What are our options?

Any general questions you might have in regards to loans and finance.
Jellybean
Posts: 5
Joined: Wed Feb 17, 2010 11:52 am

What are our options?

Postby Jellybean » Wed Feb 17, 2010 12:10 pm

Hi there,

Wonder if you could shed some light on our situation.

My husband and I bought our first property 5 years ago. Since then, we have refinanced our loan to pay off a car loan that hubby had when he was still a bachelor :? . With the current market, i do not believe we have any equity in our current property. Fast forward five years, hubby and I now have 3 young children and have outgrown our house and wish to upgrade.

Here are some rough figures for you to work with:
- Our combined salary is $110k
- Our current loan amount is $365k (i believe in the current market, our home is work about $330k)
- We have a car loan with another financial institution (seperate from our home loan), and the loan amount is $43k
- Basically, total debt of about $410k

Having 3 kids in the last 5 years, i have had a total of two years Maternity Leave. We were lucky enough to have enough savings to last as while living on one income. I have recently returned to full time work, however, in the last 12 months we have had to touch our "savings" now and again for unexpected expenses. The bottom line is, we do not have 10% or even 5% genuine savings because of this. We have never defaulted on our loan and we dont have any bad credit records.

Our parents own their house outright. They are willing to be our gaurantor should we need to borrow equity from their home. My question is, is this do-able? Are there lenders out there that would take our situation and consider it? I am just worried, that with no genuine deposit or savings, we wont be able to purchase our much wanted new home.

Can you shed some light on what would be the best possible solution and what can we do to get out of our "rut", for a lack of a better word? Would we be able to use our parents fully owned home as equity and use them as gaurantors, seeing as we are no long first home buyers?

Thanks so much in advance! :) :)

Regards

Jellybean
Posts: 5
Joined: Wed Feb 17, 2010 11:52 am

Re: What are our options?

Postby Jellybean » Wed Feb 17, 2010 12:18 pm

Forgot to mention, we would be willing to hold on to our current property and keep it as an investment. Again, is this possible - is it a solution since we have negative equity? How much do you think our borrowing power would be, given our circumstances?

Thanks again :)

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Otto Dargan
Mortgage Specialist
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Re: What are our options?

Postby Otto Dargan » Wed Feb 17, 2010 12:35 pm

Hi,

Yes it may be possible to get a loan with a guarantee from your parents. With a guarantor home loan it is possible to go with a lender that does not require genuine savings and does not need a deposit.

The main concern would be that you can afford the debt. As you have an existing property the lenders would assess your loan on the basis that your current property becomes an investment property. Because you owe more than the property value you would not be able to sell this property at the moment.

I would only suggest that you consider a guarantor loan if you meet the following conditions:

1. Have a clear credit history.
2. Have excellent repayments on your current loan for the last 6 months.
3. Can afford the new loan repayments as well as your current repayments (we can estimate rent income and calculate this for you).
4. If you can commit to making extra repayments on the new loan to get rid of the guarantee as quickly as possible.
5. You do not apply for any new car loans / credit cards. Once you own a home you shouldn't rely on car finance, it can cause you to go backwards and end up in serious trouble.

I hope that helps. Please call us on 1300 889 743 if you would like to go through your situation in detail with one of our brokers that specialises in guarantor lending.

Thanks!
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: What are our options?

Postby Otto Dargan » Wed Feb 17, 2010 12:36 pm

Just to clarify we'd need to know the full details of your situation to work out if you can afford the loan. One of our brokers can do this over the phone or you can send all of your documents such as payslips and loan statements that way we can give you a more accurate assessment.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Jellybean
Posts: 5
Joined: Wed Feb 17, 2010 11:52 am

Re: What are our options?

Postby Jellybean » Wed Feb 17, 2010 6:52 pm

Thank you Otto for your prompt and quick response! ;)

You're right, of course affordability will need to be taken into account. Have done a little research into the potential rental income of our property and just a coincidence that i saw a townhouse going for rent in our complex, the rental is going for $370 per week. So, to be conservative, i would estimate our property to have a rental income of at least $320 to $350 per week. So that would be approx $1300 rental income per month (minimum).

Having said that, we would be looking to purchase a new home in the $420k mark. And in regards to your previous response, we would be committed to make extra repayments to get rid of the guarantee sooner.

I do hope there are lenders out there who are willing to look at our circumstances. What do you think our chances are given the above figures/situations?

Just one last question to throw at you - hypothetically, let's say we were able to sell our property in the current market, however have about $30k in shortfall due to our loan amount being higher then the market value, are we able to borrow our guarantor's equity to make up that shortfall and consequently, getting rid of the property all together and start from scratch, so to speak?

Appreciate all your help and advice in this matter.

Regards

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What are our options?

Postby Otto Dargan » Thu Feb 18, 2010 7:28 am

Yes I think it would be possible to get you an approval. I can't be sure until we see the full details of your situation however based on the information provided I am confident we could help you. I haven't completed serviceability calculations as there is much more information required. For us to do that we would need the full details of your situation.

I doubt you would be able to borrow the extra $30k to reduce your current loan so you could sell your property. There are a few lenders that could consider this however they would very likely decline your loan due to either their credit score or an assessment of your net asset position.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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