Forum Replies Created
Hi Wayne,
I hear this type of dilema all the time in my work as a mortgage broker. May I first suggest that you have a good look at “Simply Budgets”, their website is http://www.simplybudgets.com, purchase the package (about $70), and first work out where the money is going. This alone will be a big step in the right direction.
Secondly, establish a relationship with a mortgage broker you are comfortable with. Have a good look at many of the postings to this forum, there’s a few here willing to help (including myself).
Whilst you may have a Lo-Doc loan now, there are some Lo-Docs that decrease in interest rate over 2 and 3 years for perfect repayments, so these are becoming good value.
Cheers!!!
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]All of the above posts are an excellent start, however, don’t be afraid to look at something like Simply Budgets. This software is like having a crystal ball for your bank account. Costs about $70 odd dollars, and works very well, I use it myself. Have a look at http://www.simplybudgets.com.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]Hi Aaronj,
I’ve done a lot of work with Bluestone, here’s their website address, so you can draw your own conclusions http://www.bluestone.com.au. Contact me on [email protected] if you have a specific scenario to review.
Cheers!!!
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]Hi everyone,
Well, we do have our opinions don’t we? Melanie was the closest, in that it depends on who you work with on a personal level, not so much the institution.
Whilst many of the replies are from brokers like myself, I don’t remember one of them saying to establish a relationship with a broker (or dare I say it,, a branch manager – if he/she is there very long!).
As brokers, we are very aware which institution is performing well on any particular month, for product and after sales service (such as settlements and releases).
All of the institutions have performed well in the past and will do so again. But they trip up on occasion.
Many of you may be afraid of paying a brokerage fee. This is usually past history now (certainly is with me, I don’t charge any fee to the borrower). We are paid well enough on the commission earned by the institution of your choice.
So, in summary, your situation will determine the best lender on the day, and as for multiple securities, again it depends on your situation. I have recommended in the past splitting your debt between institutions for your personal security and financial planning, and to excersise more control over the lenders.
Lots of good brokers on this forum, email them and get to know them. Distance is no longer an issue today, so don’t worry if they are not local. Form a relationship, you’ll be impressed with what a good broker can do to help you.
Cheers!!
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]Hi,
This is not going to be an easy one, but will involve some confidential discussion. Contact me on email [email protected].
Cheers!!!
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]Hi Steve,
Congratulations on the success you’ve worked hard for on your investments and your book.
I saw you briefly on Channel 9 Morning show, and was impressed with your comments as they match my advice to my clients.
Went out that same day and bought three of your books, one for my library and two as gifts to my clients. I suspect I’ll be buying more as gifts in the near future.
Cheers and good on ya’
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]Hi Alf,
I live in Toowoomba, Qld and may be able to provide anecdotal evidence or personal comments on the area in question. Email me at [email protected].
Call the local council, they will often give you some good information on local conditions.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]Hi Ash,
email me off-line at [email protected] if you have private questions, or happy to discuss them here, if you are comfortable with that.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]quote:
Home Loan Guy you made a comment about being rent dependent and how some banks look at that. Surely most IP investors once they get beyond $500 K to 1 million in debt are rent dependent. My understanding of most IP investors today is that they are in debt to their eyeballs although they may have a good LVR. You also mentioned not exceeding 80% LVR, do you mean 80% across the board, ie my whole portfolio including my own home used a security or each individual IP?Thanks again for the comments.
Hi Beachboy,
Yes, most investors do become rent dependent, and this is why Lender’s Mortgage Insurance can become a problem with some institutions. For my clients, I split their portfolio over several institutions, to reduce the perceived risk (by LMI and banks). For instance, GE LMI (one of the largest mortgage insurers in the country) used to have a maximum risk of $750,000 per client, but have recently increased that amount (due to increasing market).I recommend splitting the portfolio amongst different lenders (don’t keep all of your eggs in one basket). As I’ve mentioned it here, I think I’ll create a new topic tonight on portfolio finance managment and see where it leads.
Back to your question. Should your portfolio remain below 80% LVR? If at all possible yes…makes subsequent lending easier to obtain, and you only need to meet bank policy not LMI policy. Believe it or not banks are more lenient on rent dependency than Mortgage Insurers. Second reason, your portfolio is likely to be cash flow positive. Third reason, LMI is very expensive, and is on a sliding scale from 80% LVR up to 95%. This extra settlement cost can be as high as 2% of borrowed funds ($2,170 on borrowings of $100K on unregulated/investment contracts. This expense can often make a positive geared property become a neutral/negatively geared property.
Lender’s Mortgage Insurance is a premium/fee you pay to protect the lending institution!!!. LMI never protects you!!!
There’s lots more to say on this subject, but I’d like to hear your comments at this point.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
email [email protected]
Sounds fishy to me. I’m willing to bet the next phone call you get from your real estate agent is that you will need to increase your offer to get the vendor to sign.
You will need to decide if you think this place is worth it. Here in Queensland (and I’m sure this is much the same in other states), you can sign a contract subject to building inspection, finance, and any other clause you wish. I would never invest money in inspections until both parties have signed the contract.
Can’t help you with legal side of things, perhaps a legal person on this forum can help.
If you lose the contract, chalk it up to experience. Always consult your solicitor before signing contracts unless you are confident of all of your rights and obligations.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Hi Ash,
Good to hear from another Canadian!!! I grew up in Toronto area, and moved to sunny Australia twelve years ago. Love it here. As we say in Queensland, “perfect one day, sunny the next”.
You are right about needing a good accountant, but unfortunately I’m not sure of a suitable one to refer you to. However, I’m sure many others on this forum will be able to help.
I would however, like to offer my services as a mortgage broker to you to assist with finance if you require it. Some special conditions need to be fulfilled with our banks at this end, and I can help.
Email me off-line at [email protected] if you like.
Best of luck.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841quote:
I agree totally with Dogs. I’m just writing an article for The Australian about this. This arrangement can save you from nil to 5% (of interest payable)… not that great really.Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Stuart,
Glad to see another broker thinking the way I do. I don’t receive the Australian, any chance of a copy of your article when it’s ready? My email address is [email protected]
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841quote:
Wow, a lot of golden nuggets if information….
anyone use PC based budget programs? like Simply
Budgets etc? any other progs out there?Hi,
Yes, I use and highly recommend Simply Budgets. As a mortgage broker, I really question the use of LOC accounts and credit cards to try to reduce the term of a loan. As a matter of fact, we know 80% of people on this type of program actually do not reduce the principal balance as they should. Melanie said it earlier, far better to go with a basic variable or offset account and schedule higher repayments. You will achieve the same effect mathematically and at a lower interest rate.
Something I may have missed in the previous posts. While the interest free period may be 55 or 62 days, how often do you receive the statement? Every month, so what’s really the longest interest free period if you pay monthly? 30 days!! Bit of scam I think. Stick with strong budgeting, pay down personal debt first, Owner Occupied Home second and IP’s (on Interest only) last.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841quote:
All good debt, no car loans and I pay my credit cards monthly. I guess my wotif worries stem from the fact that my debt service levels have now exceeded my employment income (rental income not counted), which in the past I have used as a fall back if things go pear shape. I have reserve funds if I need them I guess I just don’t like owing so much money, which is envitable in the IP game. Surely I am not the only one with these concerns.Ok, all sounds good. So as advised elsewhere, look at Landlords insurance (but this only pays if professionally managed by a registered property manager).
So, consider these questions;
Are you confident your property manager will keep the property tenanted? If not, find another manager.
What is the vacancy rate in the suburb/city your properties are located in. Where I live in Toowoomba vacancy rates are 1%, Dalby is 5%. How does your town compare?
What has been the vacancy rate for your properties? Can you budget a “float” to cover the weeks vacant?
Is your rent above market? Perhaps this is a factor if your vacancy rate is above the norm (if this is indeed the case).
What can you do to attract longer term tenancy?
As a mortgage broker, I would be asking you to consider all of the above things, as you have now become “rent dependent”. Some banks do not like this. I would imagine that if you achieve enough positive cash flow from other IP’s, they may be able to carry one vacant IP for a little while. That’s why I always recommend never exceeding 80% LVR where possible.
I look forward to hearing more thoughts from you.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Hi Victoria,
It really comes down to how many titles the units are on. For instance, I researched a deal for an 8 pack of units. No bank would touch it, as it was on one title. However, if it had been built on two blocks (titles), they would have been happy to do the deal as residential finance at 90% LVR (max of 4 units per title).
AXA Home Loans has told me repeatedly they will do six units on one title at 80% LVR, but haven’t had the chance to prove it yet.
Is this helping you?
Just so you know, I’m currently paying down my O/O home loan to gain sufficient equity to do a Lo-Doc deal to construct a duplex in Toowoomba or Dalby or Warwick. May even consider a triplex, but depends on the block of land at the time.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Hi Battz,
Give me a call on my mobile 0407 64 66 32 or email me on [email protected]. I live in Toowoomba, and work all of Southern Qld, so know those areas very well. Here’s a quick tip, don’t ignore Dalby and Roma for positive cash flow.
See ya’
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Stu’s right, Big 4 banks will do 30 year terms on investment properties no matter what your age, as long as your principle place of residence is not at risk.
The truth is, lenders are not allowed to discriminate on age. However, the Unified Consumer Credit Code (which doesn’t apply for investment loans) does state that a lender must not lend if the ability to repay the proposed debt is not evident for the life of the loan. Many lenders forget that investment loans are not UCCC compliant, however, they treat them as compliant for conservative reasons.
So, if you are having trouble getting finance, there are at least three brokers in this forum (including myself) who will be happy to help.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Hi,
If you are concerned about your debt level, maybe you should cool it for a while, until you gain confidence that most of your properties are tenanted most of the time.
Have you established a “float” to cover payments when properties are vacant? Perhaps, you just need to work out a strategy of how you will manage.
I lend a lot of money to a lot of people all the time. However, I never recommend anyone borrow, if they are not comfortable with their debt level.
How much of your debt is “good debt” ie for positively geared investments, and how much debt is consumer debt ie personal loans, cars or other liabilities that don’t generate a +ve cash flow? Maybe this is where you are feeling nervous…
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Before looking at building a six pack, check with your finance specialist. Not too many banks want to do anything above four units as a residential deal. Six pack may be a commercial deal (however AXA Home Loans may look at a six pack on occasion).
Four pack, probably can get done at 90% LVR, six pack, commercial deal, may be 65 or 70% LVR.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841Hi,
Generally, most investors will go with Interest Only for the investment property, if they still have a loan against their Owner Occupied Property. The rational here is the interest on the investment loan may be a tax deductible expense (please confirm this with your tax advisor, you do have one don’t you?). Whereas the interest on your Owner Occupied property is not a tax deductible expense. So you should apply as much funds as possible to the Owner Occupied debt to reduce it as quickly as possible.
However, if you do not have any consumer debt or Owner Occupied debt, then you may still go Interest Only (variable rate or split loan), knowing you can make lump sum repayments at any time to reduce overall debt.
The real answer is not here, you must consult a financial planner and/or tax specialist.
Gary Young
Home Loan Connexion
Mobile 0407 64 66 32
Fax +61 7 4636 4841
