Hello all,
Hope this is ok in this section.
Have just spent the last few hours reading through the forums, lots of great information!
I am 23 yo and own a property worth $560k owing $480k on it and renting out at $510 pw.
At this stage I am on PI Loan but if I switch to IO I will be neutrally geared, but with the rise of IR probably looking at slightly negative. Given that my loan is ~85% of the property value I believe I could borrow 10% to increase the loan value to 95% and use that ~50k to purchase a second IP. I understand that this is going to have two propertys at 95% debt and that maybe I should be looking to pay down to a lower % before looking for another property. In the end does the debt % really make a big difference as long as I am able to service both debts?
TIH
Paddy
G'day Paddy,
Provided you are disciplined enough and will not spend the money, your investment loan should be interest only, and accompanied by an offset account – There are dozens of articles on this topic throughout the site so I won't go into detail on it, but feel free to have a search around to see the reasons behind.
The debt % does make a difference to what you can purchase down the track if prices stagnate for a while or even go backwards. It is worth considering what else you may need/want to purchase in the near future, and this adds more weight to reasons behind having an offset account for your spare cash. (ie: redraw for personal purposes against an investment loan can be a pain in the a$$ at tax time).
You might want to be a little careful. I think, and I am sure someone will correct me if I am wrong….Richard
, that if you refinance your current IP and establish a 95% LVR you will have to pay lender’s insurance again. Then when you buy the new property you will have to pay lender’s insurance on that property also. So that is something to be aware of.But if your income can support the loans, and you can afford the lender’s insurance and you get enough equity to pay for the deposit and the closing costs then you should be able to do this.
Also be careful about leveraging that much. Interest rates will only keep going up. So make sure you can afford the property if interest rates go up to 8-9%.
Good luck, and well done starting your investing so young.
Ryan McLean | On Property
http://onproperty.com.au
Email MeRegretfull most lenders wont allow a refinance past 90% lvr these days but you would normally merely pay the additional LMI.
Richard Taylor | Australia's leading private lender
Lending is quite tight at the moment. So I can understand why they wouldn’t lend more that 90% for a refinancing. Lenders are really trying to lower their risk aren’t they?
I wonder when lending will get easier again?
Ryan McLean | On Property
http://onproperty.com.au
Email Mei agree to ryan that lending is really tight in this moment … i just don''t know the reason behind it…maybe because of the calamities and crimes ? hmmm….what you think guys?
Hi Paddy
I am new to this site as well. Ive been searching the forum for people your age ( i am 22 ) And I just want to say good on you mate for taking the bold step in owning a investment property. I currently rent but hope in a year or so to be able to save for a deposit for an investment property and go from there. I have read a few property investment books ( Peter Spann, Steves books etc) and attended a few seminars just to get some more knowledge on the topic i am very interested in. If you have any advice or could steer me in the right direction about what books/education to take the time to read/watch that would be highly regarded!
Cheers
Scotty
Hi Paddy,
Yes, the banks will be interested mainly in you servicing both debts and also in having the equity available for the deposit. You also want to make sure your own cash flow can handle any increases to interest rates for your own peace of mind.
Another point is that if the lender you are currently with doesn't allow a refinance to 95%, your only choice to get that equity would be to refinance to another lender who will allow 95%, and paying the full LMI again (which would be anywhere from $15K on a $500K loan, although some lenders will capitalise this amount on top of your loan) as they wouldn't discount the LMI already paid with your current lender.
Another option might be to have the loan as IO, keeping the deductible debt maximised and putting your excess cash to deductible debt (like a PPOR for some people). This cash would also serve as a buffer if interest rates increase.
, that if you refinance your current IP and establish a 95% LVR you will have to pay lender’s insurance again. Then when you buy the new property you will have to pay lender’s insurance on that property also. So that is something to be aware of.
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