All Topics / Finance / Finance for 2nd IP

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  • Profile photo of JayroJayro
    Member
    @jayro
    Join Date: 2007
    Post Count: 18

    Just after some advice. I currently have an IP and our PPOR loans through the CBA. We are more than happy with them up until now. My problem is that they are not super useful when trying to build a portfolio. Maybe all major banks are the same im not sure.

    They told me that I cannot cross more than 2 properties so I had to sell one IP to allow us to buy our PPOR as we moved to a new area and were renting while we had 2 IP's. Sick of renting we felt we had no choice but to sell the cheaper IP to allow the bank to free up funds for us to get our PPOR. They say its to do with there Mortgage insurance provider not them directly.

    So my situation is now this. Wife and I have both managed a few pay rises since setting into our new jobs since moving 3 yrs ago now. Plus rent on our IP has gone up which has helped as well. There is a chance that both propertys MAY now stand alone but they may not also. We will have finished the reno here in the next month and will have it revalued by the bank.

    Now my question is this, IF they say our PPOR cannot stand alone, then If I was to go to another major lender and put up say a 5% deposit would I be able to get a loan for the next IP without involving my other 2 property's???

    I just re read the post. I THINK its clear enough, hehehe.

    thanks in advance

    Jayro.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi  Jayro

    The Big C only have one interest at heart when doing deals and that it is their own and certainly not the borrowers.

    Firstly you can X as many properties together as you like however this is not a recommended strategy as it leads to problems as you have outlined.

    Restructuring your whole porfolio would allow you access to funds (subject to valuation) and certainly enable you to move forward. Many lenders will do a 95% LVR on an IP without having to involve your existing securities.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of Brisbane BrokerBrisbane Broker
    Participant
    @brisbane-broker
    Join Date: 2003
    Post Count: 25

    Hi Jayro
    In a lot of cases it pays to break the big picture down into sections.  for example
    Your current structure – what is the maximum you can achieve without introducing anything new.
    Naturally leaving this with your current lender will then save potential new loan expenses especially lender mortgage insurance.

    Knowing what you have in terms of deposit there is then only the income capacity to explore.  In this case there are some lenders who allow a higher portion of rental income for servicing loans. 
    IN addition to this by using separate lenders your current loan committments are measured on their cost and not at a higher qualifiying rate used by many lenders when assessing new loans.

    A new lenders exposure to risk is only focused on the new property

    Regards

    Craig

    Profile photo of JayroJayro
    Member
    @jayro
    Join Date: 2007
    Post Count: 18

    Thank you both for the replys. Does seem that the general feeling is that the CBA are a little like that. At this stage id say that I will get the PPOR re valued after my reno is finished and fingures crossed its done enough along with the extra we have paid off to stand alone. Time will tell.

    Jayro

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    One of my clients has 3 properties x-col with CBA (before coming to me!). It makes things very hard.

    Even if your valuations come in a bit low you may be able to release a property by paying LMI. It may be best to bite the bullet now and start unravelling this and gradually moving out to a new lender.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of micmanmicman
    Member
    @micman
    Join Date: 2007
    Post Count: 9

    Hi Terryw

    Could you please explain what cross collateral is

    Thanks
    micman

    Profile photo of THEHEATHTHEHEATH
    Participant
    @theheath
    Join Date: 2006
    Post Count: 27

    Since Terry W has spent so much time answering questions already allow me :) Cross Collateralisation is when you use one property as security to purchase another. ie. You may have 50k equity in your principal place of residence (PPOR) and want to use this equity to purchase an investment property, so the bank will suggest you use the 50k equity in your pricipal residence to secure a loan for the investment one. This is a bad idea because obviously if things go ARSE UP as they say, you risk losing not only your investment property but also your principal place of residence as the bank sells things up to recover their money! Banks of course love to do things this way because it gives THEM more security. A more desirable way to do things would be to simply draw down against the equity you already have in your PPOR via a line of credit loan and then using that money as deposit for the purchase of the investment property.

    Profile photo of micmanmicman
    Member
    @micman
    Join Date: 2007
    Post Count: 9

    That brings me to the next question
    with a line of credit say i had 50k  equity for example would the bank lend me the  50k to be drawn down at my discretion and only charge  interest on the drawn amount I:E say 25k or is interest charged as soon as the loan is approved on the whole amount
    Hope this makes sense
    Thanks
    micman

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871
    micman wrote:
    That brings me to the next question
    with a line of credit say i had 50k  equity for example would the bank lend me the  50k to be drawn down at my discretion and only charge  interest on the drawn amount I:E say 25k or is interest charged as soon as the loan is approved on the whole amount
    Hope this makes sense
    Thanks
    micman

    yep, it does. THink of your 50k LOc when it is approved, as being like a giant credit card secured by your house -at cheaper rates of ocurse. You only pay interest on the out standing balance. Interest only – you pay as much as you like. With a true LOC , if you are game, you can let the interest capitalise up to the limit (ie make no repayments at all – if you have a good reason!)
    hope that helps. All the best

    Profile photo of No Deposit KingNo Deposit King
    Member
    @no-deposit-king
    Join Date: 2007
    Post Count: 6

    Jayro,

    First Permanent (a lender owned by Merrill Lynch) has just brought out an investment loans that is 100% No Deposit PLUS lends you all the Stamp Duty – Best bit is they DON'T REQUIRE ADDITIONAL SUPPORTING SECUIRTY of any kind (such as your family home or other IP). They also offer 3 years interest only and variable or fixed for 3 years (plus will lend on a 50 years term)

    No other lender in Australia has a loan like it. Given the benefits it delivers, its 8.8% p.a.interest rate is good too (tax deductable anyway). No Cross Collateralising of Properties on No Deposit + Stamp Duty Lent. Fantastic – Details @ http://www.firstpermanent.com.au

    Profile photo of deeptangshudeeptangshu
    Member
    @deeptangshu
    Join Date: 2007
    Post Count: 6

    hey guys,
     I am pretty new to this, having secured my 1st IP with CBA in perth.
    I was reading through this, and was wondering what about the equity in the IP (would the bank release it for anything)?

    D

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