Hi
I am a newbie to the forum but I have been reading the posts with much interest for a while. This is my first post.
I am seeking some advice.
My parents have recently bought a home near us and they will be selling their home in SA to move up to Melbourne. The settlement is in February 2011.
Their existing house in SA has been given a conservative quote of 600K by the agents and they are doing some minor touch ups to ready the house for sale.
They were hoping to get an investment loan to service the loan of this new home instead of getting a bridging loan – which has a higher interest rate. However, they were told that because of their age (>60) – the only loan that can be given is a bridging loan.
We are considering 2 scenarios:
Scenario 1:
I was wondering what I can do to help them financially in the short term so that they won't need to feel pressured into selling their home in SA in order to mitigate the risk of the high interest rate of the bridging loan. My partner and I have equity in our home and we are both on good incomes.They only need to borrow up to 500K.
Scenario 2:
Is it possible for us to go into an agreement with my parents (eg tenants in common, JV, 80-20 etc) to subdivide the block and to build 2 quality investment properties on them. If this was the case, my parents will remain in SA until the townhouses are built and then move up into one of the 2 townhouses – and whatever shortfall will be covered by the party affected. The other townhouse will either be sold or remain as our (my partner and I) IP.What are the ramifications that we need to be aware of in either scenario?
Other facts:
My parents' property in SA is fully paid off. The Melbourne property was purchased for around 1.2M and is located within 10km of the Melbourne CBD with easy freeway access and a 10 min walk to the train station and 5 min walk to the bus stop. There was a recent subdivision (2008-2009), on a similar sized parcel of land as my parents' property, on the street. 2 double-storey townhouses that were built are now being rented out at $850 per week each. The property itself is a late 80s house built with cheap materials but it is on one of the best streets. A recently renovated home on the street on the same sized block of land as my parents' property sold for close to 1.7M a week prior to my parents' purchase. Recent sales on the street are between 1.4-1.6M. We are a bit concerned about scenario 2 as it may not fetch as good a return as we expect due to predictions about a downturn in the property market.Which scenario is recommended? Any help would be appreciated.
Thanks in advance!
baybee wrote:However, they were told that because of their age (>60) – the only loan that can be given is a bridging loan.
Hi Baybee
Firstly, welcome to the forum
Secondly, who told your parents that?
Cheers
Jamie
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]
Thanks Jamie for the warm welcome
It was commbank who said that they are too old to service any loan. Mum and dad were obviously rapt with the commbank customer service training! So much for their Determined ads… Definitely NOT determined to give the oldies a chance.
They haven't gone to any other bank to speak about the potential of getting an investment loan but will plan to discuss with the other banks next week.
Hi Baybee
Lenders cannot discriminate based on age. Can your parents service the loan at present?
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]
Hi Jamie,
That's how my parents felt – they were discriminated because of their age.
They were not asked if they were working etc… the home loan manager at the Ashburton commbank branch just took a look at them, asked them their age and said that they are not eligible for a loan because they won't be able to service a 30 year loan at their age! My mum and dad has an investment property that they were intending to sell at a later date to clear out all their debts when they finally retire.
My parents are both still working – mum intends to work till she is early 70 – she is still fit and able and most importantly, she enjoys working! She is currently working full time and earning 60K+ per year in SA. Here in Melbourne, in an equivalent role she will be expecting the same amount or up to 100% more if she chooses to contract. She already has a few interviews planned late this month. Dad is on casual wages – he's semi-retired, at $50 dollars per hour – approx 20 hours per week. He intends to continue this casual working lifestyle when he comes to Melbourne. They both have super which they will not acess to service the loan. They also have an IP which is currently approx 400K.
So I think that they could comfortably service the $500K loan based on this. They have no other debts.
Whilst a lender cannot discriminate over your age under NCCP they are required to ask for evidence that the loan can be serviced whilst in retirement.
Statements such as they intend to sell up their investment property to pay down the debt are not acceptable under NCCP and a lender would ask for statement from their financial planner or superanuation company advising of the likely annuity payment etc to determine whether they can service the debt.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard.
I guess, the point I am trying to make is that the home loan manager didn't bother to ask for any evidence from my parents. She just basically said that the bank will not lend them any money because they cannot service the loan. It was a 10 minute conversation – she just wasn't interested to find out more. They weren't even customers of the bank so she couldn't really make a deduction about their financial ability to service the loan based on savings accounts etc held at the bank. I just think that is really poor service and a strong cause for complaint – but that is another story altogether.
Anyway, I have just been told that they have managed to find 2 banks (Westpac and NAB – they didn't go to ANZ) that are willing to lend them the money based on their financial statements and they won't need a bridging loan after all. They may keep the property in SA and rent it out in the short term as the rental returns are very good. Of course, they will have to consider other tax implications such as CGT etc later on. This, I will leave to their accountant!
Thanks so much for helping me out in this forum.
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