80% LVR LoDoc loan - Am i dreaming?

[ok180]

Hey everyone, below is the situation I have, hoping some of the finance wizards on the board here can help me out.

What I want to do

Refinance 2x IP's that are in my name, releash cash to purchase Ip 3 in my wifes name.

IP1: Value 600k, loan remaining 330k
IP2: Value 300k, loan remaining 215k

At 80% LVR I should be able to release 175K if values stack up.

I am self employed, started a business 2 years ago, first year I didn't show very high wages, the last 12 months have been a bit better.

What StGeorge has offered us

Bring across the IP's plus PPOR (value 600k loan 230k all in my name) they will only offer 60% LVR and want to cross collaeralise all 3 loans - meh

This will leave us with about 125k cash out which I could give to my wife to buy an IP under her name.

Obviously this type of situation is not as beneficial to us as I had hoped having to X col the properties and the cash out would be a lot less.

So my question is, I want 80% LVR and only want to refinance the 2x IP's, can it be done the way I want without having to cross collaterise?

 

[Peter_Tersteeg]

Cross collateralisation isn't an issue here. If you qualify for the loans, then you can put together whatever structure you like. Crossing the loans shouldn't affect your eligibility for the loans. If St George can do this by crossing your properties, they can also do it without crossing the properties.

On the surface it appears that you do qualify for a lo doc loan given you've been self employed for over 2 years. Lenders also need additional evidence of income, usually a one or two of the following:
* Last 12 months of BAS statements.
* Last 12 months of business trading statements.
* Accountants letter stating your income.

From these documents they determine what your ability to service a loan is and thus what they'll approve. It doesn't matter if it's a refinance or a purchase, or if you've already shown you can afford the loans you've got. The lender needs to be able to prove that you have sufficient income going forwards to maintain affordability.

I also suspect that St George isn't doing this as a lo doc loan. The last time I looked their 'cash-out' policy for lo doc is they'll only give you $10,000, not $175,000. This could have changed because it's been a long time since I've actually written a lo doc loan.

99% of cases where people legitimately qualify for a lo doc loan, we find that they also qualify for a full doc loan. There are a few lenders who will accept only 1 tax return, not the last 2. It's also a heck of a lot cheaper.

 

[Shahin_Afarin]

Why not go with a lender that accepts the higher of the tax returns? Or one that accepts last year's return?

Have you determined whether you are able to service the loan this way? Based on your equity position I think you have a good shot. If not this needs to be your first step.

Also at 80% lo doc LVR you are paying LMI - you need to factor this.

There is no need to cross securitise your properties.

St George is not the right lender for this scenario.

Regards

Shahin

 

[ok180]

On the surface it appears that you do qualify for a lo doc loan given you've been self employed for over 2 years. Lenders also need additional evidence of income, usually a one or two of the following:
* Last 12 months of BAS statements.
* Last 12 months of business trading statements.
* Accountants letter stating your income.

None of those are a problem, my BAS statements alone show a lot more than the Tax Return of the year I started.

Thanks for the response guys, I knew there had to be a better way of doing this.

 

[Peter_Tersteeg]

None of those are a problem, my BAS statements alone show a lot more than the Tax Return of the year I started.

Thanks for the response guys, I knew there had to be a better way of doing this.

That's good news. With an excess of documentation it might be possible to convince lenders go with interim statements and qualify for a full doc loan. Alternately you could wait until July and almost certainly qualify for full doc at that point once your tax return is done.

 

[Aaron_C]

None of those are a problem, my BAS statements alone show a lot more than the Tax Return of the year I started.

Thanks for the response guys, I knew there had to be a better way of doing this.

If you got 4 quarters of BAS to show self employed income then go for full-doc with another lender. Forget lo-doc.

 

[ok180]

If you got 4 quarters of BAS to show self employed income then go for full-doc with another lender. Forget lo-doc.

BAS are no problem, they look really good.

I don't want to wait until July because my tax return wouldnt be done until Oct/Nov anyway so would be better to go off the BAS. Also we have a baby on the way so want to get that property in my wifes name before she has to stop working full time.

 

[Marty McDonald]

BAS are no problem, they look really good.

I don't want to wait until July because my tax return wouldnt be done until Oct/Nov anyway so would be better to go off the BAS. Also we have a baby on the way so want to get that property in my wifes name before she has to stop working full time.

If 70% floats your boat then a Citi bank "lite doc" might work. 12 months BAS together with a signed P & L statement for same period, no cash out issues no LMI, same low %'s as full doc. They take the net profit figure before tax and from the P & L and there is also potential to add back any wages you have paid yourself.

 

[Rolf Latham]

Most "real" lo doc scenarios can be sold on a full doc ...........so much so that many brokers dont bother with lo doc anymore, us included

ta

rolf

 

[Qlds007]

Agree with Rolf if it doesnt work on a full doc basis we steer clear.

Thats doesnt mean we always provide 2 Years Tax Returns but the days of doing it on a nod, wing and a prayer are been and gone.