Hi Everyone!
I'm going to be in the hunt for finance early next week because we were successful in purchasing a property today…after much anguish so I'm stoked!!!
Very much interested in your opinions as to which instituation you may suggest I follow up with and whether I should go full variable, full fixed (5 years?) or split. Any other general advice is most welcome!
Here's my situation:
1) Purchased a place for $600K where I will be renting it out for minimum 5 years before I'll move there through rebuild or extension.
2) Had pre-approval from ANZ for $600K prior to making offer. I will be paying stamp duty out of my own $170K funds (offset in current home loan).
3) I already have a loan with the ANZ for the house am living in for at least next 5 years (becomes IP after), $180K remaining, house valued at $450K. It's a package where I get 0.7% discount off variable with no fees whatsoever. I'm expecting if I went the full variable option, I would get get at least 0.8% discount.
4) Due to the equity in my existing home, I can borrow $600K without having to pay mortgage insurance…IF…I go with the ANZ for this new loan.
5) If I had the choice, I would like to go with another institution to diversify loans, especially if you guys say go full fixed option for 5 years…as there is a big difference between ANZ's and NAB's rates for example. However, NAB will not be recognising the equity in my current house so I will not be able to borrow $600K from them (they said I could borrow up to that amount) due to LVR.
6) Have good experience negotiating variable loans in the past. Have no idea about what to ask or expect for fixed or split loans as they vary so greatly between institutions.
Thanks in advance!
Hi noisuf
1) Purchased a place for $600K where I will be renting it out for minimum 5 years before I'll move there through rebuild or extension. Ok with that noted need to make sure you structure it properly.
2) Had pre-approval from ANZ for $600K prior to making offer. I will be paying stamp duty out of my own $170K funds (offset in current home loan).
3) I already have a loan with the ANZ for the house am living in for at least next 5 years (becomes IP after), $180K remaining, house valued at $450K. It's a package where I get 0.7% discount off variable with no fees whatsoever. I'm expecting if I went the full variable option, I would get get at least 0.8% discount. Would assume this is interest only if not it should be only the interest on balance on the day you move out will be Tax deductible.
4) Due to the equity in my existing home, I can borrow $600K without having to pay mortgage insurance…IF…I go with the ANZ for this new loan. This would be the same with anyone due to the lvr.
5) If I had the choice, I would like to go with another institution to diversify loans, especially if you guys say go full fixed option for 5 years…as there is a big difference between ANZ's and NAB's rates for example. However, NAB will not be recognising the equity in my current house so I will not be able to borrow $600K from them (they said I could borrow up to that amount) due to LVR. The will recongise the equity in your home but you would never structure the loan by borrowing 100% of the purchase price secured against both properties anyway. Cross collateralising the loans is inviting problems down the track.
6) Have good experience negotiating variable loans in the past. Have no idea about what to ask or expect for fixed or split loans as they vary so greatly between institutions. Think them days are gone. You wont get more than 0.7% out of Anz as the loan isnt big enough. Anz dont discount on their fixed rates but other do.
Richard Taylor | Australia's leading private lender
Thanks for your reply!!! I was going to do this myself but it seems my situation requires a broker!
A few questions and full info on my situation:
1) Purchased a place for $600K where I will be renting it out for minimum 5 years before I'll move there through rebuild or extension. Ok with that noted need to make sure you structure it properly.
What do you mean by structure properly?2) If I had the choice, I would like to go with another institution to diversify loans, especially if you guys say go full fixed option for 5 years…as there is a big difference between ANZ's and NAB's rates for example. However, NAB will not be recognising the equity in my current house so I will not be able to borrow $600K from them (they said I could borrow up to that amount) due to LVR. The will recongise the equity in your home but you would never structure the loan by borrowing 100% of the purchase price secured against both properties anyway. Cross collateralising the loans is inviting problems down the track.
Is cross-collateralising when you borrow money for one property against another? What are some reasons why you wouldn't do it? Is calculating capital gains tax down the track one of them?Here's my full situation that I will put forward to a broker, I noticed some small errors and missing info above:
1) $600K pre-approved from ANZ.
2) $190K owing on $450K PPR, $260K equity. Loan with ANZ. In VIC.
3) Purchased $620K IP. $35K extra for transfer costs. In VIC.
4) Will swap between living in current PPR and IP just bought in around 5 years time.
5) $220K in cash (offset account of PPR) before $62K deposit for IP…$160K if deposit deducted.
I want to try to achieve the following, please let me know if some of my objectives are not advisable:
7) Max neg gearing for IP
Different lenders for IP and PPR9) No mortgage insurance to be paid
10) Maintain current PPR variable discount of 0.7% with 100% offset facility. No fees.
11) Need to transfer current PPR and loan to wife before the 5 year PPR and IP swap as my PPR will be positively geared based on current loan amount owing + expenses vs rental income.
12) I've been told that I can transfer my PPR to my wife in VIC without paying stamp duty and still have the loan under my name. I would have thought that for taxation purposes, the loan needs to be transferred to her too though? Should I at least transfer the ownership to her asap in case VIC gov decides to remove the stamp duty exemption between partners?
13) Something that might put a spanner in the works for 11) above is she owns a investment property already which is $300K value with $150K owing. Close to positively geared…I'd say in around 2 years time depending on interest rate movements. She is currently on mat leave as we just had our second child and won't be returning to work part time until May next year. Due to being part time, she'll be earning less than $40K gross per year. So I doubt she'll be able to service both her current IP and take over our PPR? (but at least she won't have dependents on her loans as my 600K preapproval takes into account 3 dependants, my 2 kids and her).
Such a complex situation……………………………..
I've been thinking overnight…I may be better off paying the LMI on the IP to help with maximising negative gearing?
Also, I got a real bargain for the IP (private sale, vendor did not market well) so the actual sale price is not reflective of market value. Is there a possibility of getting a lender to value the property or do new loans always use the sale amount for LVR purposes?
Since you will be only renting out for 5 years you need to determine if the LMI will end up cheaper than the extra tax deductions to be gained by borrowing more.
You also said you may sell the current PPOR to the wife, so maybe consider paying off this loan and reborrowing the deposit so you can claim the interest on this portion and reduce the non-deductible loan. Consider setting up a LOC on the PPOR to borrow the 20% deposit and costs and then get the remaining 80% from the other bank.
If you just take the money from the offset you non-deductible interest will increase and you will have a lower loan on the IP so will lose out on tax.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Most lenders will only lend against purchase price or valuation whichever is the lower (there are the odd exception).
Richard Taylor | Australia's leading private lender
Hi,
please visit georgemortgages.com.au or mail us on [email protected]
Different lenders for IP and PPR
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