Question on Joint Ventures?

Hmmmm. Its rare that a customer (even with 5+ IP) actually knows how the loan is being submitted. Often I have refinanced a loan that was submitted by a different lender that the customer thought was a car loan secured by their car but was infact “Misc investment purposes” secured by their house so that the bank would accept it.
With this in mind he is probably using Low doc loans. If he signs a declaration stating his income then its definately a Low doc. This is where instead of providing tax returns to show servicability he just signs a declaration. This type of loan is designed for people who are self employed and so avoid as much tax as possible, so their tax returns are not an accurate measure of their income. If he is using these Low doc loans then he can pretty much service any loan on paper as he can claim his income to be whatever he wants.
With low doc loans you need to have more equity 20% is the norm, but it can be 10% or 30%. Also you pay a higher rate or something along those lines. Remember the lender is taking a huge risk so its not unfair to get a higher interest rate.

So maybe this is the case with your friend? By law a lender cannot give a loan to someone who cannot afford it (Kinda makes sense doesn’t it?). If they cannot show that your friend can afford it then they cannot give him a loan.

Please tell me if this isn’t what hes doing.

Otto Dargan
Home Loan Manager
Mortgage House Five Dock
0297128988
[email protected]

Interesting question, Vinh. I spoke to my banker who advise borrowings are based on your salary plus rental income. Apparently they take about 70% of your rental income into consideration. That includes the new property that you may be buying as well.

When you start hittng troubles with the lending ratios, etc. why not start borrowing in another entity and start all over. Multiple structures lead to massive possibilities.

Enjoy
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(Andrew)

“”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert Einstein

The trouble with doing multiple structures is that as Director of a company, you must guarrantee the loan thru that company. So even if you set up another company, buy more property you will have to keep guarranteeing the loans. You would legally have to declare all loans you have guarranteed to the bank.

Terryw
[email protected]

Terry,

Please somebody correct me if I am wrong, but I believe that legally there is no requirement to disclose loans that you have personally guarranteed. At least through a company/trust strucutre.
i.e. if you were doing a statement of position (asset & liabilities = net worth), you do not include any loans that you have become a guarrantee for). Therefore they are not calculated in your personaly serviceability. But obviously it would be included in the company balance sheet.
While there is a risk (legally and otherwise) involved in becoming a garrantor at the end of the day they make the world go round!
It is really a matter of looking closly at your risk profile – if you can’t sleep at night, then you know something is wrong

Regards,

Tim Wilson.

“Poverty is not an option”

Hi Terry,

Thanks for clearing that up.

I guess at the end of the day, so long as you ensure you (or your company) is able to service the loans addequately then I guess there is no reason for alarm.
Also we are finding that a vital aspect of this is to develop a close relationship with a financier – almost a “I’ll scratch your back if you scratch mine” approach. Reguliar communication is also important. We try and send all of our business to the one financier, and this seems to make it a whole lot easier with questions, bcause they alread know the answers.

Regards,

Tim Wilson.

“Poverty is not an option”