overcapitalisation ???

travelbug · Aug 10, 2014 1:03 pm

JB1

travelbug

Your first mistake was paying down the land.

In hindsight what you should have done was pay interest only and put the remaining money in an offset account, that way you would have all that money at your fingertips.

Unless someone cannot control themselves I say never pay down loans. Having the money inan offset achieves the same interest payments but you avoid situatons such as yours. Once you pay it back it's the banks money. Money in an offset account is yours to do with what you want.

I hope it works out for you.

I don't know where to start, but that's actually poor advice.

Not all loans have offset accounts and most loans have redraw facilities. Most loans with offset accounts charge a higher interest rate. I will admit offset accounts is better than redraw for investment properties, but have no advantage for PPORs.

Regardless, how does having money in an offset account help the OP in any way?

OK first you criticise me for giving poor advice (which it is not) then you admit you don't know what you are talking about. What's with that?? Clearly a case of "you don't know what you don't know".

There is a definite advantage to having an offset over a withdraw. And that is accessing money.

Money n an offset is the banks money (that you have paid above the compulsory). You may ASK the bank if you can have it back to purchase something else.
Money in an offset is YOUR MONEY that you can withdraw ANYTIME you like to buy WHAT YOU LIKE.

See the difference this makes to the OP?? I hope so. I"ll make it simple for you. They could have used THAT money to build the house (or for psart of it) thereby not having any of the problems they have now.

JB1 · Aug 10, 2014 4:58 pm

He can redraw on the loan so why did you say it was a mistake to pay down the loan?

hard_aground · Aug 10, 2014 6:25 pm

i have extra payments on the land loan. i can redraw this money at any time but then of course, the principal owed goes back up. while i have the "extra" funds in the loan account, the interest is less. simple equation to my way of thinking.

i am going to make an appointment to see the bank manager when i get back home from my current two week contract. i will be asking why the bank won't accept the house construction materials/process as i planned etc. plus i will be questioning why i had to jump through so many hoops in the first instance only to have my loan rejected due to valuation figures (based apparently on the construction method/materials etc). bit like a dog chasing its tail here.

i would like to stress that i am not the risk in the equation here. i earn good money and have no other debts other than the land loan. no dependents and i have other assests….and so on. thats why I'm really annoyed with the bank. they gave me the green light all the way through the loan process right up to pre approval etc then threw the whole lot down when the value came in less. i think the whole process is biased. i was told by the lender that valuations rarely come in less!!! what a surprise to learn that mine did!!!

sometimes i get the impression that the younger people in the bank are blind to the bigger picture and don't extend themselves to actually HELP people. if i cant get a loan at this bank then what real chance have i got at other banks???

and the house is not unique in construction or look….just the bank being too damn hard to deal with. i expect i will be taking my business elsewhere…
bernadette

AussieMark · Aug 10, 2014 6:55 pm

I can assure you that the younger people in the bank are following policies and procedures outlined by older people in the bank. It is the older people you should speak with and articulate why you are not a risk and the other assets you have. I would start speaking to other banks as it does sound a little odd.

robbie55 · Aug 10, 2014 7:07 pm

It is odd but some banks are just awful. Our last loan was nearly refused because 3 different people couldn't read a statement and instead of seeing that my other loans were in credit they thought it was in arrears.

Weeks later it was approved but I already moved on. Approved by another bank in days.

History with a bank means zero, the person assessing works by the banks criteria not how long you've been a customer.

Good brokers have a strong handle on each of the lenders criteria. Find a good one and they will find a lender that can work in with you rather than the reverse.

Crazyk · Aug 10, 2014 8:01 pm

+1 for a broker.

Ditch going direct to banks. The days of personalisation are gone. Brokers are far more effective at knowing where to get the best deal for your circumstances.

plc · Aug 11, 2014 12:45 am

AussieMark

I can assure you that the younger people in the bank are following policies and procedures outlined by older people in the bank. It is the older people you should speak with and articulate why you are not a risk and the other assets you have. I would start speaking to other banks as it does sound a little odd.

The lenders hands are tied. According to the OP it's the valuation that is the sticking point here and this is done by an independent party to the lender. The lender is not going to override the valuer no matter how great your income is. Only way around the valuation is to dispute it, but then you need good reason and recent comparable sales. If you can't get around that then really the only option is another bank, but try and find one that will do an upfront valuation so that the value is known without a hit on the credit rating.

How much lower was the valuation than expected? Is there any equity that can be pulled out from elsewhere? Get gifted funds from a family member? Options that could help.

Cheers

Tom

Crazyk · Aug 11, 2014 7:38 pm

Be careful with gifted funds if you plan to give them back. The lender will make them part of the loan.

As the OP said, and you said yourself, he has no issue with serviceability.

Get an Independant valuation done it may help.