Hi All,
I was wondering what % mortgages banks are currently loaning their clients to purchase property and if deposits compulsory?
I know alot of investors in South Africa and the UK (including myself) who use 'no money down' principles to purchase property without using any of their own money. This realloy helps you expand your portfolio at a rapid rate.
I am very interested to see if these principals work in Australia?
Also, do you get mortgage originators in Australia? Are there any on this forum?
Regards,
RobbieUp to around 95% loans are available.
No money down is possible in Australia by using a second property – either cross collateralising or borrowing extra from one property and using the cash as deposit for the 2nd. There are also a few tricks you can do such as vendor financing – but this is difficult in this climate.
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
Hi Terry,
Thanks for the reply.
Do you know if banks based their loan on the property value (LTV) or on the purchase price of the property?
My guess is that the loan is based on the value of the property. Therefore if banks are willing to lend 95% to the value of the property, take the below example:
If I wanted to buy a property worth $400k and I managed to get it at a real discount for $300k, the banks would be prepared to lend me 95% of $400k (the value), which is $380k. As I agreed to buy this property from the seller for $300k, does this mean that the banks would give me a $380k loan? which is a 126% loan based on the purchase price.
Interested to see what you guys have to say.
Cheers,
RobbieNot so lucky. The banks work on the lower of valuation or purchase price
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
Terryw wrote:Not so lucky. The banks work on the lower of valuation or purchase priceTerry – I would be interested to know if this would be the same case if I purchased a property via my LOC, did some reno's and leased out. Then approach the bank to re-finance as a standard IP loan 3 or 4 months later.
I was hoping in my case that they'd be only looking at the valuation. What do you reckon?
Yes, that is a way around it. Pay for cash, reno and revalue. The only problem is convincing the valuer.
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
This really doesnt seem logical by the banks..
Scenario 1
If you take my example of the $400k property. If I bought it $300k, the banks would only be prepared to give me $285k to buy the properpy.Scenario 2
Now lets say I wanted buy that same property BUT i bought it at market value ($400k), then the banks would be willing to give me $380k.In the above two scenarios, there is ALOT less risk from the point of view of the purchaser and bank to buy a $400k property for $300k. So they why would the bank be prepared to loan more money for the riskier scenario (2)? The bank is prepared to lend the purchaser almost $100k MORE just beceause they are buying a property at market value. It doesnt make sense.
Also, do you get OTP addendums is Australia?
If you can buy if for $300,000 is it really worth $400,000? Thats how they may see it.
What is a OTP Addendum? Off the plan?
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
Terryw wrote:Yes, that is a way around it. Pay for cash, reno and revalue. The only problem is convincing the valuer.Yep……..My intent is to try and make the place look much better from the outside – perhaps a carport, gardens etc. – maybe an actual "full inspection" valuation rather than the usual "drive by" look might help. I suppose we'll see soon enough.
Hi Terry,
What do you mean "if you buy it for $300k is it really worth $400k?"
I have been specializing in sourcing below market value property for quite some time. There are many reasons why you could purchase a $400k property for $300k, but i wont get into that now.
But lets just says this property IS worth $400k, which can be confirmed by online valuations AND the banks valuation. With this in mind, could u provide insight to the banks logic in my previous post?
An OTP stands for Offer to Purchase, what is your offer document called in Australia?
An addendum would mean changes made to the Offer to purchase
Market value is by definition what the market is willing to pay for something. So if a property can only be sold for $300,000 then it must be worth $300,000. Your greatest problem, if you are able to find these things, will be valuations. It would be extremely unlikely for you to buy a house for $300,000 and then the value to come in at $400,000 without extensive renovations and/or time. Valuers will see what you paid for it on their searches. In all my 9 years of acting as a broker I only seen a few valuations come in substantially higher than purchase price. One was a unit where the one across from the one being purchased sold for 20% more. Since these were identical the valuer had to value the same. But few houses are the same so it is much harder.
In Australia you make the offers on the contract of sale. You can do them verbally or on a fax or email, but these wouldnt be legally binding, usually, even if accepted.
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
Hi Robbie
I Know what you are saying, I also come across deals just like what you find,
And the banks would rather loan money on the lower value, which to me makes sense in one way but not in others, Using your figures as an example, I have found a property that I can buy for $300,000 and the bank wants 20% deposit without Lenders mortgage insurance, Which means they will loan $240,000 and I have to come up with $60,000
I have had properties valued a lot higher than the purchase price, and if you said $400,000 less 20% then this comes in at $320,000, which really means if the bank just paid out $300,000 and I put up nothing then they still have 25% safe equity in the deal.
I am still yet to find a bank that will take on my deals, honestly they would have less risk with me and you than some others that are out there paying $400,000 and putting up a deposit of even 20% or even worse 5%
they would have less to loose with our deal.Terry how are the banks at the moment with lending 95%, are they still as strict as what they were 6-12 months ago?
And will they build the LMI on top of the purchase price which would mean you get closer to a 100% loan or do they want the 5% up front plus LMI upfront?Keiko
Not sure, I stopped broking a while back. It was pretty near impossible to get a loan at 95% a while ago.
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
Hi Keiko,
Thanks for the reply.
Im glad to find that there's someone else here who knew where I was coming from in terms of my thinking
Cheers,
RobbieStill lenders doing 95% + LMI but good luck on ever getting one approved if you do not have an existing arrangement with a lender.
Richard Taylor | Australia's leading private lender
Adelaide Bank will look at a 95% + LMI deal without having an existing relationship – for PPOR only though.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Keiko, you there? Sent you a PM, would like make contact with you..
Why not look at Rent/Lease to Own? It will mean that you won't have to muck around with banks and potentially open up more opportunity to purchase more properties.
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