80% low doc loans (with self declare income) for investments

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scotthochgesang
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80% low doc loans (with self declare income) for investments

Post by scotthochgesang »

I am a self employed individual with a very good credit history, a successful property investing record (own 3 properties plus our PPOR) and am keen to make add'l property investments yet this year. One issue I've been running into is the limit on total borrowings, set either by the lender directly or in coordination with the mortgage insurers. My current approved borrowings, some unused, sits at $2.6M.

My research has ruled out Suncorp and Bankwest due to borrowing limits. NAB still possibly an option but I've yet to run across an investor or broker who has closed an 80% low doc loan with them in the past few months. I've been focusing on lenders who use QBE as their insurer.

On interest rates, I"m not going to proceed if I can't get a variable rate still in the 6's. Or possibly a really good 3-5 year fixed rate.

My alternative strategy is to go with 60% low docs but that will likely require waiting for further appreciation of my current properties - meaning more costly for me to buy in later this year or in early 2011. I am also interested in purchasing via a trust structure if available from the lender.

Curious to hear your thoughts and any recommendations/options :) There must be quite a few property investors in my situation at the moment....

Best,
Scott
Last edited by scotthochgesang on Fri May 20, 2011 3:21 pm, edited 1 time in total.

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Otto Dargan
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Re: 80% low doc loans (with self declare income) for investments

Post by Otto Dargan »

Yes QBE is the ideal mortgage insurer however as you have suggested there are issues here. Suncorp will not approve low doc loans to people with > $1.5m in loans. BankWest technically has no issue with this however their loans all have to go to QBE LMI for approval, the loan will be credit scored and will be declined for the same reason. NAB use QBE LMI however I am not confident doing business with them as they are very disorganised and will credit score the application as well.

We have a lender that is cheaper than Suncorp, BankWest or NAB and can lend 80% with no BAS through another LMI provider. The catch is that you would need to provide an accountant's letter confirming your income.

If that isn't any good then you would need to provide BAS statements and use a lender that uses Genworth Financial for their LMI or to go with a more expensive low doc lender around the 7.5% to 8% mark that self insures.

Low doc loans are very hard for the lenders to fund at the moment so unfortunately they are harder to do. Increasingly lenders are also seeing a trend of low doc investors with many properties having a higher arrears rate than other borrower types. It is for this reason that QBE and the lenders that use QBE have put limits on the maximum total exposure / total borrowings that any one customer has.
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scotthochgesang
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Re: 80% low doc loans (with self declare income) for investments

Post by scotthochgesang »

Hi Otto,
I don't quite understand what you mean about "credit scoring" somehow hurting me with certain lenders because I have a few (4) different property loans. I thought that the credit scoring issue dealt with having many many checks on your credit (say by credit card companies, banks) where you have applied for some type of credit (e.g. credit cards, home loans, personal loans etc.). I could see having 10 credit checks in a short time period causing some issues, for reasons you've previously pointed out in the forum, but not for 4, especially when each led to a closed loan and settlement??

In any case, I've pretty well decided to sit tight for now and either wait for more equity growth which would allow me to continue purchasing with 60% low docs. Or to hopefully wait for the emergence of new low doc loan products that are rumored to be in the works, 1 being a new 70% low doc product without LMI, that I understand Adelaide Bank is considering. Lots of investors would be very interested in this product (hey Adelaide) if it can be delivered at the same discounted variable rates given to home purchasers purchasing at 80-95% LVRs...

Basically I have grown tired of chasing after the elusive 80% low doc No Bas "Tazzie Tiger" investment loans - there are many rumored sightings but no true catches :) And there's always a gotcha somewhere...

Interesting forum - hope you keep it up as it's a nice educational service for potential borrowers.

Scott
shochgesan@aol.com

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Otto Dargan
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Re: 80% low doc loans (with self declare income) for investments

Post by Otto Dargan »

Hi Scott,

Basically the mortgage insurers, in particular QBE, have noticed that investors with a high number of properties / a high amount of debt are a higher risk for a low doc at 80%. As such they have tweaked their credit score to be very conservative for this customer profile. It isn't fair and it tars everybody with the same brush, however those are the rules of the game at present so that is what we have to work with.

Yes low doc 80% is becoming more and more conservative. With new funding pressures in recent months and new legislation coming in this week I seriously doubt that any new products coming out will be anything to write home about. Many lenders are eager to create a product for this market niche however they just can't raise the money overseas at a low enough price to make it feasible.

Can you get an accountant's letter to confirm your income? If so then we can do an 80% low doc at an excellent interest rate. Without this then it is very expensive.

Thanks
Otto Dargan
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peggy5919
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Re: 80% low doc loans (with self declare income) for investments

Post by peggy5919 »

Hi, otto,

I am looking for a low-doc construction loan(70%-80%) at this moment. I have been with ANZ bank 80% low doc for 2.5 years (the house I am living ) and 1.5 years with a block of land. However 80% low doc is no longer available from ANZ therefore I am thinking of refinancing the land loan and get another construction loan. I have ANZ valued my house and land last month. The house valued at $450,000 with loan of $235,000 and land valued at $280,000 with loan of $240,000. construction cost between $350,000 to $400,000. I would not be able to provide tax return and business activity statement. currently paying around $1200 per week for 2 loans. 20 years term and extra payment. Please kindly advise what options are available for me. thanks

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Otto Dargan
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Re: 80% low doc loans (with self declare income) for investments

Post by Otto Dargan »

Hi Peggy,

Yes there are a lot of people in similar situations to you, who have purchased land with the intent to build only to find that their lender no longer does 80% or now requires BAS statements.

The good news is that we have two very cheap options for your situation:

* Option 1: No Bas or other evidence required. Can do a refinance at 80% as long as the purpose is construction. Low rate and low LMI premium. What is the catch? You must pass a strict credit score which in particular will automatically decline if you have too many enquiries on your credit file in the last 12 months.
* Option 2: An accountant's letter is required to verify your income however you can borrow 80% as above and do not require BAS. The credit scoring for this lender is more lenient and it is rare for people to get declined.

The location of your land is also important. Capital cities and major regional centres are fine. If in doubt check our Postcode restrictions calculator.

Please call one of our mortgage brokers on 1300 889 743. This is the kind of problem that we specialise in solving, I'd be very happy to see you get out of this situation considering ANZ has let you down after you have been so loyal to them.
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peggy5919
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Re: 80% low doc loans (with self declare income) for investments

Post by peggy5919 »

Hi, otto,

thank you for your reply. just wonder how it works. do I have to refinance my house and land or the land only? I did not intend to get loan other than ANZ since I bought my land 1.5 years ago. Anz do offer to refinance my house for up to 75%. but my point is how I can get 80% of the construction loan. Not sure whether I can get an accountant letter but I am very sure that no enquiries made to my credit for the last 2 years other than ANZ. I initially was looking for bridge loan as I intend to sell my house after the house is being built, but somehow I did not negoicate with Anz and look other way to get out of this situiation . My land is 7 km away from adelaide CBD so i think it should be fine. The most important thing for me is how easy and how quick I can get the loan rather than intereste rate because I will be selling my property. thanks :lol:

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Otto Dargan
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Re: 80% low doc loans (with self declare income) for investments

Post by Otto Dargan »

Hi Peggy,

We can hopefully just refinance your land. As long as the loan is for no more than 80% of the land value plus cost of construction then this will be fine. If we need more funds then we will need to refinance the house as well.

Thanks
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peggy5919
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Re: 80% low doc loans (with self declare income) for investments

Post by peggy5919 »

Hi, otto,


wonder who the insurer is? :?:




regards peggy

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Otto Dargan
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Re: 80% low doc loans (with self declare income) for investments

Post by Otto Dargan »

Hi Peggy,

It is through one of the major LMI providers using what is known as a DUA. This allows the lender to use their own policy instead of the LMI providers.

Thanks
Otto Dargan
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