Can some one please give me some advice.
We have just finished building our home
Worth $700,000 have a $300,000 mortgage
Have 2 investment properties (one with son)
Worth $580,000 have mortgage of $387,000
Receiving rent before fees of $1885
My husband earns around $35,000 a year
Through family problems my wage is up and down, am a real estate rep and have earnt between $40,000 to $130,000 and year
We have low doc loans we want to borrow more but our broker says we can’tAny ideas please
Caitlyn
those low doc loans must be real killers!!!!
while you certainly have the equity to go and buy more property (your lvr is 53%), i suspect that you broker is knocking you back due to servicability issues, i.e. hubby’s low income and your irregular income. is there anyway that you can stabilise your income? once i could do this, I’d be going to see another broker pronto. Eric
Thanks Eric for your advise
I think this is what it boils down to but when we get it at a stable situation then they want 2 or 3 years figures and as we are in 50’s we dont want to wait that long till we have to buy
Any more suggestions
I’d be sitting down with another broker and get a second opinion on your borrowing capacity and the way your loans are structured.
State Manager
Wholesale Mortgage Lender that deals only with brokers.
20 years in Finance Industry
I think your mortgage broker is probably telling you something that you don’t want to hear but it sounds to me like it is the right thing. It sounds like the broker is one of the few with good ethics.
Any unscrupulous broker will tell you just to state a higher income on another low doc loan and use up all your equity and get the next property. Brokers get paid to write loans so your current broker is doing him/herself out of income by telling you that you do not qualify. I think your broker is also protecting themself from being sued by you if you lose a property down the track and decide to acuse the broker of telling you to state a higher income. Believe me, you will be out for blood if it happens.
If you do the low doc thing again and don’t have the income, you might find the ATO calling you to make an appointment to audit you.
What happens if a tenant moves out of one of your investment properties and your income is still at the low end? How will you meet all the repayments?
Regarding the comment about 2 or 3 years figures being required once your income is stable, this is not required for low doc loans. You should stabilise your income to protect yourself from losing everything.
I think your broker has done a great thing!!!
Robert Bou-Hamdan
Mortgage Adviserneo,
I just wanted to make comment on your LVR calculation, because I think sometimes equity is seen as more simple than it is. Can someone *please correct me if I’m wrong about this, but I wanted to mention it because it does make a difference on how much useable equity one can have to make new purchases.
Caitlyn has about 1.4 million in property, and owes about 700k. However, assuming she has to have an LVR of 80% to call off the debt dogs… then she would have to have at least 20% of each property *purchase* price (not current valuation) in reserve. If she purchased her three properties for, say, $1 million, then she would have to have 200k remaining in the loan. She would have to minus this amount before she can determine equity.
On paper, her situation looks good, but when you add that 20%, it looks very different.
kay henry
Hi Kay,
Equity is just the difference between current valuation and what is owed. I don’t know what you mean when you say ‘debt dogs’ but LVR is always calculated on current valuation. The 80% level just avoids mortgage insurance costs but you can borrow at higher levels.
If LVR was done against purchase price, those who bought million dollar properties for $20,000 about 20 years ago would be severely retarded when considering their investment potential.
Serviceability is the only restrictive variable when there is a sufficient surplus equity being held.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by kay henry:neo,
I just wanted to make comment on your LVR calculation, because I think sometimes equity is seen as more simple than it is. Can someone *please correct me if I’m wrong about this, but I wanted to mention it because it does make a difference on how much useable equity one can have to make new purchases.
Caitlyn has about 1.4 million in property, and owes about 700k. However, assuming she has to have an LVR of 80% to call off the debt dogs… then she would have to have at least 20% of each property *purchase* price (not current valuation) in reserve. If she purchased her three properties for, say, $1 million, then she would have to have 200k remaining in the loan. She would have to minus this amount before she can determine equity.
On paper, her situation looks good, but when you add that 20%, it looks very different.
kay henry
Hi Kay,
I disagree with you. Equity has for me always been calculated using current valuation. I don’t see in what circumstances you would even need to work out the equity on the purchase price. Maybe if the current valuation of the property was, God forbid, less than the purchase price???[shocked3] I agree that some of us here (not me, ofcourse!) have hocked ourselves to the point of being a breath away from being eaten by those `debt dogs’ you describe. I hardly think Caitlyn is in sight of those fangs! Keep smiling, Eric
You could borrow more fairly easily if you want to.
for example getting a 65% No doc loan on your main house would give you $155,000 extra. you could then use this as deposits and borrow more. This should enable you to borrow for another house at approx $380,000 price range.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry, they cannot service that level of debt mate.
Robert Bou-Hamdan
Mortgage AdviserThanks guys for all your in put.
What about another idea
We buy more properties with our son
He earns $75,000 year in the mines, has his own home mortgage of $165,000 worth $240,000
Has a property with us mortgage $190,000 Worth $280,000 Rent being paid $225.00 week.How would that work
CaitlynThe problem with teaming up with your son is that you will have to service the complete debt on properties you own with him if you want to buy more yourself later and he will have to service the complete debt on properties he owns with you if he wants to buy something himself later. This is on top of any liabilities you already own yourself.
Then there is the stamp duty issues if you want to change the title details. It can be done at no cost if inter-family with parents and child but can be extremely difficult.
There is also the problem of one of you ceasing to make payments (through choice or unforeseen circumstance). The other will be liable for the lot. I would ensure all had income protection insurance, life insurance and their mortgage insured as well as the property insured (required by the lender).
As long as you know the pitfalls, doing this will definately improve your ability to service debt and borrow more.
Robert Bou-Hamdan
Mortgage Adviser“Then there is the stamp duty issues if you want to change the title details. It can be done at no cost if inter-family with parents and child but can be extremely difficult.”
I would be grateful if you would explain the above—or point me in the direction of how to achieve this. All the best to Forum members from an infrequent visitor.to call off the debt dogs..Did I hear my name being mentioned?[snitch]
markk
Happy Hunting
http://www.kentscollections.comOriginally posted by Magellan:“Then there is the stamp duty issues if you want to change the title details. It can be done at no cost if inter-family with parents and child but can be extremely difficult.”
I would be grateful if you would explain the above—or point me in the direction of how to achieve this. All the best to Forum members from an infrequent visitor.Hi Magellan,
I was made aware last year that changes to title between immediate family members could be done without incurring additional stamp duty under specific circumstances. One of those was where parents went on title to help a child purchase a property and the child made all payments and obtained all benefit from the property. There were other situations.
It was very difficult to find anyone knowledgeable enough in this area to get a definitive response but the resulting information was that an application to the ATO could be made for a private ruling to avoud the stamp duty.
I am not an accountant or solicitor and would not be able to tell you which would be better to approach. A good accountant familiar with creative investment structures would certainly be able to help you.
Maybe if you post a question in the Accounting section, Mark Unwin or another accountant may be able to help.
Robert Bou-Hamdan
Mortgage AdviserIf you can get a hold of the Money & You lifout of the Courier Mail (from Wed 4 May, 2005), there is a “makeover” on page 3 that sounds a lot like your situation.
It may provide some useful tips for your future investing.
Cheers,
Jason.I have seen a few clients do this, but only between spouses. It can be done when there is a court order, on separation – without stamp duty and CGT. In NSW and Vic, it is also possible for spouses to transfer to each other for $1 stamp duty. I don’t know, or think, it would be possible with other family members.
It can help when one of a couple has credit problems which would result in a much higher interest rate. A transfer is done into the person with the clean record. They then get the loan at normal rates.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thank you all who replied to the point I raised on this thread. Cheers
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