one loan would save on the statements and internet banking time, but does this really matter? It would complicate things at tax time as the interest would need to be apportioned between properties.you dont need loans for each property – as long as the split reflect the same tax purposes e.g. investment debt can be bundled. If you need something done fast you dont need statements as the bank already has them. If you have your loans split you need to give each lender copies of each other lender statements – if you want to move quickly on something this can be a nightmare.
Terryw wrote:3. If all your loans were with different banks you would need 5 applications, but if 2 or more where with the one bank then you could also use 1 application. If you don't like applying for loans this could be a benefit, but it is only minor.Banks credit score is affected by level of enquiries on your CRAA. It also means you have a lot more lenders to worry about – it can be hard getting them all to the same party if you need something done quickly
Depends – nab business bankers can go to 90% but you need to have some form of commercial interests to get a business banker. Westpac and Cba can do 85% but it is pretty rare – need to be an existing client with in a strong position. You will struggle at branch level. I have no idea about what non banks offer – am a born again non-bank virgin
Is this one lender or two?
Can you provide interest rates?It’s hard to say if you should restructure. If cashflow is tight make sure rates are as low as possible and switch peronal debt to IO only (keep in mind you can still reduce an IO loan if you want by increasing your repayment).
You could always role the LOCs into the loans – might be cheapr and easier to manage from a admin point of view.
From what you’ve said you not should be paying more than 6.0% ( excluding today’s rate rise).
Just a quick point – it does not matter if the loans are split between one bank or two – property 2 value is insufficient to support the total debt.
You have 2 options;
1: restructure all debt to be secured against property 1 (get the title back for property 2)
2: have both properties supporting the debt (as you do now)If you choose option 2 you can split between 2 banks or keep with 1. Regardless which way you go both properties will be mortgaged and titles will be held by either one or two banks so you will not free property 1’s title.
Why not just save on fees and keep these two cross collaterailsed for now and get an incease for the 20% deposit ?
This will avoid the refinance costs and still allow you to buy another property… Unless there is a deeper reason you can’t get approved that you have not mentioned.Banks are still lending if the developers have experience, a strong balance sheet and plenty of equity. Pre-sales required in almost all instances. If your a first time developer you should cut you teeth on something a little smaller to start with.
Lots of people lose money on these deals
Mark – Terry has a point re offset has benefits. My point above and I think Terry’s is that one glove dosnt fit all people and it depends on future goals amongst many other things.
Another thing no one has touched on is servicing. Some banks will assess deals on a 30 year term. If you apply for 5 years IO then 25 years PI banks will often assess capacity to repay over 25 years.
E.g. Cba calculator
income 80k one adult, no dependents. No other liabilities
max loan 30 years $487,784
max loan 5 yr I/O then 25 p+i $421,729
max loan 10 yr I/O the. 20 p+i $286,306With this in mind lender selection will also impact what is best for you. Your choice of lender may be more important to you than keeping your debt I/O… E.g they might be 0.5% cheaper.
Also a loan of 300,000, pi, 6%, 30 years, will have a balance of approx 279k after 5 years. The 21k difference is usually not in the offset for interest only clients. 10 years in banking tells me most people spend it.
