All Topics / Finance / Investments and structuring of loans

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  • Profile photo of macpermacper
    Member
    @macper
    Join Date: 2011
    Post Count: 2
    Hi,

    I would like some advice on how to structure my loans. I still live at my family home and have one investment property currently tenanted and worth about $425k, I owe $270k on the property.

    This property was newly constructed and hence I have two loans, let’s call these, land loan A and construction loan A with the one lender.

    I also purchased a block last year purchased for $160K which I signed up with the same lender (no cross collaterisation as i didn't really know much about it so I put a 20% deposit down out of my own funds to avoid LMI) and now I have land loan B.

    I have signed an agreement to build on the land next year, this will be another investment property and i am still in two minds about whether I should choose another lender for this new construction loan B and how I should structure my loans so I can get the best benefit from them.

    My mortgage broker has given me the option of either a) cross collaterising both properties to avoid paying a deposit or LMI b)Use the equity that I have but pay the LMI, which would be over $7k c) Pay 20% deposit down (which if I had to, I could do with my own funds) to avoid LMI.

    Could anyone shed some light on what course of action I should take?

    Thanks

    Profile photo of luke86luke86
    Participant
    @luke86
    Join Date: 2010
    Post Count: 470

    You could use some of the equity you have in your investment property to pay the deposit on the new property. You have an LVR of less than 65%- you owe $270k and it is worth $425k. Is there any reason why your broker hasn't suggested this?

    Cheers,
    Luke

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

    Or

    Set up a LOC on the PPOR and use the LOC to pay for the initial  deposit/costs so that you only need to borrow 80% under the main loan. This will avoid cross collateralising the loans and also avoid LMI. Why didn't he suggest this? he could have cost you $7k.!

    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 Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Wow what an incredibly complicated structure your Broker has set up for you and as the boys have mentioned could end up costing you a pretty penny.

    Before you rush might be an idea to take stock of the situation switch mortgage brokers and get the structure right before you proceed any further.

    Always try and get the individual loan standing on its own two feet secured solely against the individual property.

    Without further hard data it is difficult to comment fully but sounds to me like a wee bit of a mess.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of raveygravyraveygravy
    Member
    @raveygravy
    Join Date: 2011
    Post Count: 2
    Qlds007 wrote:
    Wow what an incredibly complicated structure your Broker has set up for you and as the boys have mentioned could end up costing you a pretty penny.

    Before you rush might be an idea to take stock of the situation switch mortgage brokers and get the structure right before you proceed any further.

    Always try and get the individual loan standing on its own two feet secured solely against the individual property.

    Without further hard data it is difficult to comment fully but sounds to me like a wee bit of a mess.

    This is good advice. I just got out of a messy loan structure and it cost me $6,000 to refinance to a new lender.

    It was worth doing because my interest rate dropped from over 9% to 6.39% but those refinance costs were a bit. It would have been preferable not to get into the mess in the first place.

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