Forums / Getting Technical / Legal & Accounting / COC & IP Loan Cost when using Equity

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  • Profile photo of WTBNowWTBNow
    Member
    @wtbnow
    Join Date: 2004
    Post Count: 24

    Hi,

    Can someone pls clarify how to correctly calculate the COC and the total IP loan costs when using equity in another mortgaged property.

    E.g. 20% deposit and closing costs are funded from equity. This would result in an ‘infinite’ COC as no cash was outlaid. Or do I calculate the loan costs on 80% of the purchase price and use the 20% deposit and closing costs to calculate the COC?

    Thank you for yur help.

    WTB

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    You could do it either way. COC is just a measurement used to compare different investment strategies. Infinity is nto real meaningful, so I would calculate it as if using 20% cash deposits. You could be using these deposits elsewhere, so that is what you want to compare.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of WTBNowWTBNow
    Member
    @wtbnow
    Join Date: 2004
    Post Count: 24
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