hi i bought my first house in Darwin but only could buy with parents as guarontor, the loan was principal and interset and we lived there for a year and a half but we werent getting anywhere as far as saving money to get another investment. So we moved out of that house and back in with the parents (rent free) and the house is now getting rented out. Because of this we were able to buy another investment loan (interest only) in gold coast but only with guarontor again as we did not have the funds to do so.
My question is i would like to purchase another property in a year without using the parents as guarantor, what would i need to save or do in order to get my next investment
from a year from now i could save about $30,000 deposit and would like to buy next property under $225,000
can i buy a investment property with just $30,000 deposit or do i have to wait for equity of my propertys to get higher
G'day Judd!
Have you ever heard of a family pledge?: Most people haven't so here goes!
A family pledge is where, for an example, a young single or couple are trying to buy a first or subsequent property but either lack equity in an existing property or simply don't have enough of a deposit. Here comes the magic of a Family Pledge. In the above example, young people have older relatives such as parents, uncles and aunties who usually have good equity in their PPOR or an investment property. Going guarantor is not the best way to go because if the kids default then the parents and reli's can end up sacrificing or losing what has taken them all their working life to own – their home. A Family Pledge completely avoids the need for guarantors! Instead, what the parents or rel's do is 'pledge' at least 20% of the purchase price in a short-term loan (if they need to borrow) and usually for no more than 5 years OR, they put up only 20% of the equity in their home or IP. This structure does many amazing things for ALL concerned.
1. The parents or relatives are NOT responsible for the whole debt and their liability is restricted to only that 20%. If the kids default, the lender usually negotiates a personal re-fi with the family 'pledger' and go after the kids for the rest.
2. The banks like this structure because it means that the kids have instant equity in the property of at least 20%, giving more flexibility and room to move if the 'wheels fall off'.
3. But here is the KICKER Judd – NO, I repeat, NO LMI Lender's Mortgage Insurance! The LMI on just around a $300K home loan will start at about $8500 BIG ONES!There you have it Judd. I hope this bit of info is helpful to you. <moderator: delete advertising>
Good luck with it!
CHEERS!TC
juddmcelroy wrote:what would i need to save or do in order to get my next investmentfrom a year from now i could save about $30,000 deposit and would like to buy next property under $225,000
can i buy a investment property with just $30,000 deposit or do i have to wait for equity of my propertys to get higher
Hi Judd
The short answer is yes.
You could look at taking out a 90% loan with LMI capitalised on top. You would need $22,500 for the deposit and the remaining $7,500 will go towards stamp duty and other purchasing costs (it might be a bit tight – so a couple of extra thousand would help).
The other option is taking out a 95% investment loan. In this situation, you would require a smaller deposit – however, they’re not as widely available and 95% lends are scrutinized more heavily then a 90%.
Obviously, your borrowing capacity and credit history will also come into play.
Best of luck
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Judd,
Seems to me as if you are in a 'hurry' and you are going to have a high LVR across your whole portfolio.
I would not be adverse to you sitting and waiting for a while and getting some mroe financial wherewithall behind you rather than constantly pushing the envelope as you currently seem to be.
PI is not a race.
I don’t see a problem with aggressive investing – I’m guilty of it as well. However, it might be worthwhile removing the folks from the picture if you’re planning on building the portfolio. I’m not sure of your personal situation but from my experience, parents are generally happy to help the with purchasing the first property….but purchasing multiple investments might make them a little uncomfortable.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Well my aunty has been doing it for about ten years now and has 18 investments at the moment thats why i think im trying to get a few quckly but i believe that the next investment that i get i will not be able to get guarantor because i think 2 on guarantor is enough.
What i also would like to know is that if i were to buy my next property without a gurantor, do i have to pay mortgage insurance for my othere investments as well as the new investment?
This is what i am afraid off. Maybe i should slow down and wait for my investment to get equity!juddmcelroy wrote:What i also would like to know is that if i were to buy my next property without a gurantor, do i have to pay mortgage insurance for my othere investments as well as the new investment?
This is what i am afraid off. Maybe i should slow down and wait for my investment to get equity!Hi Judd
No, you won’t. I’m not sure how the other two loans are structured but if you’re using a $30k cash deposit this loan should be set up separately to the rest so you would only pay LMI on it (not the others).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
It definitely sounds like you are trying to get maximum potential upside while exposing your parents to huge potential downside. You should make your first priority removing your parents risk in your investments before even looking at expanding your own empire.
Also note that when your Aunt started building up a portfolio, conditions and prices were very different. What was working then won’t work now.
mattnz wrote:It definitely sounds like you are trying to get maximum potential upside while exposing your parents to huge potential downside. You should make your first priority removing your parents risk in your investments before even looking at expanding your own empire.Also note that when your Aunt started building up a portfolio, conditions and prices were very different. What was working then won’t work now.
I agree with Matt – perhaps that should be your priority at present.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
mattnz wrote:It definitely sounds like you are trying to get maximum potential upside while exposing your parents to huge potential downside. You should make your first priority removing your parents risk in your investments before even looking at expanding your own empire. Also note that when your Aunt started building up a portfolio, conditions and prices were very different. What was working then won't work now.This is exactly what I was thinking. Being a guarantor is extremely dangerous and with little benefit. taking on extra debt you are making this even more dangerous to the guarantors. I would work on taking them off as guarantors.
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
So to take the parents off as guarantors i would have to just wait until my equity increases?
Yes. get your parents off as guarantors for your first home…..and this will give you a bit more leverage power in the future as well.
Your property need to increase in value for your parent’s to be removed, a new valuation needs to be ordered ( ~$250).
P.s since it was P and I – i would expected usually within 2-3 years you would be able to remove your parent’s off.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
If you really want assistance from your parents then maybe they could set up a LOC and they could lend you some money. This would be less risky for them and easy for you to use this to remove the guarantee.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
