Join our investing community

Servicibility Solutions?

Discussion in 'Finance & Banking' started by Giddo, 23rd Oct, 2006.

  1. Giddo

    Giddo Active Member

    Joined:
    9th Jun, 2006
    Posts:
    42
    Location:
    SE Qld
    Hello banking people/ brokers and knowledgable others,

    If, hypothetically:D , one had a servicibility problem, but some cash in the bank-

    Can one
    Invest in an income fund such as Navra's.
    Will this income help with servicibilty?
     
  2. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
    Posts:
    1,172
    It certainly might. But you would need to find out which lenders would include the income and how many quarter's distributions required before they will include it in your income.

    Also bear in mind that you're moving from safe cash to risky equities.

    I guess the starting point is why do u need more serviceability? Is it a case of just the bank/s thinking so or do u have a real cashflow problem?

    there may be other ways to move forward.

    cheers
    N
     
  3. johnnyb

    johnnyb Well-Known Member

    Joined:
    16th Aug, 2005
    Posts:
    190
    Location:
    Hobart
    I'm not qualified to answer your question, but I can tell you what I was recently told.

    I applied for a loan with Macquarie (although the same thing happened with STG a while ago) and I wanted to include my managed fund distributions as income. I was told I could only do so if I had 2 years worth of distributions as evidence. Fortunately I have 2 years in Navra so I put in an amount equivalent to a distribution of 10% as income in my application form. Some of my other funds have had less than 2 years distributions, so I didn't include them.


    John.
     
  4. OLI

    OLI Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    96
    Does it work if the managed (Navra) funds are held in a hybrid trust and the trust makes one 'official' distribution to you as the income unit holder each year? Do any of these lenders recognize distributions from trusts in their serviceability calculations?
     
  5. MJK

    MJK Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    280
    This is a troubling thing as I'm sure these same lenders make sure they include the debt against the funds, that they won't allow the distributions for, as liabilities. :mad:

    My portfolio is moving into a 50% property / 50% managed funds realm and has never been so cashflow positive before as it is now!

    I would hope next time I apply for finance that income from funds would be considered. Surley the banks can find out particular fund distribution histories and expectations.

    MJK
     
  6. MJK

    MJK Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    280
    Sim,

    How do you go with this given your exposure to funds?

    MJK
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    I haven't really had to rely on this yet ... my regular income has been sufficient for IP loan servicability to this point.
     
  8. johnnyb

    johnnyb Well-Known Member

    Joined:
    16th Aug, 2005
    Posts:
    190
    Location:
    Hobart
    Exactly! Without being able to include my fund distributions as income, but having to include my LOC and margin loans as liabilities it meant I was refused the loan I applied for. After I had a 2 year history though, it was OK.

    I guess you could always put the distributions as income on the application form, but if something goes wrong and the banks come back to check the details then I'm not sure what position you'd be in.

    As for the banks being able to find out the distribution history of a fund, I'm heard they were going to make an effort to do that as soon as the flying pigs were cleared out of the way.

    John.
     
  9. APerry

    APerry Active Member

    Joined:
    7th Jul, 2006
    Posts:
    30
    Location:
    Melbourne
    Hi Giddo,

    If income from managed funds appears in your tax returns it makes it far easier to get a bank to include them. I had a case last year where a client had almost $10k/month income from managed funds, but had only started investing July 1 the previous year. The funds had a good trading history and a number of months income was in evidence in his bank account, but he had to wait until his latest tax return was complete before a bank would recognise it.

    Regards
    Alistair
     
  10. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
    Posts:
    1,172
    Maybe you need to shop around (or get your mortgage broker to). Banks are throwing money away these days :rolleyes:
     
  11. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    476
    Location:
    PERTH..WA
    Maybe the CashBond is once again worth investigating..especially if it takes 2 years of dividends to get them to count?

    I read on Somersoft that "As long as you have Equity DSR is not aproblem"?
     
  12. coopranos

    coopranos Well-Known Member

    Joined:
    11th Oct, 2006
    Posts:
    498
    Location:
    Perth
    Surely this is the ideal time to use the Low Doc type of loan? My (limited) understanding of these is that you are saying to the bank "I will receive $X this coming year, some of it from PAYG income, and some from distribution income"
    Surely this would do the trick?