All Topics / Help Needed! / EQUITY ???

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  • Profile photo of Bradles CBradles C
    Participant
    @bradles-c
    Join Date: 2004
    Post Count: 52

    Hi Guys [cap]

    I am planning on buying an investment property with a partner. My current financial situation is as follows :

    · Currently building a house with my girlfriend (to be completed in March). Estimated value of $550,000
    · Current Loan of $395,000
    · Estimated Equity of $155,000

    My partner is going to put the investment property under his name so that he can get the FHOG. We will go halves in all costs and I will contribute approximately $100,000 towards the property.

    Can I use the Equity in my current house to get the $100,000 cash ? What percentage of the Equity can I borrow and will the banks lend me this much money (Total of $500,000 ?) Our current wage is $95,000 (total) and we have no other debts. Am I better off seeing a Mortgage Broker for the extra loan or sticking with a regular Bank ?

    One last question : Would I be better off getting an interest only loan for the $100K to use for the investment property ?

    Thank heaps guys [biggrin] Any responses will be greatly appreciated !

    Bradles

    Profile photo of PropertyGuruPropertyGuru
    Participant
    @propertyguru
    Join Date: 2003
    Post Count: 1,502

    Hi Bradles,

    You can borrow up to 90% of $550k which is $495k. So you can still borrow $100k extra out of this property and can use to buy another property.

    Repayment for this loan won’t be tax deductible as another investment property is going to be under your friend name. But Interest only loan leave you more money to do other things.

    You can contact broker to see more options with loans.

    Cheers
    PropertyGuRu [sultan]
    Mortgage Consultant
    [email protected]

    NZ loans and pre approval from 7.99%

    Profile photo of NATS12NATS12
    Member
    @nats12
    Join Date: 2003
    Post Count: 129

    you say you are building with your girlfriend and then you reference yoru partner as a he!!!

    Profile photo of Bradles CBradles C
    Participant
    @bradles-c
    Join Date: 2004
    Post Count: 52

    Thanks for the fast reply PropertyGuRu !

    NATS12 : I am building a house with my girlfriend but my investment partner is my best mate who is a he ! There aint no gay shit going on here !!!

    We have full mortgage insurance for the $395K loan. Can you guys recommend any good mortgage brokers in the melbourne region to discuss some options ?

    Thanks heaps !

    Profile photo of kpkp
    Member
    @kp
    Join Date: 2004
    Post Count: 509

    WHOA !!!
    How is your interest in the property protected if its in your partners name ??
    Do you have an official jv afgreement to protect your interest, or some other documentation….

    Regarding your equity position…most banks will lend to 80% of the value of your property, so if your place is worth $550k then 80% will be $440k and if the mortgage is currently $395k then the available equity that you can use is down to $45k.

    You will need to go beyond 80% borrowing to tap any extra equity in your property, and then you start incurring extra costs like Mortgage Insurance, etc. plus the bank may query your servicability based on your income of $95k

    I reckon you need to do more homework and get some expert legal and accounting advise

    KP

    Profile photo of Bradles CBradles C
    Participant
    @bradles-c
    Join Date: 2004
    Post Count: 52

    Thanks for the reply KP !

    These are the issues that I need to know before I jump in head first ! I will draw up an agreement with my friend for the new investment property stating that we will go halves in all costs such as maintenance, property management, etc, etc.

    I may be asking too much to borrow $495K based on my current situation but this is what I need to find out !

    Profile photo of PropertyGuruPropertyGuru
    Participant
    @propertyguru
    Join Date: 2003
    Post Count: 1,502

    Hi Bradles,

    If your pay be 95K and you don’t have anyother loan etc. you will be able to borrow $495k easily.

    I understood what you were trying to say when you mention about gf and partner. yes you have to come up with some sort of agreement. one of my friend doing almost same thing. They are buying one house to get FHOG using one person name but they have plan to buy another house soon using other person name and get another FHOG.

    Cheers
    PropertyGuRu [sultan]
    Mortgage Consultant
    [email protected]

    NZ loans and pre approval from 7.99%

    Profile photo of RegrowRegrow
    Member
    @regrow
    Join Date: 2004
    Post Count: 77

    Hi

    KP Please correct me if i am wrong, as I am still trying to figure things out myself.

    If the property was worth 550,000 minus 395,000(mortgage) = 155,000(equity) x 80% = 124,000(borrowing capacity)

    Am I missing something or just wrong?
    [dazed]
    Regrow

    You are a fool for 5 seconds if you ask a question, but a fool for life if you don’t.

    Profile photo of kpkp
    Member
    @kp
    Join Date: 2004
    Post Count: 509

    Geeze I’m no expert and one of the mortgage brokers would answer this better…

    But its $550k x 80% = $440k available to borrow.
    Then $440k – $395k = $45k.equity available to use.

    However if you can go to 90 or 95% LVR then of course the amount available to borrow increases.

    KP

    Profile photo of Bradles CBradles C
    Participant
    @bradles-c
    Join Date: 2004
    Post Count: 52

    Thanks everyone for the replys but I am still confused [confused2] !

    Can I borrow up to 80% of the house valuation or is it 90% ???

    If I can borrow 90% then I will be able to get the $495,000 ($550,000 x 0.9) but 80% will mean I can only borrow up to $440,000 !!! It makes a HUGE difference !!!

    I am sticking with PropertyGuRu on this one !!!

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes you could go to 90% of the valuation of your property, but you would have to pay mortgage insurance – which could be around $5000.

    You could then withdraw the money and ‘lend’ it to your friend witha written loan agreement, charging market interest rates – same as your loan.

    You should have some sort of written agreement on how profit and costs can be shared.

    He then pays you interest on this money loaned, and can claim the interest on it, if the property is an investment. But since you are paying interest the interest you receive will offset this amount and your net tax bill won’t change.

    You should run it by your solicitor.

    It will be hard to increase your existing loan until your building is complete.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of waynel2waynel2
    Member
    @waynel2
    Join Date: 2004
    Post Count: 311

    G’day Terry,

    Is there a calucaltion to work out the cost of mortgage insurance?

    Wayne Leech

    *Below are links to my websites – any feedback, comments would be appreciated:)
    http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
    http://www.homesearcher.com.au – List your property for FREE (Private sellers only)

    Profile photo of TringTring
    Member
    @tring
    Join Date: 2004
    Post Count: 24

    Hi Wayne;

    depend on which bank you’re borrow the money from, usually, cost of morgage insurance is about 0.98% to 1.2% of the loan amount.

    Regards
    start

    Profile photo of waynel2waynel2
    Member
    @waynel2
    Join Date: 2004
    Post Count: 311

    cheers start:)

    Wayne Leech

    *Below are links to my websites – any feedback, comments would be appreciated:)
    http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
    http://www.homesearcher.com.au – List your property for FREE (Private sellers only)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Start and Wayne

    Yes, it varies between banks and can go as high as 3.1% of loan amount!! It also varies depending on whether the loan is PI/IO, amounts over $300,000 or over $500,000 and whether investment or owner occupied.

    as a rough guide:
    80.01 to 81% 0.41
    81.01 to 82% 0.41
    82.01 to 83% 0.56
    83.01 to 84% 0.62
    84.01 to 85% 0.72
    85.01 to 86% 0.84
    86.01 to 87% 0.95
    87.01 to 88% 1.01
    88.01 to 89% 1.12
    89.01 to 90% 1.16
    90.01 to 91% 1.54
    91.01 to 92% 1.59
    92.01 to 93% 1.78
    93.01 to 94% 1.85
    94.01 to 95% 2.04

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of kay henrykay henry
    Member
    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    LMI is basically like an entry duty (like an exit duty). I wouldn’t use it, but if you do, I would only use it for a property that appears to have potential for CG. If you’re paying 2% LMI, then that’s an extra 4k onto a 200k property. You’d want to have the opportunity to recoup that money in the deal. I don’t think LMI is suitable for vanilla buy and hold CF+ deals- it would take too long to get that $$ back. I would be factoring the LMI cost into any exit strategy.

    kay henry

    Profile photo of Bradles CBradles C
    Participant
    @bradles-c
    Join Date: 2004
    Post Count: 52

    Thanks guys, your advice has been extremely helpful !

    Cheers [biggrin]

    Profile photo of kpkp
    Member
    @kp
    Join Date: 2004
    Post Count: 509

    Ummmm,
    if your friend is going to claim the FHOG, therefore claiming to use the home as his PPOR, then he can’t claim any interest costs, as if it were an investment property…

    KP

    Profile photo of Bradles CBradles C
    Participant
    @bradles-c
    Join Date: 2004
    Post Count: 52

    Thats a bloody good point kp !

    Is there any way around this ? How long will he have to live in the PPOR to receive the FHOG ? I think it is 12 months but not sure !

    Is there any way that he could still call it his PPOR while renting it out to someone else and living with his parents ? It sounds a bit dodgy to me but may be possible ? Maybe he could get a few ‘friends’ to pay rent to live in the house with him for the first 12 months ?

    Any suggestions on the best way to do this ? We want to get the FHOG but also want to rent the property ASAP !

    Profile photo of richmondrichmond
    Participant
    @richmond
    Join Date: 2003
    Post Count: 831

    It sounds dodgy because it is dodgy. If you’re fine with committing fraud and the possible consequences that go with it, then go right ahead.

    This IMHO is one of the reasons the FHOG should be axed.

    cheers
    r

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