Need home loan advice

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craffles said:
Unfortunately my partner and I don’t have this as an option. Good tip though.




Have already seen it plateau in our area over the last month and seeing houses that have been on the market for a while starting to sell. Still much cheaper than 12-18 months ago though.
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This is not advice, but this is a scenario of a customer from when I worked at one of the big 4 banks (I finished Sep 2018 and this is when the customer pulled this of, so this may have been ruled out in the 9 months since)

Customer has money for a deposit, not quite enough for property they're after.
Customer takes out an unsecured personal loan of 50k at bank A.
Customer has excellent servicability, so can still afford to make repayments on home loan even after including repayments on personal loan in application.
Customer uses 50k as part of deposit on property for loan at bank B to avoid LMI etc.
Customer pays both personal loan & home loan.
 
Oraaaaazio said:
This is not advice, but this is a scenario of a customer from when I worked at one of the big 4 banks (I finished Sep 2018 and this is when the customer pulled this of, so this may have been ruled out in the 9 months since)

Customer has money for a deposit, not quite enough for property they're after.
Customer takes out an unsecured personal loan of 50k at bank A.
Customer has excellent servicability, so can still afford to make repayments on home loan even after including repayments on personal loan in application.
Customer uses 50k as part of deposit on property for loan at bank B to avoid LMI etc.
Customer pays both personal loan & home loan.
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This is called cocktail lending and the first tier lenders/major banks wouldn’t touch it.
 

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PieLebo87 said:
No, I’m not wrong. Go ask any major bank and see what answer you get. Just because you got a dodgy banker doesn’t mean it’s right.
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You said first tier lenders wouldn't look at it - ANZ bank who you well know are a major bank & first tier lender, didn't just look at it, they approved it. So that is wrong.

Obviously you work in the industry & know what you're talking about but it happened. I worked in the branch where it happened & questioned if we should be doing it at the time, especially as we were in the midst of the royal commission, but I was told it wasn't outside of ANZ's lending policy and they were submitting the application. The customer took out a 50k personal loan at another bank which they then used as a deposit for their property purchase with ANZ. The sole purpose of the personal loan was for the property deposit. The customer may have lied about their intentions when obtaining the personal loan but they declared that's where their deposit had come from in the home loan application. As they had fed the money from the personal loan into a savings account and held the money for a 3+ month period, it was considered to be "genuine savings" and was allowed to be used for the deposit.

I clearly said I wasn't advising anyone to do it, just that it had been done. The customer went through their home loan application in an ANZ branch with an ANZ home investment lending manager & submitted their application, which ANZ's home loan assessment team then not only looked at but approved. It is clearly not best practice, it is not something that should be done and it is something I would never do & probably wouldn't allow a customer to submit an application through myself if I were to go back into lending but it happened.
 
FWIW I have a credit card. Limit is $6k. I only use it instead of a debit card so I get points out of it. Never paid any interest and don't intend to. Balance is usually well under the limit.

If I do an online 'how much can you borrow?' calculator thingo including/removing it changes the outcome a fair bit because they factor it in as $6000 at 20% or whatever the credit interest rate is.
 
Scotland said:
If you had a $50k personal loan against your name the bank would lower your borrowing capacity significantly.

To me it sounds like he borrowed the $50k and kept it for 3 months to show savings history but didn't declare that he had the personal loan in the first place.
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he declared it, it all comes up in your credit history anyway so failing to declare it would bite him on the arse too. He just had the ability to service both loans comfortably (150k+ income no dependents/low expenses)
 
Scotland said:
If you had a $50k personal loan against your name the bank would lower your borrowing capacity significantly.

To me it sounds like he borrowed the $50k and kept it for 3 months to show savings history but didn't declare that he had the personal loan in the first place.
Click to expand...

It's kind of obvious when you look at someone's credit report that they have done this.

If you didn't declare the personal loan, the bank that you applied with can ring the other bank up to see if the credit enquiry proceeded, and if it did and it wasn't declared then you have just earned yourself an Equifax fraud match for providing false liability details to the bank. Then every other bank you subsequently apply with for the next 5 years gets notified that you have previously supplied incorrect details on a credit application.

You could potentially get away with it if you declare the personal loan as a liability, when you cover off your recent credit enquiries say that loan was for a car or holiday or whatever, combine the funds with the rest of your savings, wait for 3 months, then provide a statement for 3 months ensuring the statement doesn't show the lump sum from the personal loan being deposited to your savings account but is it worth it?

Scotland said:
FWIW I have a credit card. Limit is $6k. I only use it instead of a debit card so I get points out of it. Never paid any interest and don't intend to. Balance is usually well under the limit.

If I do an online 'how much can you borrow?' calculator thingo including/removing it changes the outcome a fair bit because they factor it in as $6000 at 20% or whatever the credit interest rate is.
Click to expand...

They take 3% of the credit limit towards your monthly servicing position. APRA are increasing this soon.
 
We are in the process of refinancing. Our introductory two year loan offer expires this week. We needed to get our property valued at a certain figure to avoid LMI.

First two valuations came back at $45k and $35k below, and then another at $25k below.

Our broker rolled the dice again and we got the figure we needed.

New interest rate will be 3.59%. Not too shabby.
 
Fat Kent said:
I have 4 inquiries on my credit report for home loans over the past 24 months. I want to buy before the end of the year but just wondering if this will have any affect on my application especially as I will need LMI. The inquiries are with the same bank and when I apply next 6 months would've passed since my last application.
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Makes stuff all difference really, especially when they are all with the same bank. A stack of unsecured credit enquiries would be more of a worry. Just say they didn't go ahead and you probably get away without further explanation. You might get asked why but I wouldn't offer extra information off the bat if you don't have to.
 

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Scotland said:
If you had a $50k personal loan against your name the bank would lower your borrowing capacity significantly.

To me it sounds like he borrowed the $50k and kept it for 3 months to show savings history but didn't declare that he had the personal loan in the first place.
Click to expand...

Or his income could service both debts.


Sent from my iPhone using Tapatalk
 
Scotland said:
FWIW I have a credit card. Limit is $6k. I only use it instead of a debit card so I get points out of it. Never paid any interest and don't intend to. Balance is usually well under the limit.

If I do an online 'how much can you borrow?' calculator thingo including/removing it changes the outcome a fair bit because they factor it in as $6000 at 20% or whatever the credit interest rate is.
Click to expand...

They take 3.8% of the limit FYI mate.


Sent from my iPhone using Tapatalk
 
Hi guys, I am a mad hawthorn supporter and keen beginner investor.

I am wondering whether it is a good decision or not to borrow the maximum amount the bank is willing to lend me for an investment property, especially in the current market where capital growth is questionable.

In my scenario, the bank is willing to lend me another 1 million dollars. This is on top of the $1 million dollars I borrowed three years ago, that I used to purchase an investment property house in Ascot Vale, Melbourne. I am currently paying $4,200 minimum a month (principal and interest) for the investment property, and still owe about $950,000. I pay a little extra each month. The property is currently rented out for $550 a week ($2,200 monthly, $25,000 annually). So I need to top up $2,000 monthly. I am negative gearing, paying about $40,000 bank interest annually.

My wife and I both work and we have 2 kids. Currently we are managing this okay. We can still go out for dinners every now and then.

My work mate suggested that, if the bank is willing to lend me another $1 million for investment, then take it, diversify and buy 2 more smaller investment property and rent them out. He said I am investing with the banks money, not my own, and not all debts are bad. I am not so sure with this as the risk is quite high (tennants, unexpected redundancy, back up money, low capital growth etc.)

So my question, is it wise to borrow the maximum the bank is willing to further invest?, knowing it would put a thick rope around my neck and really stretch me out, until the gearing becomes positive. Is there still much capital growth? I don't think there is much left. Is a recession looming? the current mini housing boom (aided by rate cuts, coalition winning, banks easing) is unsustainable in my opinion. Any advice?
 
Guju said:
Hi guys, I am a mad hawthorn supporter and keen beginner investor.

I am wondering whether it is a good decision or not to borrow the maximum amount the bank is willing to lend me for an investment property, especially in the current market where capital growth is questionable.

In my scenario, the bank is willing to lend me another 1 million dollars. This is on top of the $1 million dollars I borrowed three years ago, that I used to purchase an investment property house in Ascot Vale, Melbourne. I am currently paying $4,200 minimum a month (principal and interest) for the investment property, and still owe about $950,000. I pay a little extra each month. The property is currently rented out for $550 a week ($2,200 monthly, $25,000 annually). So I need to top up $2,000 monthly. I am negative gearing, paying about $40,000 bank interest annually.

My wife and I both work and we have 2 kids. Currently we are managing this okay. We can still go out for dinners every now and then.

My work mate suggested that, if the bank is willing to lend me another $1 million for investment, then take it, diversify and buy 2 more smaller investment property and rent them out. He said I am investing with the banks money, not my own, and not all debts are bad. I am not so sure with this as the risk is quite high (tennants, unexpected redundancy, back up money, low capital growth etc.)

So my question, is it wise to borrow the maximum the bank is willing to further invest?, knowing it would put a thick rope around my neck and really stretch me out, until the gearing becomes positive. Is there still much capital growth? I don't think there is much left. Is a recession looming? the current mini housing boom (aided by rate cuts, coalition winning, banks easing) is unsustainable in my opinion. Any advice?
Click to expand...

My first step would be to read the post I've quoted. The answer you seek is already in your comments.

The question to ask is not even should you invest, but rather WHY are you investing? For (potential) future capital growth? Clearly not for rental returns based on your figures and concern over "tipping in". Perhaps this is purely a tax-avoidance strategy? (there are better ways).

The fact you are already questioning the "thick rope around my neck" suggests you are not emotionally comfortable with the financial responsibilities, so perhaps you should focus on higher-yield properties, rather than chasing the capital growth - if you still want to invest.

"Property always goes up" - over the long term, with recent growths clearly unsustainable. Predicted Interest Rates over longer term (5+) remain stagnant/falling, with threat of further meddling from regulators continuing to suppress the market. There are still some markets with strong growth (mainly regional, non-major population centres) and decent rental returns (far above your existing) - but as always education, research and planning is key.

Start with yourself, your family, your future. Evaluation your risk and comfort levels. Lifestyle vs Investment. Then consider if you are "Investing", or simply "Gambling".
 
Guju said:
Hi guys, I am a mad hawthorn supporter and keen beginner investor.

I am wondering whether it is a good decision or not to borrow the maximum amount the bank is willing to lend me for an investment property, especially in the current market where capital growth is questionable.

In my scenario, the bank is willing to lend me another 1 million dollars. This is on top of the $1 million dollars I borrowed three years ago, that I used to purchase an investment property house in Ascot Vale, Melbourne. I am currently paying $4,200 minimum a month (principal and interest) for the investment property, and still owe about $950,000. I pay a little extra each month. The property is currently rented out for $550 a week ($2,200 monthly, $25,000 annually). So I need to top up $2,000 monthly. I am negative gearing, paying about $40,000 bank interest annually.

My wife and I both work and we have 2 kids. Currently we are managing this okay. We can still go out for dinners every now and then.

My work mate suggested that, if the bank is willing to lend me another $1 million for investment, then take it, diversify and buy 2 more smaller investment property and rent them out. He said I am investing with the banks money, not my own, and not all debts are bad. I am not so sure with this as the risk is quite high (tennants, unexpected redundancy, back up money, low capital growth etc.)

So my question, is it wise to borrow the maximum the bank is willing to further invest?, knowing it would put a thick rope around my neck and really stretch me out, until the gearing becomes positive. Is there still much capital growth? I don't think there is much left. Is a recession looming? the current mini housing boom (aided by rate cuts, coalition winning, banks easing) is unsustainable in my opinion. Any advice?
Click to expand...

Hi mate,

I think Simon_Nesbit has pretty much nailed it. I would also add though, you have stated that on your current property you need to top up around $2k per month. So if you borrow another $1mil assume the same amount. Can you afford another $2k per month? If yes, then why not start saving that amount now which does two things:
1) increases your savings/buffer
2) proves you can afford the extra repayments.

Having said that, $2mil is a lot to borrow and while I have no idea about your incomes and assets, you do need to be careful when loans are getting this high. As any rate rise can have a huge effect on your repayments/cashflow.

Sometimes I think the best investment can be the most boring, which is to just save and/or pay down more debt. This not only saves you interest, but increases your buffer if things go not to plan. Do you have an offset account?

Happy to chat further if you want (I am a broker).
 
Cruyff14 said:
I would never borrow the maximum.

Do you have a financial adviser? Speak to them, and particularly your mortgage broker. They will have good advice to lend.

If you're going to borrow that much, why don't you build a duplex?
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Hi,
I am thinking of seeing a financial advisor. But I have also been warned that some advisors just think for themselves. I think i need to speak to one but be as cautious as I can be.

I have also thought about seeing a property advisor in regards to what investment property to buy (location, growth areas, house vs. units, which investment grade etc.). But I'm afraid their advice will be very general, compared to doing my own research, plus their fees are high.

I have thought about building duplexes as well. But building a duplex costs roughly $400,000 to $500,000 nowadays, plus I need to buy the land first as well. And the land needs to be in good location. So buying land plus building duplexes vs buying two ready built townhouses/units/villas is not huge difference in cost.

That's my take.
 
Guju said:
Hi,
I am thinking of seeing a financial advisor. But I have also been warned that some advisors just think for themselves. I think i need to speak to one but be as cautious as I can be.

I have also thought about seeing a property advisor in regards to what investment property to buy (location, growth areas, house vs. units, which investment grade etc.). But I'm afraid their advice will be very general, compared to doing my own research, plus their fees are high.

I have thought about building duplexes as well. But building a duplex costs roughly $400,000 to $500,000 nowadays, plus I need to buy the land first as well. And the land needs to be in good location. So buying land plus building duplexes vs buying two ready built townhouses/units/villas is not huge difference in cost.

That's my take.
Click to expand...
Our fin advisor is great.

You should definitely speak to a broker as well.

But someone above nailed it too, don't borrow for the sake of it just because you can. Get further ahead on your mortgage, build on your equity.

Last thing you want to do is excessive debt and then your kids suffer etc.
 
Simon_Nesbit said:
My first step would be to read the post I've quoted. The answer you seek is already in your comments.

The question to ask is not even should you invest, but rather WHY are you investing? For (potential) future capital growth? Clearly not for rental returns based on your figures and concern over "tipping in". Perhaps this is purely a tax-avoidance strategy? (there are better ways).

The fact you are already questioning the "thick rope around my neck" suggests you are not emotionally comfortable with the financial responsibilities, so perhaps you should focus on higher-yield properties, rather than chasing the capital growth - if you still want to invest.

"Property always goes up" - over the long term, with recent growths clearly unsustainable. Predicted Interest Rates over longer term (5+) remain stagnant/falling, with threat of further meddling from regulators continuing to suppress the market. There are still some markets with strong growth (mainly regional, non-major population centres) and decent rental returns (far above your existing) - but as always education, research and planning is key.

Start with yourself, your family, your future. Evaluation your risk and comfort levels. Lifestyle vs Investment. Then consider if you are "Investing", or simply "Gambling".
Click to expand...
Hi,
Well, I am investing to build long term wealth. My investment strategy this time will be aiming for rental yield (positive gearing) more so than capital growth. I don't want to be negative gearing so much for so long. Are there any properties out there where I can buy and immediately start positive gearing? I don't think there are any left, especially in Melbourne. Maybe some regional area.

Owing 2 million dollars to the bank is a thick rope around the neck in anyone's language (unless you're a multi millionaire, in which case you wouldn't need to borrow in the first place).

I think you make a good point about lifestyle vs. Investment. Despite my keeness to build wealth, I want to enjoy life as well. I don't want to to be a donkey most of my life carrying massive debts, and my kids are the ones that get to enjoy the fruits of my labour. I want to leave something for my kids but I want to enjoy the here and now as well.

Finally, isn't all investment a form of gambling.

Thank you for your advice.
 
Admiral Motti said:
Hi mate,

I think Simon_Nesbit has pretty much nailed it. I would also add though, you have stated that on your current property you need to top up around $2k per month. So if you borrow another $1mil assume the same amount. Can you afford another $2k per month? If yes, then why not start saving that amount now which does two things:
1) increases your savings/buffer
2) proves you can afford the extra repayments.

Having said that, $2mil is a lot to borrow and while I have no idea about your incomes and assets, you do need to be careful when loans are getting this high. As any rate rise can have a huge effect on your repayments/cashflow.

Sometimes I think the best investment can be the most boring, which is to just save and/or pay down more debt. This not only saves you interest, but increases your buffer if things go not to plan. Do you have an offset account?

Happy to chat further if you want (I am a broker).
Click to expand...
Hi,

Just 6 months ago, I paid off my principal home. Previously, for afew years, I was paying my principal home plus investment property. Since I have paid off my principal home, it has freed up some cash and we (wife and I) can now save money as well as service the investment loan. We save into an offset account. We currently have about $15k into the offset account. I am due for a new car. I'm still driving a 2006 Subaru liberty (sigh). We roughly save about $1k to $2k a month, give or take. So i must say, we are managing okay, hence why I am thinking about investing more. But repaying an extra $2k a month for the second investment loan would mean we won't be able to save anymore moving forward. And the kids are starting to get expensive.

Our combined household income is roughly $210k before tax annually.

Or do you think, I should invest in shares (index funds, bitcoin, commodities, transurban shares etc.) instead?, which I have also thought about. Lower start up cost means less risk involved. But current trade war makes me abit scared of investing in shares. I can't wait for Donald Trump to get the boot.

Or should I do nothing and just keep saving into the offset account (like you said earlier). Particularly when a recession may be around the corner. I've got so many different ideas and schools of thought in my head, but cannot decide. I'm afraid of making wrong choice or letting an opportunity slip.

Cheers.
 
Last edited:
Guju said:
Hi,

Just 6 months ago, I paid off my principal home. Previously, for afew years, I was paying my principal home plus investment property. Since I have paid off my principal home, it has freed up some cash and we (wife and I) can now save money as well as service the investment loan. We save into an offset account. We currently have about $15k into the offset account. I am due for a new car. I'm still driving a 2006 Subaru liberty (sigh). We roughly save about $1k to $2k a month, give or take. So i must say, we are managing okay, hence why I am thinking about investing more. But repaying an extra $2k a month for the second investment loan would mean we won't be able to save anymore moving forward. And the kids are starting to get expensive.

Our combined household income is roughly $210k before tax annually.

Or do you think, I should invest in shares (index funds, bitcoin, commodities, transurban shares etc.) instead?, which I have also thought about. Lower start up cost means less risk involved. But current trade war makes me abit scared of investing in shares. I can't wait for Donald Trump to get the boot.

Or should I do nothing and just keep saving into the offset account (like you said earlier). Particularly when a recession may be around the corner. I've got so many different ideas and schools of thought in my head, but cannot decide. I'm afraid of making wrong choice or letting an opportunity slip.

Cheers.
Click to expand...

It's hard to say what you should invest in without:
- knowing your full situation and risk profile
- having a crystal ball,

I do like the idea of diversifying, however I have NFI which shares or index funds to go fo.

Remember, saving into offset is a form of investing. It saves you interest, which because it is a saving and not earnings is tax free. And it's risk free, unlike shares or more property.

Also, you probably already know this but pay cash for the new car.

Cheers,
 
Admiral Motti said:
It's hard to say what you should invest in without:
- knowing your full situation and risk profile
- having a crystal ball,

I do like the idea of diversifying, however I have NFI which shares or index funds to go fo.

Remember, saving into offset is a form of investing. It saves you interest, which because it is a saving and not earnings is tax free. And it's risk free, unlike shares or more property.

Also, you probably already know this but pay cash for the new car.

Cheers,
Click to expand...
I never really thought about saving into offset account as a form of investment. Thanks again.
 
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