Specifically, it applies in the event a borrower defaults on their loan, and the property is sold for less than the outstanding loan balance, leaving a shortfall. The insurer pays the bank the loss, then may peruse the borrower for the loss. –         LMI is generally required when the loan you need exceeds 80% of the property’s value. However certain banks only apply this over 85%, and even 90%/95% for some professionals (Doctors/Law professionals/Accountants etc.). –         LMI is a large fee to get into a property earlier than if you saved additionally….

Within the last 18 months banks have started looking much more closely at applicant’s credit files. This reduces the documentation needed for an application and makes the process faster. However, if there are any misdemeanors on your credit file, this has a much greater effect than before and may mean the bank doesn’t approve the application. Important information to note: –         Anytime you apply for any type of credit – car/home/personal loan (as well as a phone plan or utilities contract), there is an inquiry placed on your credit file. This…

When purchasing a property greater than $5,000,000 in value, the amount a bank will lend against that property will be different from traditional lending guidelines. Rather than being able to access 90% or even higher as a loan to valuation ratio, the banks prefer to reduce the % loan to valuation ratio down to 60% (but there are still lenders in the marketplace who will lend up to an 80% loan to valuation ratio under certain circumstances). Some things to consider when attempting to borrow for a prestige property at…

If you have found your borrowing capacity to be lower than you expected and the repayments lower than you are comfortable with, there are other areas we can explore. Non-bank lenders apply assessment metrics which can be more liberal than what is used by the major / non-major banks. Such examples are as follows although there are many more; – Existing loans at other banks are not stress tested as onerously. – Non-base income can be taken at 100% of its value instead of being discounted. – Income for self…

·        Dollars spent on alterations to an existing dwelling or non-structural renovations are over double the average for the last few years and are the highest they have been for the last 18 years. ·        At its peak last year, dollars spent on construction of dwellings was 4 times higher than the average of the last 18 years. Currently it is still double the average. ·        The dollars spent on purchasing vacant land was double the average over the last 18 years in 2021. ·        Interestingly the purchase of newly built dwellings on land…

Rather than the traditional method (2 years tax returns and financials for all businesses), the banks now allow self-employed borrows who pay them themselves a salary to provide 2 pay slips and be treated like a PAYG employed borrower. Benefits of this new methodology are: –         You don’t need to have completed the most recent years tax return yet. –         We can exclude any liabilities the company has from serviceability modelling. –         We can access major / non-major bank products / rates. –         We can use a recent increase to the director’s salary. –         We…

An offset account is a separate transactional account which sets off against a linked mortgage. For example, a $1,000,000 loan would only incur interest on $950,000 if there was $50,000 of cash inside the offset account. With a normal principle & interest repayment, you simply pay more principle in place of the interest you save, meaning the monthly repayment doesn’t change although the term of the loan does shorten as a result. If you placed $75,000 into offset on the $1,000,000 from the outset, at a 3% interest rate, 30-year…

Often, the banks maximum borrowing capacity is below your highest comfortable repayment. This can be due to many factors, some of which I have outlined here; –         Although the interest rate is below 2% for fixed and low 2%’s for variable on an owner-occupied product, the bank is using a stressed ~5.5% interest rate to assess the loan. Taking a $1,000,000 monthly loan repayment from the actual ~$4,000 to ~$5,700 in the banks model on a standard 30-year term. 30% higher! –         It’s a common misconception that if the rent from an…

There are three methods which can be used to successfully sell your property and purchase another property as follows; 1.      Sell your current home first, have a long settlement of 3 months or more to give yourself enough time to purchase another property and line up the settlement dates to occur simultaneously or have the purchase settle after the sale. Perhaps negotiate a rent back arrangement on your current home from the new owners to ensure you don’t have to move twice. 2.      Purchase the new home first, have a long settlement…

Construction loans are helpful when you want to engage a builder for structural renovations to your home or a knockdown/rebuild. Construction loans allow you to borrow against the future value of the property once it’s completed as determined by the banks externally appointed valuer. There are some important aspects to be aware of when looking for construction lending; –         You often have two options for a construction contract with a builder. Cost plus or fixed price. Cost plus outlines the basic known costs for the build, with the builder then adding…