Currently renting and have a IP with about $50k in equity on this property. Also have a good deposit saved in the mortgage off-sett a/c against the IP. Question is we are looking at buying another IP with the deposit but how does this equity thingy work? If I have $50k in equity can I use this as a deposit for a IP and the deposit for another? If i use this equity what happens to the original IP loan?
Do i keep all IP loans seperate? I really don’t know much about this so all the info anyone can provide is great and using examples even better!You cando it 2 ways.
1) increase the existing loan to withdraw cash and then use this as deposit on the next property
2) use the existing property as additional security for the next and borrow the lot.
1 is preferred by most people, especially if you are intending to buy more property.
Terryw
Discover Home Loans
Parramatta
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This 50K in equity – is it available?
for example a 500k loan with a mortage of 450k has 50k in equity, but really it is not availble for anything. Even if you cross collateralised it with a bank, then they may be willing to give up 5% of that equity. Others may give you more but you will pay for it.
Many people that come to me say “look I got 105% loan on my IP”, but after closer inspection you see that their PPOR which only has a 70% loan or such is tied in with the same bank. When you do the real calculations the real LVR is a lot lower.
So… is your 50K equity, available equity?
If so, as Terry above said, you can ask your existing Lender to increase the loan or get it refinanced. Get a new split if possible for the new amount as this aids accounting, and then use it for a new investment.
Never go option 2.
Regards
JohnInspired Finance
(02) 9944 7776are you better off using the deposit you have saved, which is currently offsetting the IP loan, or the equity in the IP, as a deposit on your next IP?
all help welcome please.[blink]Hi there
You have 2 real options:
1) To utilise the security of property 1 and borrow against the equity to funds the next IP. Dependant on values and amounts required then you may incur LMI on the total loan.
Alternative is to draw out some of the equity and use this as deposit and have the 2nd IP standalone. Even if LMi is incurred then it will be on the lesser loan amount.
2) Option to withdraw some of the offset account funds and use this as a deposit if you dont wish to utilise the equity.
If you are intend to hold the properties longer term you could look at a mix of fixed and variable (with your offset) as there are many attractive medium term fixed rates going around.
Hope this helps.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner.
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
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