Few odd questions

Any general questions you might have in regards to loans and finance.
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james
Posts: 4
Joined: Wed Aug 04, 2010 2:58 pm

Few odd questions

Post by james »

Hi,

I'm hoping you can answer these for me:

1. I currently have 2 loans with CBA wich total about 800K and the valuations of the properties they are holding were bank valued by them at 1.08 Million a year ago. I also have a credit card with them for $5000 of wich I owe $4800. Will this credit card debt work against me if I apply fr a new loa with them or doesn't it matter because I have a full year of perfect payments with them ?

2. If I defaulted on my mortgages and the bank say sold the properties for 1 Million, would I get the 200K back that was equity or would the bank just keep the whole 1 Million dollars even though I only owe 800K ?

3. If I strata title a block of 3 units held on 1 title will the bank have to re-value the 3 units individually ? If so would they pay for that or would I ? Is there anything negative about doing a strata title ?

4. Is it easier to get approved for a loan if you have perfect history with a bank for over 6 months or a year etc or does it make no difference ?

Thanks a million,
James

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Few odd questions

Post by Otto Dargan »

Hi James,

In reply to your questions:

1. Your internal credit score with CBA would be slightly negatively impacted because you are at your limit with your credit card. This would easily be offset by your perfect repayment history, so it is unlikely to be a problem. CBA considers any late payments on your credit card, home loans or any time you have overdrawn your cheque account as a sign of poor credit worthiness and as a result your credit score with them would likely fail if you have several late payments. On the other hand a perfect payment history for > 12 months would be seen very favourably by them. Note that your payment history with CBA would not affect your credit score with other lenders.

2. The bank would return to you any surplus funds from the sale. There would be other costs the bank incurred such as legal fees and agents fees which would be deducted from the sale proceeds. Hopefully you will not end up in this situation!

3. If you own a block of 3 units and you strata title them then generally the bank will charge a variation fee which would include the cost of the valuations. I would expect the maximum bank fees would be around $600 depending on their interpretation of the changes, so this is unlikely to be a major concern. Note that the units would now value higher so you could also increase the loan if you like, strata title units are worth more than units on one title.

4. If you have a perfect history with CBA then it would generally be easier to get an approval with them. That being said we usually complete a full assessment and work out which lenders you would qualify for, including your current bank, and then help you to select the lender that gives you the best deal overall. CBA is not the cheapest available lender at the moment so if you qualify with another lender then it may be worthwhile to switch.

Just a few handy hints:

* If you pay off the credit card before applying then this will help to increase your credit score.
* CBA is quite conservative when lending to people with multiple investment loans. They made this change in the last year so what they told you that they could lend you a year ago is likely a lot more than what they can lend now. Other lenders are less conservative when lending to investors.
* If you have a prior repayment history issue with CBA (>12 months ago) then they will take this into account. We can call CBA and confirm the way they will view your current history before applying for a loan with them.

Hope that helps!
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

james
Posts: 4
Joined: Wed Aug 04, 2010 2:58 pm

Re: Few odd questions

Post by james »

Thanks a heap Otto!!

So i'll pay the credit card off, shouldn't be too hard.

If for some amazing reason the units valued at less than the valuation last year, what would happen? Would I be forced to give the bank the difference in cash?

Also you say CBA is conservative with multiple investment loans. Can you give me sme more info on this. Even though I am still under 80% LVR is it still an issue with them? Could they knock back a loan just because I already have 2 investment loans withthem?

Is this the case for another investment loan or would that apply to a LOC, construction loan and any other type of loan???

Thanks heaps!

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Few odd questions

Post by Otto Dargan »

Hi James,

If the units valued lower then CBA would either decline your application or ask you to pay LMI. They wouldn't ask you to pay them the difference to reduce the loan. If it was a commercial loan it may be a different story, however for normal residential loans this would not be a problem.

CBA is conservative in the way that they assess someone's ability to repay a debt. They believe people can afford to borrow much less than other lenders. If you have an excellent income then this will not be a problem, however if you can only just afford the loans then it is unlikely that they can help. This problem is applicable for all loan types, however it becomes especially prevalent for people with multiple investment properties as they have a higher level of total commitments. Other lenders are less conservative in this regard.

We have the ability to order valuations for CBA prior to submitting a full application. This means that we can quickly work out if it is a deal or not without requiring you to obtain all of the paperwork first.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

james
Posts: 4
Joined: Wed Aug 04, 2010 2:58 pm

Re: Few odd questions

Post by james »

Thanks so much Otto, your knowledge is priceless!

Might see you soon...

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Few odd questions

Post by Otto Dargan »

Not a problem, glad I could help.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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