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lispingduck

7,302 Posts.

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29/10/16

16:59

Post #: 20223743
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Originally posted by Nortical ↑

Long time reader of the property forum, get much entertainment from it.

Interesting call with a bank today, I'll try and summarize the situation.

Had a personal loan when I was in my teens and paid off a 3 year loan in 10 months, other than that, never been in debit or owned a credit card.

Had been looking at buying a house roughly a year ago, have a good work history and good income, approved for about $500K on a single income, had 10% set aside and it was all approved in principle but decided to wait off on buying a home due to a number of factors.

So while working full time I have started a small business on the side, turnover expected to be around 50K. While not an issue, cash flow started to eat into my savings a bit, and with the benefit of earning points where there is no surcharge, to free up cash and for accounting purposes, I decided to get a business credit card.

So while applying for the card I was told I was automatically approved for 20K, I said that was probably excessive and that 10K would do. When the card appeared in my accounts I noticed the limit was 5K, not really an issue as I had limited outgoings at the time. Had to sort out another issue today and inquired about why the 10K was not approved as I would probably get close to that in two months if the moons lined up.

Now, despite having cash in the same bank many times the credit limit, and other assets (shares mainly) I was told that based on my particulars (a range of factors apparently) I should wait 6 months and inquire then.

I realise that a home loan and a credit card are two different forms of credit, but really? Is lending someone many times less than their equity at the same institution more risky than lending someone on a single income a few hundred thousand? To be honest I was borderline insulted as I have basically been with the bank since birth.

Credit card is in my name to be clear...

Am I missing something?

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Well you have approval for a loan of 500K potentially taken out to buy a property. You cash in bank is likely to be your deposit (im guessing this is right). If you took out the loan and bought a property you cash in bank would be zero if not close to it. Your business has negative cash flow and now essentially a $5000 per month debt.

The bank has probably assessed you on the assumption you will need to be able to service both your mortgage and your credit card. Hence they thought it was too risky to give you a $10k limit knowing that your cash balance to approach zero (deposit paid) when you activate the mortgage - just a thought/opinion.
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