Am I dreaming?

[brokerman]

Great news!

[sidinz]

Well, I figured that the worst that could happen is that they'd say 'no', so I asked my existing bank (ASB) if it were possible to have standalone lending with them. They said 'yes.'

So they have approved me to refinance my home to extract some equity which will provide the deposit for new purchases and they will lend the remaining 80% of the purchase price(s).

This lending will not have security over my home.

So.....sometimes it pays to ask!

[brokerman]

In principal it can be done with a non Bank lender to 70% as long as the rental covers the debt assuming P&I 25 year term and using 75% of the gross rental income. Hope that makes sense!

[Nick G]

Hold on a sec. Because your bank let you buy the rental in the first place I assume you have enough total equity to cover a 20% deposit on your PPOR and a 30% deposit on your rental.


If you do, then you should be able to refinance one of those properties away to another bank. You might have to shift some debt from your rental over to the PPOR, which is less tax efficient of course.


So if you were at 40% LVR on your PPOR and 90% with your rental, you might refinance the PPOR to Bank #2 at 60% LVR. That extra 20% you leave behind would satisfy the LVR requirements of your original bank.

[Anthonyacat]

Then non-bank lenders at higher interest rates it is.

[sidinz]

The simple answer seems to be to go with the current bank, and refinance your PPOR away as soon as possible. Is there a reason that won't work?

Yeah, there is. And apart from the other reason (that I don't want to go into), in the meantime I would be doing what I am trying to avoid (more cross-collaterising against my home) for quite a while as I paid down the existing rental to the 70% equity mark. It's currently over 90% as I bought it with 100% financing against my home and have had it on interest only.

[Nick G]

Ditto what Anthony said.

[Anthonyacat]

The simple answer seems to be to go with the current bank, and refinance your PPOR away as soon as possible. Is there a reason that won't work?

[sidinz]

Any scope in using your current bank for the new property, and then re-financing your PPOR to a new bank? Could work if the PPOR loan was smaller than the $200-250k rental you're planning to buy. Assumes that you don't need to use the equity in your PPOR for the lending (but since you're talking about another bank already, that seems likely?).

No - the current bank won't be able to do that as it would leave the existing rental (in Auckland) at over 90% LVR. So while the equity in my home would not be used for a new purchase, it is currently being used that way.

[Lanthanide]

Any scope in using your current bank for the new property, and then re-financing your PPOR to a new bank? Could work if the PPOR loan was smaller than the $200-250k rental you're planning to buy. Assumes that you don't need to use the equity in your PPOR for the lending (but since you're talking about another bank already, that seems likely?).

[sidinz]

Depends on your relationship with the bank.
My income fluctuates too as I have a business that relies on commercial and industrial buildings being built and/or refurbished so the income varies from month to month.
I have recently purchased a property where the bank wanted a valuation done and I simply asked them to finance me based on the current rental income and they agreed.
Shop around if you current bank will not play ball, and by all means negotiate.
Cheers,
Brian

The whole problem is that I don't want to go with my current bank so as to avoid more cross-collateralisation. My current bank would probably go for it but I want to work towards releasing my own home from the mix.

[Kirwee]

Depends on your relationship with the bank.
My income fluctuates too as I have a business that relies on commercial and industrial buildings being built and/or refurbished so the income varies from month to month.
I have recently purchased a property where the bank wanted a valuation done and I simply asked them to finance me based on the current rental income and they agreed.
Shop around if you current bank will not play ball, and by all means negotiate.
Cheers,
Brian

[Damap]

Get your broker to go to the non banks. They'll lend it's just the interest rate will be higher.

[Anthonyacat]

I don't think you'll find any lenders that won't ask to see your income, but there are always options for part-employed or self-employed (or even unemployed) borrowers. Book some time with a lending person at a bank and have a discussion. If the main street banks won't do it for you, Resimac probably will - though you'll pay a bit more for it.

[sidinz]

I want to buy another property, (provincial NZ) through my LTC, with a new bank. It will be cashflow positive. Looking at spending $200-250K.

However, I would want the loan to stand on its own merits: I wouldn't want the bank to look too closely at my income/commitments as my income fluctuates. It's not your week-in, week-out, 9-5 salary/wages, so a big chunk of it isn't guaranteed and the other portion is only guaranteed for the next ten months (when a new contract will be signed.) Current earnings also only date back a month or so.

So are there any lenders out there who will just look at the loan as self-servicing without examining guarantors' income?