Lease Options & Mortgage Brokers

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Optionman
Member
@optionman
Join Date: 2005
Post Count: 1
January 4, 2005 - 7:47 am
Hello all,
I have two questions I would like to ask relating to entering into a lease-option arrangement.
Q1.In Australia what are the chances of lease-option contracts being treated as a refinance 6 months into the term of the contract.
Q2.In Australia how much easier is it to qualify for a home loan when refinancing versus buying it for the first time.
Thanks in advance.
Robbie B
Member
@robbie-b
Join Date: 2004
Post Count: 2,493
January 4, 2005 - 10:33 am
Exercising the option will not be treated as a refinance as it is a purchase. The title has to be in you name already for it to be considered a refiance. The payments you have been making will help a bit but if you were not leasing the property, you would be renting somewhere else anyway. In any case, these payments would not be counted as they will be replaced with mortgage repayments.
I think buying for the first time is easier if your history is clean and serviceability is good otherwise refinancing when you have some equity and “clean payment history” is a lot easier. Late payments are not “clean payment history”.
Robert Bou-Hamdan
Mortgage Adviser

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Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
January 4, 2005 - 12:53 pm
A lease option is really just renting with an option. So it would not be classed as a refinance. They won’t even class a wrap as a refinance. But lenders will treat these favourably, and you may be able to get the loan based on value rather than contract price (which could be much lower), generally it would have to be an 80% LVR to do this to avoid the mortgage insurers. I have done the loan for one of these.
The first house is generally harder as you usually need to show genuine savings (depening on the LVR). When refinacing, you will not have this requirement, but must show 6 months of good repayment records.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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