Enough equity but not meeting banks servicing requirements

[Doza]

Any advice on getting around bank servicing requirements. We have a Ak rental so it's got good equity, so we are wanting to buy a owner occupied house a do up to add value & to recycle deposit to buy another rental. But we are a one income family & have been told that we don't meet servicing requirements. How do investors get ahead on fixed incomes?

[Keys]

Take the banks advice.

You can sleep easy at night and not become bankrupt.

[artemis]

What Keys said, but also have a talk to a mortgage broker.

[Gladdynook]

What type of rental do you currently own? does it have good cashflow ie pays all costs plus profit?

or is it more like an owner/occupier home (good capital gain) but poor return? if so you could sell current rental and buy one that has better cashflow, therefore enabling a 2nd purchase

other options are
1. Increase the rent
2. ask for a pay rise
3. get a second job

[Champion78]

Take the banks advice.

You can sleep easy at night and not become bankrupt.

I agree. We recently bought our first rental property and what I found is the bank is extremely 'generous' already. I can't see how I can service the loan if I borrow to the limit that they allow me. So I end up borrowing half of what I am allowed, and I still think it is the max I can handle. Saying that, I am a newbie so don't really know how to make big money and many people say I am very conservative ...

[nicko54]

If you are moving from being a renter to an owner occupier consider the difference between your current rent payment to what your mortgage payment will be and also what your mortgage payment will be if you draw down/borrow any further funds to finance the renovation. If it is not much different or you think you can cover the cost then you should be alright.

Banks are being generous and interest rates are going to increase over time so make sure you can cover any increases in mortgage payments.

Thats my 2cents!

[Rosco]

If you are moving from being a renter to an owner occupier consider the difference between your current rent payment to what your mortgage payment will be and also what your mortgage payment will be if you draw down/borrow any further funds to finance the renovation. If it is not much different or you think you can cover the cost then you should be alright.

Banks are being generous and interest rates are going to increase over time so make sure you can cover any increases in mortgage payments.

Thats my 2cents!

Make sure you factor in Rates, Insurance and other holding costs. Repairs are a big one that most don't allow for, and for rentals the long term average is about 1% of the property value per year. So you should allow for at least $2,000 to $3,000 repairs per year!

Ross

[PTILoveYou]

Talk to a different bank or use a mortgage broker.

Also you could try not disclosing your kids to the banks at your own risk...

[iwik]

OP, Apply for the loan as a rental property and go interest only.

Use a mortgage broker who is versed in presenting you to
banks in the best possible light.

[Wayne]

Also you could try not disclosing your kids to the banks at your own risk...

You do encourage a lot of dodgy moves Gary.
Don't disclose to the IRD bank contributions, lie on an application form ...

[PTILoveYou]

You do encourage a lot of dodgy moves Gary.
Don't disclose to the IRD bank contributions, lie on an application form ...

I'm not encouraging it, I'm just saying there are ways.

Like banks who actively help purchasers to fake rental agreements and fake boarder incomes, apparently that's kind of legit under the table...

[Wayne]

Like banks who actively help purchasers to fake rental agreements and fake boarder incomes, apparently that's kind of legit under the table...

Certainly not legit!

[marklowes]

Probably the most sensible would be to look for higher yielding properties outside of Auckland (an overheated, over stretched market) that represent better value. You'll run out of servicing capacity very quickly buying auckland properties.

Other things to help, get a border, asb accept up to 150/week boarder income to be included as income from a servicability point of view, other banks take a % of the boarder income. Either way if you are confident you can service, get a border at least for the period leading up to the loan application.

If equity isn't an issue, pay off all overdrafts, credit cards and hire purchases; these all have an effect on servicability.

Can't help you with the kids situation. Don't lie about it though as that is fraud and very serious.

[PTWhatAGreatForum]

Take the banks advice.

You can sleep easy at night and not become bankrupt.

+1

Sounds like the O.P. has an inflated ego.

I'm not encouraging it, I'm just saying there are ways.

Like banks who actively help purchasers to fake rental agreements and fake boarder incomes, apparently that's kind of legit under the table...

Did you learn this from your friend? There is nothing new about playing that game and every 7-10 years a bunch of idiots pay the price as a testament to their foolishness and greed.

[Davo36]

I'm not encouraging it, I'm just saying there are ways.

Like banks who actively help purchasers to fake rental agreements and fake boarder incomes, apparently that's kind of legit under the table...

Gary, mate, I don't think you should be encouraging newbies to misrepresent their financial/living conditions. The might get away with it but they might not.

I realise banks in the past (esp. in the USA) would just turn a blind eye to a borrower's true circumstances but this did in fact end up costing those borrowers all that they had. And it's just not right.