Declined by all banks due to Affordability?
Ryan Smuts
Director & Mortgage Adviser at Kris Pedersen Mortgages & Insurance and Director at Infinity Float Centre
We all know that in life it is usually the things you don't act on that end up costing you the most. Sitting on your hands in a property market like the one we're in is actually more detrimental in many cases for people than they may initially realize.
This month we've had a client unconditionally approved by Select, to assist them in furthering their property portfolio.
I've been working with two clients who had a rental property with one main-bank lender which was worth about $400k. This client had debt of about $200k against this property, so only circa 50% leveraged. In addition to this though, the banks harsh servicing criteria meant that this client wasn't able to get any more funding, although they knew they could afford it! The clients were feeling a little bit hard done by and really wanted to progress and move forward on this so had to sort other options.
In comes Select. Select have easier servicing/affordability criteria than banks and so the client was able to borrow more funds. In addition they are able to lend up to 80% on a standalone investment property so were able to release equity for these clients of up to $120k. This portion of funds was split as follows:
$100k allowed them to provide a 20% deposit on a new $500k purchase of a duplex in their area, and the other $20k is available for renovations to increase rental return.
The other $400k we required was secured against the new purchase itself.
In total this was $900k of property (two properties) and debt of $720k which is 80% LVR. This client will have rates of 5.09% at this LVR on this buy and hold property on an interest only basis which is actually lower than most bank floating rates. Repayments are $705 per week and these properties combined rent for over $1,050 per week. Allowing for expenses these are still cash-flow positive - great result!
It's great to be working with lenders who are able to assist our clients in so many different ways. As Mortgage Advisers an integral part of our job is to provide clients with options, and the more we have up our sleeves the better for our clients!