Want to buy an Apartment - Bank won't give Money :(

[Weiterbot23]

Anyone got any advice for me.

Me and the Mrs are looking to buy an apartment off the plan in Blackburn for $520k but the bank will only give us 450k.

We have a house in Pakenham which we bought 7 years ago which was the worst decision ever! Bought for $315k and 7 years later it's only worth ~$340k . We still owe $220k on it and have no other investments besides 5K in shares.

The Apartment is not yet under construction and is predicted to take 12-13 months to build (which is probably optimistic), we would only be required to pay a 10% deposit (52k) now and then nothing until the building was finished.
In the time it's taking to be constructed we could sell our house and move in with our parents for 6 or so months while it's being built so we could save some serious cash in that time.


My Mrs is a teacher and earns 72k and I've had a career change and am at uni/ have a work placement/ causal job and am only on 15k, but will be finished my course in October and it seems likely that then I'll get a position at my work placement which should net me 45k at the very least.


Does anyone have any ideas of how we could juggle this situation to be able to get the Apartment? getting a loan guarantor was the banks suggestion but that is not an option for us.

Any hint's or tips welcome
Thanks,

 

[Lyyynnnchy]

Anyone got any advice for me.

Me and the Mrs are looking to buy an apartment off the plan in Blackburn for $520k but the bank will only give us 450k.

We have a house in Pakenham which we bought 7 years ago which was the worst decision ever! Bought for $315k and 7 years later it's only worth ~$340k . We still owe $220k on it and have no other investments besides 5K in shares.

The Apartment is not yet under construction and is predicted to take 12-13 months to build (which is probably optimistic), we would only be required to pay a 10% deposit (52k) now and then nothing until the building was finished.
In the time it's taking to be constructed we could sell our house and move in with our parents for 6 or so months while it's being built so we could save some serious cash in that time.


My Mrs is a teacher and earns 72k and I've had a career change and am at uni/ have a work placement/ causal job and am only on 15k, but will be finished my course in October and it seems likely that then I'll get a position at my work placement which should net me 45k at the very least.


Does anyone have any ideas of how we could juggle this situation to be able to get the Apartment? getting a loan guarantor was the banks suggestion but that is not an option for us.

Any hint's or tips welcome
Thanks,

Well for starters I'd be very cautious about buying off the plan

See below for just one of many horror stories. This property forum has loads of information on investing in property. I suggest you read through it thoroughly and ask plenty of questions

http://somersoft.com/forums/showthread.php?t=96633&page=2

 

[Mofra]

How many lenders have you approached for finance?

Non-conforming lenders may charge a higher interest rate but have less restrictive lending practices. If they can approve finance, you can refinance 1-2 years later once a cheaper financier facilitates your borrowings.

 

[crackerjack4X4]

Buying apartments off the plan is risking business at the best of times, don't do it.
Stay where you are and build up your equity in your current house.

My Mrs is a teacher and earns 72k and I've had a career change and am at uni/ have a work placement/ causal job and am only on 15k, but will be finished my course in October and it seems likely that then I'll get a position at my work placement which should net me 45k at the very least.

I take this as October 2015? and you will be earning 45k in 1 yr from now? I don't know anyone earning less than 70k per yr. Truck drivers doing metro delivers earn 80k per year. I hope you don't take this the wrong way but seriously, the uneducated don't get out of bed for 45k.

 

[Weiterbot23]

Buying apartments off the plan is risking business at the best of times, don't do it.
Stay where you are and build up your equity in your current house.


I take this as October 2015? and you will be earning 45k in 1 yr from now? I don't know anyone earning less than 70k per yr. Truck drivers doing metro delivers earn 80k per year. I hope you don't take this the wrong way but seriously, the uneducated don't get out of bed for 45k.

1- we hate living in pakenham, 50 mins away from work and family. I was under the impression that it was more apartments in the city/docklands that were bad investments not mid/inner suburbs. An apartment allows us to live where we want, a house in Blackburn is way out of our price range. Plus our place has increased 25k in 7 years can't get much worse than that.

2- yeah 45k isn't great but it was a conservative estimate of what I'd be on first year after completing my course, I hope to be on a lot more later on but quit teaching to take 1 step back and hopefully 2 forward in the earning stakes.


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[Off Tap]

Kruzering have you thought about using a deposit bond?

I was a sales manager for a project marketer about ten years ago and we sold about 2,000 out of which 50 - 100 would have been secured by a deposit bond. Some developers won't take them but others more than happy to.

 

[sabre_ac]

If you don't mind me asking, what is the rush in buying a house?

Like you said, there is plenty of bad investments out there you can take advantage of as a renter, why not do that for a couple of years while you save a bigger deposit and establish your own career.

Even those who are most upbeat about the future of the property market would in light of your current situation would suggest you consider all options.

 

[Halloween Jack]

Hi Kruzering

I'm a mortgage broker. A few questions:

1) how much do you want to borrow for this place? If I'm reading this correctly, you could sell the house and net at least $100k, plus save plenty while living with your folks. Purchase price $520k, and stamp duty small due to buying off the plan I would be aiming for a much lower loan amount than $450k?

2) have you heard of Lenders Mortgage Insurance? This link explains it: http://www.qbelmi.com/pg-what-is-lmi.seo and this one gives you an idea of the cost: http://www.yourmortgage.com.au/calc.../result/?sid=1965510-5p2cl-mortgage_insurance

Basically, if you can save 20% of the purchase price + costs you wont pay LMI. In your case this is $104k + costs which should be very low due to minimal stamp duty. As I said about selling your house would net you about $100k, so you're almost there. Getting approval for a loan without mortgage insurance is much easier.

In your situation I would always recommend avoiding LMI, if possible. It protects the bank, not you.

On the very basis info you have there I don't think you would have an issue qualifying for a loan of $416k. But it depends on a few factors including:
- having sold and settled your home
- that you have no other debts

However, you need to raise the $52k deposit right now. I think you should go back to your current bank and request to increase your loan from $220k to $272k. This gives you the $52k cash to pay the deposit. Assuming a bank valuation of $340k, $272k is 80% of the value therefore no mortgage insurance required.

The other option as others have said here is a deposit bond.

Hope this helps.

 

[Weiterbot23]

If you don't mind me asking, what is the rush in buying a house?

Like you said, there is plenty of bad investments out there you can take advantage of as a renter, why not do that for a couple of years while you save a bigger deposit and establish your own career.

Even those who are most upbeat about the future of the property market would in light of your current situation would suggest you consider all options.

Yeah I think I might heed this advice.

We have a house (albeit in a place where we don't want to live), might be best renting that out and renting an apartment where we want to live, with the long term goal of buying where we want.




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[grouse mate]

Research the builder and developer's history extensively before you even think about buying an apartment and pay very close attention to the subdivision plan and find out exactly what is yours and what is common property, the victorian subdivision act is a joke compared to NSW. 5 years ago I sold my first house after owning for 5 years and renovating and made an excellent profit, I had to move for work and rushed into buying a newly built apartment thinking nothing could go wrong with a new building and if it does I have builders warranty. All of the money I made went into it to keep the mortgage small and due to the job I would be working requiring a lot of o/time my plan was pay it off in a short time. After 2 years the building started to have water ingress to a lot of the apartments on the level below mine, this problem has continued to escalate over the years to the point that now some people ceiling's have collapsed. There is mould growing everywhere due to poor ventilation issues all over the building and building reports have deemed the air quality to be at harmful levels. The builder declared bankruptcy about 3 years ago and as a result any demands for repairs to be made go nowhere, some other joker is now the owner of the business to void any chance of claiming under builders warranty and as he is not even a registered builder so he cant even make repairs. Lawyers have been involved for 2 years with bills getting close to $40-50K, an upcoming courtcase will decide if the current business owner will be forced to declare bankruptcy ensuing we can then claim under builders warranty, one joint claim has already been denied. That issue aside you also buying into a body corporate which is the biggest joke of all time, when I purchased the costs of levies were around $1300 a year, its now at $4k a year and it is near impossible to have any type of control of this cost blow out, people on other floors set off the fire alarms which is monitored by the MFB who are now charging $2k every time there is a false alarm, which every owner then has to pay for. Apartments seem like a hassle free way of living, they are not, coming from owning a house you will notice the lack of privacy and noise issues and are way more difficult to sell than a house, you will struggle to make any money off it, my building when I purchased was the only one in the area and there is now 3 others completed and 2 more under construction with plans submitted for 3 more at another site all within a kilometre radius. I would give an arm and a leg to walk away from this with my purchase price back but it looks unlikely, all of the policies for BW have been taken out at about 1/2 the value of the purchase prices.

 

[Off Tap]

I've owned and lived in apartments and have had no issues at all. Only reason we moved out of one is because we started a family and wanted a backyard. When we were DINKS it was a great lifestyle and really convenient.

I've heard of stories like grouse mate's but that's rare and I wouldn't let it discourage you from owning one.

 

[Lyyynnnchy]

I've owned and lived in apartments and have had no issues at all. Only reason we moved out of one is because we started a family and wanted a backyard. When we were DINKS it was a great lifestyle and really convenient.

I've heard of stories like grouse mate's but that's rare and I wouldn't let it discourage you from owning one.

When you say you have purchased apartments are you talking about off the plan apartments? Big difference

 

[John Dawh]

Anyone got any advice for me.

Me and the Mrs are looking to buy an apartment off the plan in Blackburn for $520k but the bank will only give us 450k.

We have a house in Pakenham which we bought 7 years ago which was the worst decision ever! Bought for $315k and 7 years later it's only worth ~$340k . We still owe $220k on it and have no other investments besides 5K in shares.

The Apartment is not yet under construction and is predicted to take 12-13 months to build (which is probably optimistic), we would only be required to pay a 10% deposit (52k) now and then nothing until the building was finished.
In the time it's taking to be constructed we could sell our house and move in with our parents for 6 or so months while it's being built so we could save some serious cash in that time.


My Mrs is a teacher and earns 72k and I've had a career change and am at uni/ have a work placement/ causal job and am only on 15k, but will be finished my course in October and it seems likely that then I'll get a position at my work placement which should net me 45k at the very least.


Does anyone have any ideas of how we could juggle this situation to be able to get the Apartment? getting a loan guarantor was the banks suggestion but that is not an option for us.

Any hint's or tips welcome
Thanks,

I see some major problems here:

1. You bought in Pakenham. I'm assuming new house or near new house? Now you want to do the same thing again?
2. Off plan? Low percentage play. Big risks.
3. Off plan in Blackburn (middle ring)? That's an investor wasteland for me.
4. You seem to have a lifestyle hat on rather than an investor hat. Given your disappointment with 7 years and little growth (which ultimately means lack of ability to finance your choices) you seem to be heading to repeating the process.

I'm not overly bouyant on the Melbourne market but doing a minute check I noticed:

1. On one hand there's lots of development going on. Lots of house and land packages. Supply outstrips demand. This suggests little growth
2. Houses are very cheap. Brand new decent looking house for $300k. Just the price of materials to build houses tells me they are undervalued.

So the macro market (i.e. Melbourne) will drive the micro market (Pakenham). If Melbourne has a run on then Pakenham will jump because it's undervalued. If building materials increase then construction will slow as people will prefer established homes (such as yours)

I think you should do one of two things:

1. Forget off-plan. Sell your house and buy an established unit.

2.
a. Rent out your house. At $340k value you should get $320 per week. Your loan is $220k. At 5% that is $11k pa. At 6% it is $13200 pa. You will roughly cover that in rent payments (after expenses).
b. Rent a unit in Blackburn
c. Pump your savings in an indexed fund (do not pay of your Pakenham house which is now an investment)
d. Compound your savings (a share PF) and wait until your house gets a growth spurt.
e. Once the Pakenham market gets a growth spurt, sell and buy a house in Blackburn. You should have more savings, more equity, and higher wages.


Whatever you do, scrap the off-plan idea. It's a low percentage play in today's market.

 

[Off Tap]

When you say you have purchased apartments are you talking about off the plan apartments? Big difference

All off the plan both residential and commercial.

I understand that there's a risk involved but in all of my experience in owning and selling them there was only 1 development where a developer didn't quite deliver on their quality. It was only minor where some bench tops needed to be replaced in some of the apartments.

You need to buy with experienced developers who have delivered previously. All of my experience is related to the WA and QLD markets.

 

[Sydney Bloods]

first off why did they say no?

our banks are regulated so that predatory mortgages can't be issued.

take a step back and have a look at your finances, not just "i can afford this now" can you afford it if there's a jump in interest rates?
do you both have full time job's?
can you afford it if one of you lose a job?
how many other loans and financial commitments do you have?

Alot of people think they can afford s**t when, if something happens they can't. I know you want to buy a place but the fact is lenders generally WANT TO GIVE YOU MONEY. if they are saying no there's probably a good reason for it.

My advice contact a financial advisor pay them sit down with them and they will be able to give you a better understanding of your financial situation.

 

[Weiterbot23]

Definitely glad I came here for some advice. After looking at the place we definitely had the lifestyle hat on and probably would have pulled the trigger if the bank gave the green light.

Definitely need to spend more time thinking about such a large investment or will go through the same mistakes as Pakey again, would certainly be a bitter pill if we sold pakey and in 10 years time it was worth more than the apartment.

Plan might be just to stick it out in pakey for another year till I get a job then rent it out and move to a rental closer in.




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[Pykie]

first off why did they say no?

our banks are regulated so that predatory mortgages can't be issued.

take a step back and have a look at your finances, not just "i can afford this now" can you afford it if there's a jump in interest rates?
do you both have full time job's?
can you afford it if one of you lose a job?
how many other loans and financial commitments do you have?

Alot of people think they can afford s**t when, if something happens they can't. I know you want to buy a place but the fact is lenders generally WANT TO GIVE YOU MONEY. if they are saying no there's probably a good reason for it.

My advice contact a financial advisor pay them sit down with them and they will be able to give you a better understanding of your financial situation.

ALOT of banks knock back medium risk prospects on apartments, a lot more than you think.

It comes down strictly to the size of the apartment.

It doesn't matter if you have a million dollars in equity, banks won't lend against tiny apartments in some cases.

It's around 50sq/m.

 

[Power Raid]

Anyone got any advice for me.

Me and the Mrs are looking to buy an apartment off the plan in Blackburn for $520k but the bank will only give us 450k.

We have a house in Pakenham which we bought 7 years ago which was the worst decision ever! Bought for $315k and 7 years later it's only worth ~$340k . We still owe $220k on it and have no other investments besides 5K in shares.

The Apartment is not yet under construction and is predicted to take 12-13 months to build (which is probably optimistic), we would only be required to pay a 10% deposit (52k) now and then nothing until the building was finished.
In the time it's taking to be constructed we could sell our house and move in with our parents for 6 or so months while it's being built so we could save some serious cash in that time.


My Mrs is a teacher and earns 72k and I've had a career change and am at uni/ have a work placement/ causal job and am only on 15k, but will be finished my course in October and it seems likely that then I'll get a position at my work placement which should net me 45k at the very least.


Does anyone have any ideas of how we could juggle this situation to be able to get the Apartment? getting a loan guarantor was the banks suggestion but that is not an option for us.

Any hint's or tips welcome
Thanks,

take a look at the builder and the current owner of the development.

it will probably explain why they banks won't lend.