i want to buy another property but i dont want to wait around saving up another deposit plus cost, is it possible to borrow the full purchase price plus entry costs of another investment property using the equity in my home as a deposit i have $60000 equity in my home or wont banks lend over purchase price of a property at all? will be using a I/O loan and the area is a very fast appreciating area with still low entry prices so i dont want to wait around another year or so.
thanks for any advice
Hi Falcon,
In general terms lenders will only lend to 80% of te value of the purchase. You, as the buyer, have to find the other 20% + costs.
This can either be done using cash (not recommended) or a line of credit set up against the value of an existing property.
Eg you own a property worth $200K with a debt of $100K. The bank will recognise 80% of the property ($160K) – given you already owe $100K effectively this means you have $60K available for use as deposits. Set this up in an line of credit and get your borker to arrange finance to suit.
Note you can go over 80% – in some cases up to 97% – but the higher you go the stiffer the insurance premium.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Absolutely possible if the numbers stack up – and a good idea too. This is the way I operate as do many of my clients.
Best to get yourself a preapproval whilst you are finding the right property.
Cheers and good luck mate.
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Falcon,
Set up a split loan facility on your PPR, (split A is for deductible debt, split B is for non-deductible debt)
Attach a 100% offset to the non deductible portion of the split loan, park all funds raised from available equity into the offset account, use the funds in this account for 20% deposits on further lending with multiple lenders.Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Well done Steve – perfectly outlined in a nutshell – everyone shuld have a read of this structure!
Cheers folks
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
60,000 equity does not sound like enough equity unless the property is worth $100,000 and the new purchase is under $150,000 or so to avoid mortgage insurance.
True – the numbers need to stack up. Even a reduction in LMI is worth it.
How can anyone advise on such little info?Cannot. If Falcon needs advice on structure he should contact a broker direct.
Regarding your question falcon, the answer is yes. Using equity in another property is not borrowing 100% though.
Thats just semantics. Falcon will be borrowing 100% of the purchase price of the new property regardless of securities used. 105% to cover costs might be even better.
All the best folks,
[/quote]
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by Wrap Attack:$60,000 equity does not sound like enough equity unless the property is worth $100,000 and the new purchase is under $150,000 or so to avoid mortgage insurance.
Wrap attack,
$60.000 in Equity = 20% deposit on a $250.000 property purchase, with a balance of $10.000 towards purchase costs, there is no need for Mortgage Insurance at 80% LVR.Hi Simon,,
Ill shout you a strong black coffee on the 25th,Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Steve,
Prefer a beer afterwards…..
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Wrap Attack, Derek’s example was $100K equity in a $200K property, leaving available equity of $60K…
Cheers
Melthanks for the replys guys they are very helpful, i worded my original post a bit wrong i realise by using equity im not actually borrowing 100% against the investment property and that you cant comment directly on my position without all the facts was more just a general enquiry into the structure of other peoples loans.
will have a look at thing with a financial advisor although its sounds like i need to raise a bit more equity first.thanks again
Falconp.s by the way the propertys in question are in the 100-140 price range with equity of 60k being on a $110000 home
Why a financial advisor? Thse guys aren’t as well versed in property as they should be – they are usually more into managed funds.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by FALCON:will have a look at thing with a financial advisor although its sounds like i need to raise a bit more equity first.
Hi Falcon,
You are better off speaking to a broker – they are familiar with varying products and options that will suit your circumstances from a ‘borrowing’ perspective.
My experience with financial advisers is they tend to sell an investment product – often share funds.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
I agree. I went to a financial adviser long time ago and he basically wanted to get paid before he gave me any plan to agree to. Turned me off.
You alread know what you want to do Falcon. Maybe he can sell you some shares of funds but he can’t tell you much about property.
Talk to a Accountant to get the best structure for you to do it with and find a mentor whose lead you can follow (Steve McNight).
Gung Ho
Matt[medieval]Matt
hi falcon,
the answer to your initial question is yes.
sorry to be pedantic, but despite all the other posts, what does $60k equity mean?
is is the existing property is worth $200k and you owe $140k, or…please detail as without this knowledge any reply is crap.
cheers
Brendan Heagney
Mortgage Broker
0438 436383If you don’t ask, the answer is no!!
Originally posted by FALCON:p.s by the way the propertys in question are in the 100-140 price range with equity of 60k being on a $110000 home
Hi Falcom,
Assuming your property is bank valued at $110K as stated and you currently owe $50K.
An 80% lend will realise $88K less the $50K owing which gives a line of credit of $38K. At 90% (with LMI to be paid) you realise security of $99K less $50K owing and could extend your line of credit to $49K.
If you pass the serviceability test it seems as if you have the capacity to buy another property valued at $140K and using an 80% lend – this would soak up $28K for deposits and a further $7K for purchasing and borrowing costs.
According to my calculations (I am not a broker) it would appear that you could do it.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
thanks Derek and everyone else will see a broker and get an idea of my borowing capacity first
got a much better understanding of how equity as security works now.
Originally posted by Derek:Hi Falcon,
In general terms lenders will only lend to 80% of te value of the purchase. You, as the buyer, have to find the other 20% + costs.
This can either be done using cash (not recommended) or a line of credit set up against the value of an existing property.
…
Derek
[email protected]Forgive me, but being a newbie to this game, I am a bit confused by the line of credit vs cash point.
If I get a line of credit for the 20% deposit (instead of using cash) and get a loan for the other 80%, isn’t this the same as borrowing 100% to buy a property ? I thought 100% borrowing is constantly being discouraged in the forums here. I am confused.
Hi Bennido,
Using a LOC and another loan as you described is the same outcome as total borrowings of 100% for the property.
This strategy suits me and my situation and isn’t, in my opinion, that uncommon.
While a property may have high loan value ratio borrowings – the more important loan value ratio is what gearing level does your portfolio, rather then individual properties, have.
For me I prefer to do this instead of using cash – which I have left parked in an offset account which is linked to my home loan – thereby reducing my non-deductible debt.
There are some loan products around that will lend 100% in a single loan – with restrictions and extra checks and balances by the lender.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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