Forum Replies Created
The issues around "over pricing", or "under valuing", are not peculiar to NRAS. It's a consequence of the way most new development investment property is sold- via marketing firms, and valuers subsequent attitudes to that ( whether warranted or not)
Developers pay marketing firms very large fees/commissions to sell their stock, because they want it sold quickly, and real estate agents arent good at moving property quickly. Real Estate commissions are cheaper ( lets say approx 2.5-3%, so approx 10-11K on a 350K property) , but property marketing groups are much more skilled and effective at selling these properties to investors than real estate agents are. However, they demand big fees to do so. ie- 30-40K per property. That's a difference of about 20-30K.
Some developers do not pay fees that are quite that generous They pay around 15K, which is not too different to what a real estate agent would be paid for a sale. But because of the lower fees, marketing groups often wont sell their stock. That's why, when you Google NRAS properties online, you find that most marketing groups sell only some NRAS properties, rather than a wide variety. They are selling the properties where they earn the most. Thats fine, we live in a capitalist country. No issue there, but it does explain why valuers can be cynical and conservative when valuing any property where the contract lists a non brand ( LJ Hooker, Ray White, etc) seller. This has been going on for decades, and particularly in Queensland, where its a part of the investment property selling culture – valuers are very cynical about it. Now that NRAS is getting wings and a lot more stock is coming onto the market , you're seeing the same issues occur. Its nothing new.
Always remember – banks don't value properties- valuers do. Banks have a "panel" of valuers they outsource the work to. The are guided by the valuers report and comments. So when valuers undertake a valuation and see that a property is being sold via a property marketing company, they tend to assume very large marketing fees have been built in to the prices, and value accordingly. That's why valuations of 20-30K below purchase price are common. Its really up to the developers and marketing firms to work with valuers to ensure their prices are understood. If they dont, they will tend to get low valuations, because valuers will always be conservative if in doubt. Remember, its their PI cover and their reputation on the line if the loan goes bad and the bank makes a loss.
So its unfair to say that all NRAS properties are overpriced. SOME NRAS properties, where developers are paying between 30 and 40K marketing fees to their property sellers, may experience valuation issues. And to be honest, a 30-40K fee for selling a 350K property could be argued to be excessive and the valuer is entitled to factor that in to their report.
However, in other cases, where the fee is 15K on a 350K sale, valuers shouldnt really have a significant problem. But remember that these issues would be experienced whether the properties had NRAS allocations attached to them or not. Its an issue with the marketing fees, not NRAS. It all comes down to how big the marketing fees are, and how closely the developers work with valuers before selling properties, to explain how their prices were set. You cant blame a valuer for assuming every property sold by a marketing company has 30-40K loaded to the price. If developers and sellers arent educating valuers about how they arrive at their prices, a valuer is entitled to make assumptions based on decades of previous experience.After all, for brand new property there's always a bit of a premium, and valuers will always be ultra conservative because the property hasnt been bought and sold previously, and comparable sales will often be very limited because the properties are usually in brand new areas. So when they also believe a further 30-40K has been added to the price, no one should be surpised when valuations dont come back on price…..
The moral of the story is that a valuation that is 2 or 3 or 4% below purchase price is quite normal, and no real cause for concern. Realists should expect that kind of result. But any time there's a valuation more than 5 or 6% below contract price- I'd start to ask questions.
I dont think theres anything to report here… NRAS properties are rented at 20 or 25% below market rental, and that entire "loss" is able to be deducted. Theres nothing to indicate otherwise in any ATO literature. So unless someone can demonstrate otherwise, claim the entire loss as a deduction. No need to assign "proportional" losses, in line with the NRAS rental discount as far as I can see.
There's no mention of a "discounted" effect on neg gearing , proportional to the relative NRAS discount, anywhere on the ATO website, or in any of the ATO's NRAS literature.
http://www.ato.gov.au/businesses/content.asp?doc=/content/00179876.htm&page=1&H1The ATO doesnt appear to discriminate between NRAS and non NRAS investment properties, so unless an accountant or tax professional can demonstrate otherwise, I would imagine that all costs and/or losses associated with the ownership of an investment property should be treated the same as any other investment property deductions.
In the case of NRAS investment properties, as you know, you're receiving 20 or 25% less rental than you would otherwise receive for full market rental, so you'll actually make a larger loss than if you had a non NRAS property which carried the same debt and interest repayments, but generated full market rental. That should equate to a larger deduction, and a larger net benefit via negative gearing. Call the ATO and ask them???
http://www.ato.gov.au/individuals/content.asp?doc=/content/66031.htm&page=3&H3
http://www.ato.gov.au/individuals/content.asp?doc=/content/00237831.htm&page=3&H3
http://www.ato.gov.au/individuals/content.asp?doc=/content/00237831.htm&page=9&H9
quick update… saw NRAS being discussed on Your Money Your Call a few days back- where the NRAS proponent spoke in very broad (and inaccurate) terms about NRAS. Amazing. She said that loan applications are presented to banks just like any normal investment property application, so loans were easy to find for NRAS.
I wont name her, because she deserves the benefit of the doubt and rather than proposing that people commit fraud by failing to disclose NRAS, she may have meant that the paperwork required was the same, but I do think she should have been clear about the finance limitations, the LVR limitations and the fact that rental income from NRAS properties is assessed much differently by lenders.
If you apply for 90% finance and present an NRAS property as a standard investment property- you are committing fraud. The rental income that a bank is using to assess your borrowing capacity is false, and you are signing a declaration saying it is accurate and correct. If its a broker deal, they are also being fraudulent, and the responsible lending guidelines that non banks have been observing since July 2010 and which banks are now required to observe from Jan 1, make that so.
Also, if the loan ever goes into default/delinquency- a lenders right to repossess and dispose of the security is hindered by some of the NRAS third party agreement models – so if you havent disclosed its an NRAS deal, and the lender isnt aware of the restrictions – they'll come after you.
Until an NRAS deal (which hasnt been disclosed as NRAS) goes into default and a bank hits this problem, it wont come up- but someone will default at some point, and it will be revealed. Then the banks will audit every deal in that development- if there are other NRAS deals in there and they haven't been disclosed- watch out. Then theres the Mortgage Insurers- you'll be black listed for years. You'll be banned from being able to get LMI on a deal for years.
Dont be fooled by a broker or a property spruiker that NRAS is simple- just because a COS for an NRAS property doesnt mention NRAS. To proceed that way is to proceed on a fraudulent basis because you are falsely declaring the rental income. NRAS lending is specialised and its limited. See my earlier posts, and stay within those parameters. Do it with full disclosure and dont risk it.Markymarko- I really believe its a mistake to allow your broker to "try" for 90% LVR with St George. Ive said this before and will say it again…. if the NRAS allocation belongs to one of the Approved Participants Ive talked about previously ( Ive attached the list below again), St George Westpac and Rams do 70% without LMI- 85% with LMI. None of them use the NRAS incentive for servicing. Firstmac does 80% without LMI and uses the full NRAS incentive as tax free income for servicing ( except for construction deals) Aside from case by case exceptions for extremely strong deals or extremely high net customers, those are the only official NRAS options at this time.
Seems like you need more than 70%, and servicing is a problem because of your commission income- although you didnt mention how long you'd been earning commissions…. but I think you should be calling firstmac. Dont let your broker "try" for 90% with St George. 85% is their max LVR for NRAS, and that's with LMI. Its pretty safe to assume that LMI policy on commission will be just as strict or stricter than Suncorp's, so chances are the answer will be NO- same as Suncorp. All you'll achieve is another enquiry on your CRAA and when STG more than likely says no to 90% you're probably going to be left with 3 CRAA enquiries within a week of each other ( Suncorp, St George and LMI), a second declined loan, and thats not a place you want to be.
NRAS finance is specialised. Everyone thinks they know how to get NRAS deals done, but it seems very few people do actually know. If your broker cant get commission income policy right with Suncorp…… well, lets just agree its a class 101 error, so the chances of the broker navigating an NRAS deal is probably questionable too… In this case, because of the LVR and servicing requirements- just call Firstmac. They wont take NRAS deals from brokers, but they will take them directly from customers so you'll need to visit their website and make an enquiry, or call them.Here's a refresher on the official lending options in the market. Now, there have been comments made by other brokers that other lenders will do 90% LVR- but no evidence/policy/examples of this have been forthcoming so far. I'm not disagreeing that 90% deals will be done for the right customer, but its very much by exception. and very much outside policy. So in the absence of any evidence of 90% NRAS lending existing with any lender in the marketplace, the guidelines below will serve you ( and any other forum readers) well….
Remember also, only Genworth LMI will accept NRAS deals- QBE LMI wont do NRAS, so again… the contention made by brokers on these forums that both insurers are OK with NRAS is questionable in my mind; but each to their own. I'm just telling you whats officially available so you don't ruin your CRAA by letting your broker try to fit a square peg into a round hole.
QAHC – Head Lease Agreement
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Questus – Non Entity Joint Venture via Managed Investment Scheme.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Aspire – Non Entity Joint Venture
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRASYarran Group – Non Entity Joint Venture.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.UAHA – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Ethan Affordable Housing – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.
Bendigo Adelaide – 80% LVR without LMI. They use 65% Gross Rental for servicing and they do NOT use the NRAS incentive for servicing.Affordable Management Corporation
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Accelerated Wealth Systems ( Quantum )
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.euro73 wrote:Who does 90% Richard? There's not one single lender with an official policy to 90% LVR. Westpac's( and St George and Rams) policy is 85%. Firstmac's is 80%. Bendigo Adelaide's is 80%. Of course, I know some deals are being done on a case by case basis, and Ive stated that several times in my posts, but Im posting information on the general lending policies in the market, – the policies that most investors will encounter.
If you got a few 90's done thats great – you must have good lender relationships and the clients were clearly strong… but who were the lenders, and which NRAS model were the customers buying into? ie QAHC, Questus, Aspire, Ethan, etc??? A claim that "several lenders" will do 90% should be supported by some further facts.Richard Im hoping you can provide some information about the lenders who do NRAS at 90%. The reason I ask is that QBE LMI wont accept NRAS, and Genworth LMI have only appoved a handful of NRAS Approved Participants models, those being QAHC, Ethan, Questus and UAHA. While Genworth has approved 90% for the NRAS models Ive listed, only Westpac, St G Rams and Firstmac have any official NRAS lending policy, and none of those lenders will do 90%LVR. I realise there are always exceptions, and NAB for example will take deals on a case by case basis… but I'd hoped you could share your 90% successes with us.
Who does 90% Richard? There's not one single lender with an official policy to 90% LVR. Westpac's( and St George and Rams) policy is 85%. Firstmac's is 80%. Bendigo Adelaide's is 80%. Of course, I know some deals are being done on a case by case basis, and Ive stated that several times in my posts, but Im posting information on the general lending policies in the market, – the policies that most investors will encounter.
If you got a few 90's done thats great – you must have good lender relationships and the clients were clearly strong… but who were the lenders, and which NRAS model were the customers buying into? ie QAHC, Questus, Aspire, Ethan, etc??? A claim that "several lenders" will do 90% should be supported by some further facts.Jamie M wrote:euro73 wrote:PS – no need to cross, if you have enough equity in another property to provide 20% plus costs. You would simply add a new split to your existing mortgage, for 20% plus costs. Set it up Interest Only , as its being used for investment purposes. You would then get a stand alone NRAS investment loan with one of the lenders I've mentioned, for 80% LVR.You don't even need that much. If you're willing to pay some LMI then 10% plus costs may be enough.
With all due respect, I dont believe thats appropriate advice. There is no lender who offers 90% LVR for NRAS, at the moment. That may change , but at the moment 90% isn't officially available for NRAS. Sure, there are always deals done by exception, on a case by case basis…. but there's no way 90% is broadly available. NRAS deals cannot and should not be treated like conventional investment deals where 90% is secured against the investment. I've made detailed posts on here about the NRAS lending policies available…..
onthemoney wrote:Thanks for an excellent post euro.In a nutshell Tony – I'd be using Westpac, St George, Rams or Firstmac for NRAS for the relevant NRAS Approved Participants models, as outlined above. At best, other lenders will only do NRAS on a case by case basis… and its terribly inconsistent.
I dont understand why people try to "cheat". The 4 lenders above have gone to the trouble of specifically developing NRAS lending policies, for the NRAS Approved Participants listed. I think any broker or investor trying to do NRAS finance outside these lenders, in order to avoid the LVR restrictions or borrowing capacity restrictions, is taking a silly risk…. Besides, its fraud. Anyway, thats for individual investors and brokers to decide for themselves I guess…. but I know there's lots of it going on already and it strikes me as being unnecessarily dangerous when there are 4 lenders with great NRAS products offering a legitimate way to do things…
I have to further stress that whilst St George, Westpac and Rams will go to 85% LVR and Firstmac will go top 80% LVR, Firstmac is the only lender that uses the NRAS incentive as income for servicing. They treat the entire NRAS incentive as tax free income, so you actually have better borrowing capacity with them than you would have by failing to disclose NRAS and presenting the deal as a standard investment deal, where lenders calculate 80% of gross rental, generally.
So, with St George, Westpac and Rams, rather than inputting 100% Gross Rental into their calculators, you input 80% of Gross Market Rental into their calculators, to allow for the NRAS discount. ( This applies to QAHC too, even though the QAHC NRAS discount is 25%, unlike every other Approved model, which all use a 20% discount – the lenders have gone with a one size fits all policy for servicing to keep it simple) Just like conventional investment deals, the lenders calculator then assesses this figure at 80%, so you end up with approx 65% of Gross Rental being used (80% x 80% = 64%)
With Firstmac, you do exactly the same – input 80% Gross rental into their calculator, which in turn calculates the data at 80% (80% x 80% = 64%) PLUS you input the $9140 NRAS incentive as tax free income. All the lenders calculators also apply their normal Neg gearing/Addback values… Bottom Line ? – You should get significantly better capacity from Firstmac, for NRAS. Might come in handy especially for investors wishing to purchase multiple NRAS properties in the coming year or two…
FYI…not sure whether you are aware, but Firstmac also offer unconditional approvals for 18 months, on Off The Plan NRAS purchases. The only criteria is that you must refinance another non – NRAS property to them up front, in order to qualify for this policy. It doesn't have to be PPOR, it can be another INV property if preferred…but lets face it, usually the equity for an INV purchase will come from the PPOR, so I would expect that in 99% of cases that's what people would be refinancing to Firstmac. The refinanced property is meant to provide the 20% deposit plus costs to complete the Off The Plan purchase. They set it us as an Interest Only split on the refinanced loan, and retain the funds until settlement of the Off Plan property. Pretty powerful policy. If I was buying Off The Plan, Id certainly be taking this option.,…
You should double and triple check with your lender about this 90% approval they are promising. Its all well and good for them to say they will offer 90% LVR, but they aren't offering you anything more than a pre approval at this stage, and they are not obliged to offer unconditional approval later on down the track… have you been clear with them about the fact that the property has an NRAS allocation attached? Some people on these forums will try and convince you that NRAS finance is simple to obtain. Its not. Even if this was a completed unit, NRAS finance is offered by a limited number of lenders, and there are strict criteria attached. None offer NRAS finance to 90% LVR. The fact this is Off The Plan makes it even more critical that you double and triple check with your lender.
Because even if it wasnt NRAS, pre approvals for off the plan purchases are not worth the paper they are written on in many cases anyway. Firstly, the essence of Off The Plan buying is to take a punt that the value of the property in 12 or 18 months time, when built, is greater than what you paid for it today. It works really well in boom times, but because the property wont be valued until its near completion, you have no way of knowing how the valuation will look, that far ahead. What if rates have gone up 1.5% by then and the market has softened by 50k? Remember where rates were pre GFC, and where they are now. What if you have an injury or illness and lose an income, and cant qualify for a loan in 12, 15, 18 months time? What if the builders go bankrupt? There are alot of "what if's" with Off The Plan purchase, whether they are NRAS or not…
So you'd probably be interested in this. ….
The NRAS allocations for this development are held by UAHA ( Urban Affordable Housing Association). When the property is completed, you will enter into a Non Entity Joint venture agreement with them to receive your NRAS incentive. The UAHA NEJV model is approved by Firstmac. As far as I know, they are the only lender to approve the UAHA NEJV model, so far.
Firstmacs NRAS policy includes an 18 month advanced unconditional approval for off the plan NRAS purchases. In other words, for any Off The Plan NRAS developments which are due to be completed within 18 months – you can get unconditional approval today, for those purchases. Takes all the risks mentioned above, off the table. Guarantees your finance and settlement. There are some strict criteria though;
The maximum LVR is 80%
You must refinance another property to them also- to a max LVR of 80%. That refinance must provide the 20% plus costs for the NRAS purchase.They also have the best borrowing capacity for NRAS…
They use 65% Gross Market rental for servicing – to reflect the discounted NRAS rent. (usually lenders take 80% Gross Rental)
They use 100% of the NRAS incentive as tax free income.Anyway, something I thought you should know about. If I was buying Off The Plan, I would definitely be using this option. It seems a no brainer to me…
onthemoney wrote:Anyone thinking of buying an NRAS property I am offering a complimentary NRAS PIA (Property Investment Analysis) on any property you are considering buying. NRAS is now widely accepted and lenders policies are changing daily to accommodate this scheme. Here's a video demo: http://www.screencast.com/t/plgkyshbwPj If you would like an obligation free analysis on any potential NRAS property purchase shoot me an email and I will respond. Any useful information on the latest government or lender policy changes in support of the NRAS scheme are welcome.Tony, FYI
I have posted extensively on NRAS finance previously, but I'll post here again, as these questions seem to keep coming up. Depending on which Approved Participant the NRAS incentive is being administered by, these are your finance options…
QAHC – Head Lease Agreement
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Questus – Non Entity Joint Venture via Managed Investment Scheme.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Aspire – Non Entity Joint Venture
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRASYarran Group – Non Entity Joint Venture.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.UAHA – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Ethan Affordable Housing – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.
Bendigo Adelaide – 80% LVR without LMI. They use 65% Gross Rental for servicing and they do NOT use the NRAS incentive for servicing.Affordable Management Corporation
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Accelerated Wealth Systems ( Quantum )
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Of course, you can ignore this, and get around the LVR restrictions by simply not declaring the property is NRAS, when appyling for a loan. Its easy enough to do, as NRAS isnt mentioned anywhere on the contract of sale you would present to the lender. This would achieve two things. Firstly, it would allow you to access any lender in the market, as you would be presenting a generic investment loan application. Secondly, it would allow you to access 90% LVR, as most lenders policies allow for this with conventional investment loans. So I can see how it might be tempting for investors who dont have enough equity to buy NRAS at 80% LVR for example. I can also see how it would be tempting for brokers to use this "loophole", so they can write the loan and make a commission
However, if you fail to disclose the fact it is an NRAS property, you would technically be presenting false information on the application form, and the bank would be calculating your borrowing capacity based on full market rental rather than discounted NRAS rental. It amounts to fraud, and it's a very very dangerous path to tread. If a lender discovers the property is NRAS after the loan has settled, they may call in your loan on the basis of failure to disclose. I suggest you double check and triple check that any broker you use, is disclosing NRAS to the lender, and is sticking to the lenders above, so you don't have any problems down the road…
Just my 2 cents…
euro73 wrote:no no no…. don't go down this pathFor starters, loans for purchasing NRAS property are only available through a limited number of lenders.They are generally available to 80-85% LVR maximum. Anyone recommending a 105% loan ( which I assume is the 105% Mortgage House product – which isnt available for investment anyway) for an NRAS investment property purchase hasn't graduated mortgage broking class 101, yet. They certainly dont know NRAS.
I have posted extensively on NRAS finance previously, but I'll post here again, as these questions seem to keep coming up. Depending on which Approved Participant the NRAS incentive is being administered by, these are your finance options…
QAHC – Head Lease Agreement
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Questus – Non Entity Joint Venture via Managed Investment Scheme.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Aspire – Non Entity Joint Venture
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRASYarran Group – Non Entity Joint Venture.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.UAHA – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Ethan Affordable Housing – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.
Bendigo Adelaide – 80% LVR without LMI. They use 65% Gross Rental for servicing and they do NOT use the NRAS incentive for servicing.Affordable Management Corporation
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Accelerated Wealth Systems ( Quantum )
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Of course, you can ignore this, and get around the LVR restrictions by simply not declaring the property is NRAS, when appyling for a loan. Its easy enough to do, as NRAS isnt mentioned anywhere on the contract of sale you would present to the lender. This would achieve two things. Firstly, it would allow you to access any lender in the market, as you would be presenting a generic investment loan application. Secondly, it would allow you to access 90% LVR, as most lenders policies allow for this with conventional investment loans. So I can see how it might be tempting for investors who dont have enough equity to buy NRAS at 80% LVR for example. I can also see how it would be tempting for brokers to use this "loophole", so they can write the loan and make a commission
However, if you fail to disclose the fact it is an NRAS property, you would technically be presenting false information on the application form, and the bank would be calculating your borrowing capacity based on full market rental rather than discounted NRAS rental. It amounts to fraud, and it's a very very dangerous path to tread. If a lender discovers the property is NRAS after the loan has settled, they may call in your loan on the basis of failure to disclose. I suggest you double check and triple check that any broker you use, is disclosing NRAS to the lender, and is sticking to the lenders above, so you don't have any problems down the road…
Just my 2 cents…
PS – no need to cross, if you have enough equity in another property to provide 20% plus costs. You would simply add a new split to your existing mortgage, for 20% plus costs. Set it up Interest Only , as its being used for investment purposes. You would then get a stand alone NRAS investment loan with one of the lenders I've mentioned, for 80% LVR.
no no no…. don't go down this path
For starters, loans for purchasing NRAS property are only available through a limited number of lenders.They are generally available to 80-85% LVR maximum. Anyone recommending a 105% loan ( which I assume is the 105% Mortgage House product – which isnt available for investment anyway) for an NRAS investment property purchase hasn't graduated mortgage broking class 101, yet. They certainly dont know NRAS.
I have posted extensively on NRAS finance previously, but I'll post here again, as these questions seem to keep coming up. Depending on which Approved Participant the NRAS incentive is being administered by, these are your finance options…
QAHC – Head Lease Agreement
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Questus – Non Entity Joint Venture via Managed Investment Scheme.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Aspire – Non Entity Joint Venture
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRASYarran Group – Non Entity Joint Venture.
Westpac, St G and Rams. 70% LVR without LMI, 85% with LMI. They use 65% of Gross Rental Income for servicing. They do NOT use the NRAS incentive for servicing.UAHA – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Ethan Affordable Housing – Non Entity Joint Venture
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.
Bendigo Adelaide – 80% LVR without LMI. They use 65% Gross Rental for servicing and they do NOT use the NRAS incentive for servicing.Affordable Management Corporation
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Accelerated Wealth Systems ( Quantum )
Firstmac. 80% LVR without LMI. They use 65% Gross Rental for servicing and they DO use 100% of the NRAS incentive as tax free income for servicing. They have the best borrowing capacity by far, for NRAS.Of course, you can ignore this, and get around the LVR restrictions by simply not declaring the property is NRAS, when appyling for a loan. Its easy enough to do, as NRAS isnt mentioned anywhere on the contract of sale you would present to the lender. This would achieve two things. Firstly, it would allow you to access any lender in the market, as you would be presenting a generic investment loan application. Secondly, it would allow you to access 90% LVR, as most lenders policies allow for this with conventional investment loans. So I can see how it might be tempting for investors who dont have enough equity to buy NRAS at 80% LVR for example. I can also see how it would be tempting for brokers to use this "loophole", so they can write the loan and make a commission
However, if you fail to disclose the fact it is an NRAS property, you would technically be presenting false information on the application form, and the bank would be calculating your borrowing capacity based on full market rental rather than discounted NRAS rental. It amounts to fraud, and it's a very very dangerous path to tread. If a lender discovers the property is NRAS after the loan has settled, they may call in your loan on the basis of failure to disclose. I suggest you double check and triple check that any broker you use, is disclosing NRAS to the lender, and is sticking to the lenders above, so you don't have any problems down the road…
Just my 2 cents…
sorry Mike, I meant a difference of $300 between St G and the Rock…. $2450 v $2142
Thats good information Mike- thanks.
Seems as though The Rock has a pretty competitive product. In the scheme of things, $300 or so in set up costs is pretty inconsequential, if they have superior borrowing capacity. Correct me if Im wrong, but I believe St G is priced at 7.80% and The Rock is at 7.89%? Not much in that, either…
OK. My understanding was that the Rock has 70% LVR, no Personal Guarantee and more generous borrowing capacity than both St G and NAB…. and an app fee of $600. That would seem to make it a very good product in a side by side comparison. Is that not the case?
MikeF wrote:euro73 wrote:Richard/Mike.Pro's/cons of those three lenders products, versus the Rock and St George?
Too many to list here in detail and depends on your individual situation but here are a few; Minimum net SMSF Asset Position – CBA require minimum $300,000 Variable Interest rates – vary 7.67% to 8.59% Monthly/ongoing fees – from $8pm to $93pm LVR's 65% to 80% Minimum Loan Amounts – $10,000 to $250,000 Bank application/legal costs range – $2,200 to $3,200 Will lend to individual trustees – Not at 80% LVR
So the Rock and St George are amongst the better SMSF loan products then?
keiko wrote:euro73 wrote:keiko wrote:Bloody valuers, I would Keep it with the same agent, she sounds like she will work hard for you to get this sold, the agent may be able to make the change to the other properties that she sold by logging onto RPData and making the changes, that is as long as they have sold and are not still under contract, (I think this is possible but not 100% sure)
Another option, pay $500 or whatever the cost in your area to do a valuation and then tell that valuer you think it is worth $650,000ish, and provide him with the evidnce of the other sales and why your apartment is better, and hope it comes in somewhere around $620,000 and then have your agent go back to the buyer and say look here is a new valuation,
that other valuer didn't know what he was doing etcThats not going to assist, unfortunately. Neither banks nor mortgage insurers will accept a valuation that has been ordered by the vendor. Thats precisely why lenders have panels of valuers who they assign valuations to randomly, and its precisely why mortgage insurers have check valuation departments. Valuers are liable to lenders and insurers for the information contained in a valuation report, so they arent going to take chances. If they provide a dud report they could be cut from a lenders panel, and that means a huge hit on their income. Valuers are always, always always required to provide 3 comparable sales on a valuation report they prepare for mortgage and mortgage insurance purposes, at a bare minimum, which are officially recorded on an independent dtabase such as Residex or RPData, for example. The 3 comparables usually include one superior, one inferior and one similar sale. They will never never never use data thats not provided by an independent source, so your agent yelling at them and telling them she sold one for 642K wont have one bit of influence, I'm afraid. Until the 642K sale appears on rpdata or residex, the valuer will behave like it doesnt exist. Thats the cold, hard reality.
Besides, who says the valuation that the lender ordered on the 642K sale, was for 642K? It may have been lower. The valuer cant just work on the word of the selling agent. The selling agent has no idea what the valuation came in at. The buyers may have had loads of $$$ and the valuation may have been lower than 642K, but they just wanted that property so they tipped in extra money. No one knows how large their loan was or what LVR it was. You cant expect a valuer to work in theories. They just wont do that.
I have done it before, I have used a bank panel valuer that I have ordered and the bank accepted the valuation, so it can be done.
It may be possible that the valuation for the other property sale was less than $642k but that doesn't mean anything as when the sale price shows on RPData at $642k then the new valuer will take this into account.
If you can name a single lender or mortgage insurer that accepts a val ordered by the customer, and is undertaken by then valuer in the customers name, I'll defer to your point…but I dont believe you can. Maybe its happened in the past, but its definitely not normal practice. For a valuation to be acceptable to a lender for mortgage purposes, it must be prepared noting the lender, the mortgage insurer and any other related parties ( such as state custodians, perpetual, etc) on the report. Otherwise, in the event of a delinquency or repossession, an insurer wouldnt pay, and a borrower could challenge the legality of the mortgage and would win, and walk away.
What you may have been able to do is order the valuation on behalf of the lender…some lenders do allow that- but in those cases the valuation report is prepared for the bank, not the customer. Its unlikely you ordered it in your name, and the bank used it.
Richard/Mike.
Pro's/cons of those three lenders products, versus the Rock and St George?
Thats useful information Sue, but it's only information about QAHC. As I've stated in other posts, QAHC is not the only NRAS Approved Participant whose model has been approved by lenders such as St George, Westpac and Firstmac, or approved by Genworth LMI…. so Id like to talk about the other models too, so we arent being seen to be recommending one model over another.
I would still urge potential NRAS investors to look at a variety of Approved Participants on the basis of three things. Lender Finance Availability, Cost of the model, and Property locations/prices;
Here's a rough guide of the state of play as of December 2010. Finance- which lenders will do what, generally speaking? FYI-Genworth has approved each of these models to 90% LVR, FYI. You'll see that no lender is offering loans to 90% though.
QAHC – St G and RAMS – 70% without LMI 80% with LMI Westpac 70% without 85% with. Firstmac 80% without LMI
Questus- St George as above, NAB case by case up to 80% without LMI, Firstmac 80% as above
Ethan Affordable Housing- Bendigo Adelaide 80% without LMI, Firstmac 80% as above
UAHA- Firstmac 80% as above
Yarran – St George as above
Aspire- St George as aboveThe models- There are other NRAS models other than the ones Ive listed, but they arent appoved by lenders ( yet) so the models above are probably the only ones worth talking about at the moment. Check the entry and exit costs for each model. Check the ongoing costs to administer NRAS, also. Check the property managers they're using. You'll find significant differences in the costs of some models… which is fine- its a free market…but factor it in to your thinking.
The stock/locations/prices…. each NRAS Approved Participant has stock in different locations. QAHC and Questus for example, have mainly got house and land stock in Qld. Ethan mainly has house and land in Vic, and some Off the Plan in Darwin…. Yarran has regional stock in WA, etc etc… as more NRAS incentives are awarded by Fahcsia, across Australia, more stock will become available in other locations too.
Remember that whether you purchase a 250K 3 bedroom property through Ethan in Bendigo, or a 450K 3 bedroom property through QAHC in Qld…the NRAS incentive is the same- $9140 this year).
The costs of the property and the costs associated with the Approved Participants models are the variables. But just because one model is dearer doesnt mean its not a good model. For example, if you believe a more expensive Qld property attached to QAHC has better capital growth potential, dont be put off simply because the QAHC model is more expensive than the Ethan model, for example. Ethan cant offer you that particular property in that location- so you have to accept the QAHC costs as the price of doing business in that example…More important than anything- as long as you buy NRAS stock attached to one of the Approved Participants listed above, and use one of the lenders listed, you know you can access legitimate NRAS finance, subject to LVR/LMI limitations. The rest of the decision is really just about ongoing costs, location and potential for capital growth…
