richmondParticipant@richmondJoin Date: 2003Post Count: 831
This might be a dumb question, but I am curious.
In Jan Somers’ books she talks about borrowing 105% to buy IPs, so that it’s essentially no money down of your own…
Do you have to x-coll to do this? If not, which lenders will lend 105% as a stand alone?
Everything I’m reading is saying don’t x-coll, no matter what…
My stats: PPOR worth around 320k, 130k loan, 56k LOC
IP 1 – worth 370k, 155k loan
IP 2 – 1/3, total worth $250k, 190k loan (mum and I helped my sister buy a unit)
4 more IPs bought in the last month that have pushed the portfolio past the $1 million mark, went for 5 yr fixed interest only loans… I know, I know, a lot of people advocate P&I, but at this stage I’m comfortable with IO, just while the empire building is in its infancy…
All are stand alone loans… waiting for them to settle and be tenanted before looking to purchase again… renting them out won’t be a problem ,average return across the new 4 will be 9.5%. Am I being too conservative in waiting for my IPs to get tenanted before buying again? I think I’m not as gung ho as some… ah well…
rStuart WemyssMember@stuart-wemyssJoin Date: 2003Post Count: 598
The only 110% loan that I know of is offered by Liberty. Conditions that must be fulfilled are:
1. 3 years in the same job.
2. Clear credit.
3. Income must be $60,000+.
4. Owner occupied ONLY
5. Metro capacity cities only.
Interest rates are around 9.5%. Borrowers have to make accelerated repayments for the first 2 – 3 years to reduce the LVR.
I’m sure that there are other private lenders that do these as well (but I don’t have any relationships in this area).
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And there’s an up front fee of around 1% of the loan. However, this is still cheaper than mortgage insurance, which I think is around 1.5%.
I used the Liberty loan – I thought it was great to help give me a leg up into my first property, but it’s definitely only a short term loan, and the people at Liberty actually acknowledge that. I’ve refinanced after 12 months to a much more comfortable rate, but am still quite thankful that Liberty was there to give me a hand when the banks didn’t want to know me.
The other plus is that there’s no “break” or refinancing fees. I don’t know if that still applies, but that was the case for me. Like I said, Liberty has the realistic expectation that people will want to refinance as soon as they can.
MLeighMember@leighJoin Date: 2003Post Count: 130
A couple of creative suggestions that might be useful to you richmond.
1. You could try approaching the vendor to retain an equity in the property.
i.e – Vendor leaves 15% in the property and you obtain 90% finance through the bank. Most likely to achieve this when offering the vendor a premium price for their property for doing so.
2. If you’re using the same bank to finance a new property you may be able to refinance enough money out of the other properties and place it into a term deposit. You can then secure 100% finance by using the term deposit as well as the new property as security rather than x-coll another property. When the property has increased in value (either by way of purchasing BMV, improvements or CG) you can simply request that the bank removes the security against your term deposit and you’re off again .
Might help you, but I’m not sure if you’re looking at using this as a strategy to purchasing further properties or refinance an existing one.
Good luck, sounds like you’re doing really well so far .
“If you can count your money, you don’t have a billion dollars”
J. Paul Getty
picja1Member@picja1Join Date: 2003Post Count: 144
Are you aware of the 100% products introduced recently with interest rates of 6.87%.
One particular products requirements for this loan is:
1)Min. income $50000
2)2.5% of own funds to cover costs
3) Min net assests of $175000
1)Genuine Savings of 2.5% to cover costs or FHOG
2) No requirement for Min Income or Net Assest position, However does need good income to service the loan.
P.S. there are different sorts of genuine savings than just saving into a bank account.
ALSO I think Liberty’s rate is a bit cheaper than what Stuart said. It could be 8.75% for a 110% Loan and 8.5% for the 105% loan. However, I will post confirmation of the corect interest rates tommorrow.
AND, some other methods you may want use is Superannuation Funds – these funds will lend their superannuation on property.
I was paying around 8.5% on my Liberty loan, as recently as June 2003.bobbieParticipant@bobbieJoin Date: 2003Post Count: 13
there are lenders out there now who are doing 100% loans with conditions not as restrictive and as expensive as Liberty. If you have a little equity in your home this will make the difference with the costs, which on the properties that we discuss is fairly minimal.
Cheers bobbiepicja1Member@picja1Join Date: 2003Post Count: 144
The rates from Liberty are: 110% – 8.75
105% – 8.5
are you on the 105% loan? If not, you got a good discount.
Also there is another 100% loan about to be launched in August. This product is better than the rest for owner occupied.
Another way to look at it:
We use 80% stand alone loans at around 6%
We use 20% deposit from line of credit 6%
We use 05% fees etc from line of credit 6%
For those with equity in their PPOR, this is the cheapest way by far to do it.
DelMJKMember@mjkJoin Date: 2003Post Count: 157
I think to only people that would touch Liberty are tose with no equity or cash.
What do you think ?
MJKmotherMember@motherJoin Date: 2003Post Count: 12
Does your 20% deposit and 5% fees come from a line of credit against your own home or is this seperate from your PPOR.
eg. Value of PPOR $165,000
Loan $ 55,000
Apply for LOC of say $120,000 to supply you with money for deposits and fees.
If it is not against your PPOR then how does it work?
Hi MJK and mum!
MJK – Yeah, Liberty will be making a killing on poor unsuspecting people. But if it’s the only way you can do it, it’s the price you pay to get into the game. Hopefully after a while you can find other cheaper avenues for finance.
Mum, (can I call you that)[?]
Yes, we do have a mortgage still on our PPOR. Our LOC is seperated from that. (Two totally different loans), so that the interest doesn’t get to complicated. Our mortgage for our PPOR is P&I and we pay extra off it as much as we can. The LOC is of course IO, as it’s an overdraft.
We also have a mortgage offset account, (against our PPOR home loan) which all our rents received get paid into. The offset acc builds up, reducing our home loan. Our repayments to our loans come out of that as well.
Works pretty well so far.
Hope I have answered all your questions OK. If not let me know, and I’ll have another go at it!
Have a great day,
DelHueyParticipant@hueyJoin Date: 2003Post Count: 213
You seems to have plenty of spare equity from your PPOR & IP1 ($ > 20% of each one’s value). If it’s enough you can use equity of this 2 properties to secure a 105% mortgage for the new IP. (even without having to pay mortgage insurance), unless you already used it to service your recent purchase.
Which Bank lends me 105% of my IP at < 5% interest, 1st year introductory rate, after that it’s back to the standard variable rate.
HueyrichmondParticipant@richmondJoin Date: 2003Post Count: 831
I’ve actually got exactly the same set up as Del already… I was just curious after reading the Jan Somers book…
I thought I was on the 110% loan. But I’ll go home and check, and let you know.motherMember@motherJoin Date: 2003Post Count: 12
You can call me mum any time you like, my kids (3 & 1) do it all the time!
How did you go about getting an LOC loan that is seperate from your Home Loan and how does this work? I have heard of overdrafts before but don’t know much about them.
Sorry for the delay in answering your question.
Yes, our LOC is mortgaged against our PPOR.
The bank (ANZ) offered this option to us when we applied for the line of credit.
Keep our separate home loan (stand alone) and have a seperate LOC to keep our accountant and the ATO happy.
It was quite simple to set up an entirley different loan (LOC) mortgaged against our PPOR.
eg…Value of property, say…$500,000
less current mortgage………$100,000
80% OF EQUITY FOR LOC……$320,000
Hope this is clearer.
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