Hi everyone,
I need some advice/s regarding equity for investing property. I owned a property (outright) worth $700,000. I want to buy this property worth $250,00 for an investment. Is it a good idea to use my existing property to borrow this amount $250,00?
Thank you,
Lioness59I think that all depends on whether you have a large enough deposit without it.
If you can come up with 20% or so deposit, then it is probably best to leave the other property out of it. But if you dont have a large enough deposit, then the bank will probably require the other property as security.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsAssuming you do not have enough for the deposit (of say 20%), if it was me I would borrow enough for the deposit only against the unenecumbered property (20% of $250,000 = $50000) and use the new property for the balance. That way if there are problems down the track you have not cross collaterilsed and do not put the more valuable property at risk (apart from the $50000.00).
If as you say it is an investment purchase then all of your interest should be tax deductible. I would tend to use as little of my own money as possible and try not to risk the major asset
markk
Happy Hunting
http://www.kentscollections.comHi Lioness,
I would not suggest using the unencumbered property as security on the new purchase,there is no need,
Instead, you could access your current equity and use this as a deposit on 80/20 finance; this will avoid giving the lender 2 properties as security over One loan, (cross colaterisation)This structure will allow you to borrow 100% finance on the new purchase without the need for mortgage insurance and cross colaterisation, as your LVR on the new purchase will be 80%
An IP savvy Mortgage Broker could set this structure up for you. Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Hi Steven
How do you “access the equity” on an unencumbered property without a financial institution wanting security in the form of a mortgage over the $700,000 property?
Are you suggesting that she goes through different institutions for 2 seperate loans (more fees of course) or just tells the bank that she wants separate loans?
interested from my own point of view
Cheers
markk
Happy Hunting
http://www.kentscollections.comI think Steve was saying not to borrow all the money for the new purchase and secure it against the existing property.
I would borrow 20% PLUS costs ($75,000 maximum) against the 700k property and borrow 80% ($200,000) against the 250k property regardless if I had lots of cash or not. Both loans would be interest only.
If I had cash and wanted to reduce my interest expense, I would deposit all of it into an offset account linked to the $75,000 loan on my 700k property.
Benefits include NO cross-collateralisation, NO Lender’s Mortgage Insurance, Minimal Fees, lots of flexibility and an easy way to achieve your goals.
As Steven said, use a Mortgage Adviser who has a clue.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by debtdogg:Hi Steven
Are you suggesting that she goes through different institutions for 2 seperate loans (more fees of course) or just tells the bank that she wants separate loans?interested from my own point of view
Hi Debtdogg,
Yes that is correct
BTW, I notice you edited your initial post[biggrin]Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Actually I didn’t edit it. In fact I didn’t know you could edit until now-what a handy device!
Anyway thanks for the clarification. It is the way I thought it would be
cheers
markk
Happy Hunting
http://www.kentscollections.comOriginally posted by Mobile Mortgage:Hi Lioness,
I would not suggest using the unencumbered property as security on the new purchase,there is no need,
Instead, you could access your current equity and use this as a deposit on 80/20 finance; this will avoid giving the lender 2 properties as security over One loan, (cross colaterisation)This structure will allow you to borrow 100% finance on the new purchase without the need for mortgage insurance and cross colaterisation, as your LVR on the new purchase will be 80%
An IP savvy Mortgage Broker could set this structure up for you. Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
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