I earn 110k year but have no deposit at all.I have $210 000 worth of shares but owe about $240 000 on variuos loans including credit cards.I am looking for an investment property around $600 000 with rents around $600/week.I do not have any property at the moment.I dont qualify for first homebuyers grant as I had a property which I sold 10 years ago.
Can any one offer any advice on how I can get hold of a deposit because a morgage broker told me I will need around 50k deposit.
I am finding it a little frustrating as I sold my house to go back to study and now I am qualified and earning good money I am worse off.Any advice greatly appreciated
JohnHi John
Great shame you hadnt asked this a week or so ago as the last 100% lender has withdrawn its product today.
Not only will you need a 5% deposit (Soon to be 10% with a lot of lenders) but also sufficient to cover your purchase costs and loan costs which will include mortgage insurance.
If you havent purchased before you might be better off to look at buying your first home and taking the First Home Owners Grant. Whilst you would still need to come up with a deposit might not be so much depending on where you are thinking of buying.
Richard Taylor | Australia's leading private lender
Richard, when is the cut off date for St George 100% loans?
John, you can still go through Rams until 9th April for 100%/no deposit but it needs to be through the Franchise channel only. If you want further info send me an email as I know lots of good Franchises and if you get a pre-app before the 9th you will be ok….
Cheers
RayJohn,
Good Luck at getting $600 /week rent on a $600,000 property.
Maybe you should start out a bit smaller.SGB have the same cut off date of the 9th April.
Richard Taylor | Australia's leading private lender
Thanks for all the replys
Would there be any scope to get a private person to set up a personal loan to cope with a deposit and fees etc?Or do these investors not do that sort of thing.
regards JohnMight be able find some but would then need a lender to grant a loan with a borrowed deposit.
They are not thick on the ground.
Richard Taylor | Australia's leading private lender
Richard
could this be done unofficially so the banks dont know.Some thing like a person to person loan with documents between person to person to secure it?
JohnYour share worth about 210k but you owe 240k… Is it a margin loan?
John, Yes it could be done but the lenders would want to see where the deposit came from over say a 3-6 month period.
As i say still 1 or 2 lenders who dont ask for savings history but that will likely change over the next few months.
Richard Taylor | Australia's leading private lender
What will kill this deal and what has kill most of these 100% lend deals is not so much the banks as the Mortgage insurer. Both the mortgage insurers Genworth an PMI require evidence of 3% deposit and 3 months of saving history. Any thing to do with LMI above 90% is becoming a costly nightmare.
Saltiimbanco you have a $110K income and if this is a single income no depends you have a borrowing capacity out to $550K now include your debt of $240K that reduces you down to $310K I don't know who told you you can borrow out to $600K I strongly recommend you rethink your investment strategy.
Here's an Idea. Spend less than you earn and use that extra money to clear debt. Once you have cleared debt set up a savings plan to generate a deposit, aim for at least 20% +costs. This may take you some time but it will give you a good solid foundation to work from.
The vital piece of info missing here is whether your 210k in shares was funded by a margin loan?
If your shares are heavily geared, you are going to have problems (obtaining finance) until you clear some debt, but if your shares are unencumbered you have options (so to speak!)
Let's assume you have no margin loan for the purposes of this example. From the sounds of your description it seems like little, if any, of the debt is deductible. If this is the case, you will be paying high rates of interest, particularly on the CC's. Let's use round figures and say the average % across your entire debt is 12%p/a. For your shares to 'outperform your debt' (for want of a better term) they will need to return more than 12% (dividends + capital growth + franking credits). In the current market this is highly unlikely, and maybe it would be in your interest to liquidate some, or all of your portfolio.
If you liquidate your entire portfolio at it's current value and put all proceeds towards clearing your debt, this leaves you with 30k debt which is all well and good but it still leaves you with no deposit/funds for costs etc.
Perhaps an option to consider would be to liquidate your portfolio but put perhaps 150k towards your debt. This obviously leaves 60k cash but 90k debt remains. Depending on the individual debts, this could put you into a position to service a considerable loan and also have funds for the deposit and costs. Credit cards are the killer when it comes to banks assessing servicability so knocking your credit card debt on it's head before all else is usually a sound strategy. If you rid yourself of CC's altogether your servicability will increase dramatically.
I'd still say 600k is overly optimistic with 90k debt, but with 60k cash and 110k p/a you would get reasonably close. Of course if the shares are secured this makes this option impossible, but it's worth putting out there.
Alan you might want to check your figures a little.
It's likely salt has made an assumption of getting $600 per week in rent which provides more income. Similarly, in working out the borrowing power, the new debt would be investment debt, and so salt would have added in negative gearing benefits. which further enhances borrowing power.
Finally, depending on how long the shares have been held, I would suppose there would be income derived from this investment.
Working out borrowing power is not as simple as "multiplying income by 5" anymore…
Hi Hany & Bootlace
Yes you are both correct in your suggestions but the facts remain that John has 240K debt and asking for something that does not exist any more and that is 100% loans. In today financial climate to do what he wants he first needs to restructure his financial situation clear all bad debt and set up a savings plan. The bubble has burst Gone are the day of pie in the sky greedy borrowing. the banks tighten their credit policies and it may be heading back to the days of 80% loans.not know the full situation In this case John is up to his eyeballs in debt with only one decreasing share portfolio and looking to jump into a very expensive product. My suggestion is for him to re-evaluate his situation.
Multiplying by 5 is a good rule of thumb to quickly calculator conservative serviceability when asked and if the person want more details you can then invite them to sit and work on the calculator.
Hany I like free property report are you offering this service to other members of this forum even if they are other brokers?
Cheers
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