My partner and I purchased our first property last year (place of residence) and has been valued at $400,000, while we still owe $345,000. This only amounts to having $55,000 or 14.5% equity and we have no other savings.
How much equity is needed before we can realistically purchase our first investment property. Obviously we do not want to have to pay mortgage insurance this time due to us not having a deposit of 20% the first time.Any advice greatly appreciated!
Stu
Couple of options:
1) To avoid LMI on an IP purchase then you will normally require 20% plus costs. On a $300K property this would equate to somewhere in the region of $75 – $78K.
If you accepted the loan would be mortgage insured then you may get away with a lot less. Some lenders will lend 100% on IP’s you still need to come up with the costs and charges. Remember LMI is a tax deductible expense and often a cost of getting ahead.
2) You could look at swapping your standard home loan to a shared equity style loan and releasing some funds to enable you to lower your monthly repayments and start investing. You would release some equity and this would be used for your deposits.
3) Keep on saving and wait until you have sufficient funds but realistically that may take a long time. In the meantime ensure you have your offset account in place and pour money into this account to save as much interest as you can.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Using LMI gives leverage and helps you to reach your objective much faster but as Richard has said saving is the other option.
Wayne
Mortgage Adviser
Email [email protected]
http://www.alphamortgagesolutions.com.au
First home buyers, investors, refinace, loan consolidation, equity loans, free service we come to you!
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