I need some assistance in understanding how much equity I have available to use to fund against borrowing for another house.
I purchased my PPOR for $253k with finance of $240k and obviously paid mortgage insurance on this.
The property is now valued at $320k (could probably sell for $350k in real terms) with a loan of $230k.
How much equity is available from the above info for me to use in financing my next purchase. I want to put no cah down and use equity to fund the deposit.
Thanks.
A good method of accessing this equity would be to refinance with your nominated loan provider. Generally you’ll only be able to refinance up to 80% of the current value of the property. EG:-
.8 x 320,000=
256,000 (refinance available)Current loan $230,000 gives you $16,000 available for use. You will need to subtract bank/lender fees from this $16,000 also for the refinance costs.
Refinancing with a higher LVR is not advisable as the LMI payable will not make it worthwhile.
I disagree. Going to a higher LVR with LMI may well help you get what you need. It should be weighed up by the borrower and a decision made.
Cheers,
Simon Macks
Finance Broker
[email protected]
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.
I guess it all depends on the amount of risk you are prepared to take on board.
Whats the risk?
You mean the leverage?
Cheers,
Simon Macks
Finance Broker
[email protected]
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 Nats12,
At 80% LVR you have $26.000 available in equity,EG, property value $320.000 @ 80% LVR = $256.000
Less current loan balance of $230.000 = $26.000 available.As the equity will come from your PPR I would suggest a split loan, One portion of the split will be your PPR loan $230.000 (non deductible debt) and the other portion of the split would be the $26.000 investment equity loan (deductible debt)
The $26.000 is then used as a 20% deposit on a separate 80% investment loan for the new purchase,
Structured this way you will be borrowing 100% of the new purchase and your PPR and IP will not be cross-collateralized, I hope this helps, cheers.Regards
Steven Crane
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.
DOE… next time I’ll do my subtracting correctly!
I would have thought that since I have already made LMI on the $253000 purchase to 95% I am able to refinance this to 95% less payments on the mortgage that I would have to have made.
On the $320,000 valuation I would have thought I could borrow 80% of $320 less 253k. so 80% of $67k is $53k.
Is my theory stupid from a banks’ perspective?
No unfortunately it does not work like that, but depending on your lender and the time frame of your current loan you may be eligible for a part refund on the LMI premium,
If you do refinance at 95% you will have access to $74.000
EG, property value $320.000 @ 95% LVR = $304.000
Less current loan balance of $230.000 = $74.000 available. Cheers.Regards
Steven Crane
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.
In simple terms, you can refinance up to 95% (97% if you capitalise mortgage insurance) but ONLY on the ‘value’ of the property. The value and your ‘real terms’ figure should be very close.
TMA
http://www.email4money.info
Essential Links
First Home Buyer WebsiteSo let me get this straight…got a bit confused with all the figures…using another example
.
Current prop value 400k @ 80% LVR = 320k
less current loan 150k = 170k
.
So would this mean that there is now 170k available for investment purposes.
.
If so would this be a suitable amount to be starting out with.You’ve got it[biggrin]
Don’t forget the $170K represents your DEPOSITS available. Once you locate the property to buy, you can use it to obtain the rest of the money. Okay, that sounded confusing even to me…
If you purchased another $400K property and borrowed $320K (80% LVR), you would only need to access $80K of that $170K you have. Which effectively means you could purchase two $400k properties. Hence the wonderful world of leverage. But beware, this means you are basically financing 100% of the property value. There is not too many $400K homes where you could support a $400K loan & still be +ve geared
You can also go higher than 80% LVR on both properties but it will cost you a few thousand in mortgage insurance. Best to use a broker to sort it out for you so you don’t make a mistake and leave yourself short.
TMA
http://www.email4money.info
Essential Links
First Home Buyer Website
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