I am new to the real estate area of investing with plans under way to conduct ‘wrap’ deals in the not to distant future. I have however come across a new obstacle. After much searching, seminars, reading and offers to vendors, I have had my first offer accepted. The accepted offer is for $110K with a 60 day settlement period (extended from initial demand of 30 days by the bank who has taken over preliminary foreclore of property). I had already held a meeting with a Mortgage Broker in order to leverage my time whilst I continued to search for more properties. He has informed me that all of their lenders (29+)are not willing to take on our mortgage. I have been running my own company for under six months, with AUD$10K+ per month coming in and a further $1500/month in income from other sources. The property is positively geared with an 8% interest only loan. As my company has less than 2-3 years of earnings to display he said all of his lenders were unwilling to loan me or the company the funds for the deal. I do not own my own house or other real estate. I have contacted a couple of the non-conforming lending institutions who are also unwilling unless I provide 15-25% deposit, which I have but do not wish to commit to the one deal.
Does anyone have any thoughts or similar experiences in regards to this recent challange?
Regards
Edited by – [email protected] on 17/11/2002 7:58:08 PM
I’m not sure how your offer works with the bank, but I’d first of all recommend getting out of the deal now unless the Exchange of Contracts has already taken place (and any cooling off period has expired). Never be afraid to pull the plug on a deal if it isn’t working out – put it down to a learning experience, and get pre-approved for loans where possible.
If, however, you’re already 100% legally committed, I see your best options as:
1. Call (or write to) a whole heap of mortgage brokers explaining your situation NOW – as long as there is no marking of your credit report happening, what’s the worst that can happen? I’m sure some of them have experienced the same situation before – you may just be using someone not really a specialist in fixing this particular sort of problem.
2. Find an investor to take out the loan (either under their name, or as a guarantor). You’ll obviously have to give them a cut, but it may be cheaper than your current options. I can’t qualify for loans myself so offer 1/4 cashflow (plus 1/4 contract profit if refinanced/cashed out) to the person who takes out the loan until I get full investors on board. It may sound overly generous, but if you’re putting the person’s FHOG at risk and want them to be happy being caught up in the deal for potentially 25 years, it’s a pretty fair deal. Run the figures against what it will cost you to pay the additional deposit.
3. If you’ve got it substantially under market, then pay the extra deposit and try flipping it (obviously before Settlement would be optimal).
4. If you get really, really desperate (ie. committed to deal, Settlement looming, and extra deposit still won’t get you a loan) let me know – I’ve been told of a broker that exists in western Sydney (can try and get you their details if you like) who may be able to assist in such a situation. I’ve never dealt with them – I keep them in mind as a contingency only. The additional cost there would probably be $3,500 (plus a 9% interest rate) on a 10% deposit but it beats failing to Settle, losing your deposit and possibly being sued by the vendor for any further losses.
Regards,
Marcus.
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Edited by – [email protected] on 17/11/2002 10:52:40 PM
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