All Topics / Help Needed! / HELP NEEDED WITH BUYING AN INVESTMENT PROPERTY WITH EQUITY

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  • Profile photo of coxy86coxy86
    Participant
    @coxy86
    Join Date: 2010
    Post Count: 12

    HEY ALL, MY NAMES GRANT AND IVE JUST JOINED THIS WEBSITE. IM 22 YRS OLD AND IM LOOKING AT GETTIN INTO THE INVESTMENT GAME. ME AND MY GIRLFRIEND PURCHASED OUR HOUSE AROUND 6 MONTHS AGO IN WOLLONGONG AND WE ARE PLANNING ON MOVING BACK WITH OUR FOLKS FOR A COUPLE OF YEARS TO SAVE SOME $$$$ WHILE WE RENT IT OUT. I WAS CONSIDERING BUYING ANOTHER PROPERTY WITH THE EQUITY OFF OUR HOUSE, I HAVENT GOT IT VALUED YET BUT WE WILL HAVE AROUND 50K EQUITY. SO IM CURIOUS AS TO HOW WE GO ABOUT BUYING ANOTHER PROPERTY WITH THIS EQUITY?? AND ALSO WHEN WE RENT OUT OUR HOUSE, IS IT BETTER DOIN IO OR PRINCIPAL AND INTEREST? ANY HELP WOULD BE REALLY REALLY APPRECIATED THANKS

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

    Grant

    First thing you might like to do is remove that Cap Locks on future posts.

    You mention you have $50K equity is that actual equity or usable equity as there is a big difference.

    What you need to do initially is get your current lender to revalue the current home and advice you how much they would lend against the property by way of an equity loan (Line of credit or straight investment loan).

    Once you are aware of the net amount you can work backwards to see what deposit you can put down (less acqusition costs and LMI) for the next property.

    Unlikely you would get more than a 95% lend on the new property and only a few lenders around still offering such a product but a revaluation is the main starting point.

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

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of coxy86coxy86
    Participant
    @coxy86
    Join Date: 2010
    Post Count: 12

    Cheers for the reply mate, ive actually spent the last couple of hours browsing through the forums and noticed you have alot of comments regarding a range of different topics, so thanks for your help.

    I actually just got off the phone to our bank (St George) and they said we wouldnt have any problems with how much we could borrow, but they said because we dont alot of equity, we would be paying around 10k LMI with a 90% LVR, does that sound right to you?? Plus 15k onttop of that for stamp duty and legal fees etc And also mentioned we should get our house valued in conjunction with the new home loan application, apparently its alot cheaper???

    Im very curious as to whether investors just put that extra say 15-20k on their loan for all these expenses or is there other ways i should look into??

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

    Coxy

    Costs sounds about right but i would get the equity loan set up now and then look to use a separate lender for the next investment property.

    Keep them separate.

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

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of prusliprusli
    Member
    @prusli
    Join Date: 2007
    Post Count: 31

    Hi Grant,

    Your LMI increases exponentially with LVR i.e. the higher the LVR the higher the percentage.  You could ask your lender to provide the LMI table to get better understanding.  LMI usually applies if you borrow more than 80% but I know several lenders can go up to 85% without LMI.  Westpac is one of them I think.  Check with your broker.

    As for Stamp Duty and other government taxes there is nothing we can do about this.  However these costs will be deducted as expenses if you sell the property.

    I always keep my portfolio LVR around 70% – 80%.  Anything lower than that I consider lazy money in my opinion but everyone is different.

    Best of luck.

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

    Patrick

    Regretfully the days of Westpac going to 85% lvr without  LMI have been and well gone.

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

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

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