The couple’s aspiration for a holiday home on the South Coast was hindered by the lending limitations set by their past financials. Despite a flourishing business and solid income, traditional loan assessments based on their previous two-year financials did not showcase their true borrowing capacity, putting their dream just out of reach.
Our clients, a self-employed couple, were on a mission to purchase their dream holiday home on the South Coast. They encountered obstacles due to limited borrowing power, as their financials from the past two years didn’t sufficiently support the loan amount they needed. Despite their business taking a positive turn and drawing a substantial wage, their historical financial records fell short of reflecting their current financial prosperity.
We introduced them to alternative methods of income verification tailored for self-employed individuals, such as reviewing BAS statements, obtaining Accountant’s Letters, and exploring the new Simple Verification for Self-Employed. The Simple Verification method, which involved analyzing six months of payslips, proved to be the golden ticket. By annualizing their six months of income over a year, we significantly enhanced their borrowing capacity. This financial maneuvering enabled us to tap into the equity of their existing home, paving the way for them to acquire their much-anticipated holiday retreat on the South Coast. The dream was no longer a distant vision; it was a reality, enriched with the promise of countless cherished moments in their new sanctuary.
With their borrowing power successfully amplified and the right loan strategy in place, the clients not only secured their idyllic holiday home but also unlocked a new level of financial flexibility. The seamless navigation through alternative income verification methods ensured that their current financial stability was accurately represented, leading to a fulfilling transaction. As they settle into their coastal haven, they do so with the knowledge that their entrepreneurial journey and financial acumen played a pivotal role in turning their dream into a tangible reality.
A seasoned investor hit a snag when attempting to add a fourth property to her collection; her broker said she’d maxed out her borrowing capacity. Despite this, her portfolio was healthy, with a strong 60% LVR. We switched her loans to Interest Only to improve cash flow and connected her with a non-bank lender that recognized her rental income potential, enhancing her borrowing power. Our strategy led to a profitable interstate property purchase and plans for further expansion into her SMSF, underlining her investment acumen.
An ambitious property investor was aiming to add a fourth property to her impressive portfolio. However, she hit a roadblock when her current mortgage broker told her that her borrowing capacity was fully utilized. Upon reviewing her property portfolio, it became apparent that equity was abundant, with a solid 60% Loan to Value Ratio (LVR) in her holdings.
After a thorough analysis of her financial situation, we shifted all her loan repayments to Interest Only, significantly enhancing her cash flow. To facilitate her property acquisition, we introduced her to a non-bank lender, known for their flexibility and favorable terms for property investors. This lender acknowledged the full potential of her rental incomes, applied only a minimal loading on her existing Interest Only repayments, and worked with a lower benchmark for living expenses, thereby boosting her borrowing capacity.
The strategic financial restructuring and lender switch facilitated an interstate property acquisition worth $563,000, boasting a robust 7% rental yield. This fifth addition to her portfolio not only solidified her status as a savvy investor but also fueled her confidence and provided clear guidance for future endeavors. Within the next 12 months, she plans to acquire two more properties, and we’ve laid out a strategic plan for her to delve into investment through her Self Managed Super Fund (SMSF), opening doors to even more opportunities and financial growth.
Our client surpassed their pre-approval limit at auction, risking their property purchase due to insufficient funds. We refinanced their existing property, extending the loan term and securing a lower interest rate, which increased their borrowing capacity. This bridged the financial gap, allowing them to finalize their new property acquisition successfully. The client’s proactive refinancing approach ensured their property ownership and financial health.
The client secured a pre-approval for their maximum borrowing capacity but ended up bidding beyond this limit at an auction. This left them short of funds to cover the difference between the pre-approved amount and the final purchase price.
Before bidding for a new property, they had an existing property which has 25 years remaining on the loan term. We opted to refinance this property and by resetting the loan term to 30 years and negotiating a lower interest rate, we effectively increased their borrowing capacity. This strategic move provided them with the necessary funds to bridge the gap and complete their property purchase.
The client transitioned from a potential financial setback to a triumphant property owner, all thanks to a tailored refinancing strategy. With a more manageable loan and an extended term, they could secure their new property without compromising their financial stability. This experience not only resolved their immediate funding shortfall but also imparted valuable lessons in strategic financial planning and the importance of having a flexible and responsive mortgage strategy.
Faced with a low property valuation from their bank, our client was unable to access equity for renovations. We stepped in as mortgage brokers, securing multiple no-cost valuations. The result was a higher valuation from one bank, enabling the client to refinance for a better rate and withdraw $150,000 for home improvements. Consequently, the renovations enhanced both their living space and property value, leaving the client thoroughly satisfied.
We had a client looking to access equity from their owner-occupied property to help fund cosmetic renovations on their property. The client originally approached their existing bank and had a valuation completed. The valuation was completed but did not allow for any further lending.
We spoke with the client and explained that as mortgage brokers, we can order valuations with multiple banks. We approached three different banks and ordered three valuations at no cost to the client. One bank valuation came back with a much higher result that allowed the client to refinance their existing home loan to a better interest rate and access $150,000 to go towards their kitchen, bathroom and landscaping upgrades.
Empowered with the ability to upgrade their living space, the client successfully utilised the additional funds to design their property to their style of livability and functionality. Their investment in key home improvements not only increased their quality of life but also added substantial value to their property. With a more competitive interest rate and a home tailored to their tastes and needs, needless to say, the client was delighted with the outcome.
When it comes to buying your first home, you have two options:
The term ‘rentvestor’ was coined and trademarked by LJ Hooker as one of the key trends for millennials (i.e. under 30’s) for the buyer who loves their lifestyle of renting close work or the city and doesn’t want to relocate – but knows the importance of getting into the property market. Given they are priced out of their local area or the suburb they want to live in, an entry point into the investment property market is to buy within their budget.
This particular client was aged 25 and was renting near Cronulla and knew he needed to get into the market, but was priced out of this area.
Many clients experience the excitement of buying their own home and then get into the habit of simply paying their mortgage down monthly. There is nothing wrong with this, but the mentality of ‘set and forget’ is where banks tend to make money from complacent customers. When was the last time your bank called to let you know you could actually pay down your home loan faster, or that you were entitled to a lower interest rate?
This example looks at clients who were guilty of ‘setting and forgetting’ their mortgage.
To learn how you could save more each month by having the right structure in place for your home loan, please get in touch. We would be happy to help you.
The concept of using equity to purchase an investment property can enable clients to launch their plans to build a successful property portfolio – whether it’s to buy one additional property or purchase several more.
We have taken a number of clients on this journey and now they all have thriving investment property portfolios which will lead to financial freedom in the long term.
Darren and Ashley were great clients who had the right idea – pay down their mortgage as fast as possible. In doing so, they had equity in their home to assist with purchasing their first investment property. They realised they wanted to build a portfolio, which would assist with their retirement in twenty years’ time and also build wealth along the way.
As investors, they accessed up to 80% of the equity in their home, less their existing loan, to assist with purchasing an investment property. Therefore 80% of $850,000 = $650,000
Total available equity = $650,000 – $350,000 = $300,000
They purchased an investment property for $400,000 and also needed to budget $20,000 for additional costs such as stamp duty, legal fees and disbursements. Their total costs are now $420,000.
Using the equity in their home, they funded the 20% deposit and costs which was $100,000 (i.e. 20% of $400,000 and $20,000 for costs).
They also had a separate loan for the 80% lend against the investment property, which was $320,000.
The rental income for this investment property serviced the 80% loan of $320,000 and the loan of $100,000.
As Darren and Ashley gained confidence, they repeated the process and have now purchased four investment properties – all funded from the equity in their own home. Importantly, they have also protected themselves from over leveraging their properties’ equity by continuing to pay down their primary mortgage.
If you would like to know more about using the available equity in your own home or in your investment property/ies to build an investment property portfolio, let us show you how this is achievable.
