hi all,
on my home bought for 220 K i currently own 25k. home should be worth around 240K i guess…
here the forum members suggested i use my equity to manage 20% borrowing cost using my home.
i even have to switch lenders as my current loan is with small provider..
i went to 2 banks. they both are like yes u can borrow 400k no issue.
but u will have to refinance with us. use both property as security…is this the best way to go…
i earn 90k a year and wife earns 40k…
1) whats the best way to go from here?
2) if i pay off my loan in 2-3 months, have the title in my name only.. can i then use all the equity… say 240k?
3) anz bank is saying we offer .7 off all loans over 300k, but could not find that offer anywhere online.
any suggession/help appreciated.
investhut
investhut wrote:hi all,on my home bought for 220 K i currently own 25k. home should be worth around 240K i guess…Do you have a mortage of only $25k or have you paid $25k off your mortgage? I'm just a little confused about the word "own" in the first sentence – I think you have meant "owe."
investhut wrote:here the forum members suggested i use my equity to manage 20% borrowing cost using my home.Yep, if you have that sort of equity at your disposal, then it's ideal. It helps you avoid mortgage insurance on your IP.
investhut wrote:i even have to switch lenders as my current loan is with small provider..Small lenders can be ok. What are the particular issues confronting you with this lender?
investhut wrote:i went to 2 banks. they both are like yes u can borrow 400k no issue.That's good news.
investhut wrote:but u will have to refinance with us. use both property as security…is this the best way to go…That's not so good. No, it's not the ideal structure. Ideally, you want to keep your securities separate (uncrossed), in this instance, the lender is saying "sure, we'll give you the loan for that IP but we want to take your PPOR as security as well". Instead, depending on your current lender, you could do a "top-up" on your current loan for an amount that covers the 20% deposit plus purchasing costs. You can then go back to the same lender and say "guess what, I have this deposit, will you give me the rest of the money?" In this situation, the new bank is only taking your IP as security for that IP loan (not both your PPOR and IP).
investhut wrote:1) whats the best way to go from here?Get a good mortgage broker that understands investments and save yourself the stress and hassle of setting it up correctly.
investhut wrote:2) if i pay off my loan in 2-3 months, have the title in my name only.. can i then use all the equity… say 240k?Not all of it, most lenders will only go up to 90% LVR and a large cash out like that, in the current lending environment, may not be a walk in the park.
investhut wrote:3) anz bank is saying we offer .7 off all loans over 300k, but could not find that offer anywhere online.It's there breakfree package.
investhut wrote:any suggession/help appreciated.I hope that helped.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
investhut wrote:here the forum members suggested i use my equity to manage 20% borrowing cost using my home.
i went to 2 banks. they both are like yes u can borrow 400k no issue.
Now I am not a broker nor advisor so take what I say with a grain of salt.
Why haven't you considered 10% deposit instead of 20%?
On $400K purchase you will need to find around 5% (20K) for purchasing costs.
With a 20% deposit ($80K) you draw upon available equity by $80K (deposit) + $20K (costs) = $100K total draw.
If you opted for a 10% deposit the numbers change somewhat.
On $400K purchase you will need to find around 5% (20K) for purchasing costs.
With a 10% deposit ($40K) you draw upon available equity by $40K (deposit). We mustn't forget there will be LMI costs to pay. Allow ~2% ($7.5K). N.B LMI costs are approximated and they can be capitalised with some lenders.
Under a 10% deposit scenario you need $40K (deposit) + $20K (costs) + $7.5K(LMI) = ~$68K total draw down.
Now this doesn't constitute advice as I am not qualified to give it but it may be something worth exploring with your broker.
Derek wrote:investhut wrote:We mustn’t forget there will be LMI costs to pay.Hi Derek
That’s the reason. If you are able to access sufficient equity in another property (20% plus purchase costs) to purchase the next, then it’s usually best to do so, because you avoid paying LMI.
It’s a different story if you’re using a cash deposit – then I can see the merits in using a smaller deposit and paying some LMI.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
I disagree Jamie. I don't see the $7.5K as a cost rather as a 'saving' – a little obtuse I know.
Using the numbers above the investor has paid a one off fee of $7.5K. This is tax deductible over 5 yrs, or the life of the loan, whichever is shorter. Don't think for one minute I am advocating making decisions based on tax deductions – to me tax deductions are the bonus of doing something and not the reason for doing something.
But back to my point in the scenario above the investor uses $32K 'less' of his available cash, LOC, equity, family pledge, bank robbery proceedings etc.
This $32K can be directed towards renovations, unexpected repairs, the next deposit, fall back reserves if the world goes pear shaped and so on.
One key aspect all investors should consider is the 'what if scenario' – paying LMI in this scenario provides $32K for 'pear shaped' eventualities.
Personally we have always paid LMI whenever we could.
investhut wrote:hi all,on my home bought for 220 K i currently own 25k. home should be worth around 240K i guess…
here the forum members suggested i use my equity to manage 20% borrowing cost using my home.
i even have to switch lenders as my current loan is with small provider..
i went to 2 banks. they both are like yes u can borrow 400k no issue.
but u will have to refinance with us. use both property as security…is this the best way to go…
i earn 90k a year and wife earns 40k…
1) whats the best way to go from here?
2) if i pay off my loan in 2-3 months, have the title in my name only.. can i then use all the equity… say 240k?
3) anz bank is saying we offer .7 off all loans over 300k, but could not find that offer anywhere online.
any suggession/help appreciated.
investhut
Hi,
Let me answer some of your questions and then i will provide you with a general recommendation;
1. As jamie said – Do not x-cross your securities if you dont need to ( which in your case, you don’t need to cross…)
2. Why did you choose ANZ? they are normally not the best for this sort of situations- they tend to x-cross EVERYTHING with there ” portfolio manger loan”
3. The offer you are mentioning about ANZ is only available via a Broker or if you ask the ANZ branch manger/ specialist . It’s not available online…i have no idea why
—- if you want the flyer/promotional material about this i can email it to you.There are a few products out there ( CBA, CItibank, AMP, ING) that offer 90% LVR refinance – and cash out up to the 90% mark – NO questions ask…I reckon this is your better option. No cross and access to cash – and if this is your IP then it has the tax advantages.
But end of the day; you might want to speak to a broker.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Derek wrote:I disagree Jamie. I don't see the $7.5K as a cost rather as a 'saving' – a little obtuse I know.Using the numbers above the investor has paid a one off fee of $7.5K. This is tax deductible over 5 yrs, or the life of the loan, whichever is shorter. Don't think for one minute I am advocating making decisions based on tax deductions – to me tax deductions are the bonus of doing something and not the reason for doing something.
But back to my point in the scenario above the investor uses $32K 'less' of his available cash, LOC, equity, family pledge, bank robbery proceedings etc.
This $32K can be directed towards renovations, unexpected repairs, the next deposit, fall back reserves if the world goes pear shaped and so on.
One key aspect all investors should consider is the 'what if scenario' – paying LMI in this scenario provides $32K for 'pear shaped' eventualities.
Personally we have always paid LMI whenever we could.
Hi Derek
If you have enough equity elsewhere so as you can avoid paying LMI, then why wouldn’t you? Think about it, if you have one PPOR with enough equity to cover the 20% plus purchasing costs on an IP – why would you only access a portion of this equity, say 10%, and pay some LMI and leave all that equity sitting dormant in your PPOR?
I’m talking about equity here – I can see the merits in not saving a large 20% cash deposit to avoid paying LMI.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Also, in terms of “what if” scenerios – the IP has an LVR of only 80% and this can generally be taken up to 90% later on if required. If the PPOR hasn’t been maxed out to 90% LVR, there would also be some equity to cashout there, if required in the future, as well.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
I always use a 'gunfight' analogy here.
If at all possible when in a 'gunfight' keep a bullet in the breech – just in case someone else pops their head in.
Using as little of my funds as I possible can is akin to a gunfight.
Keep something up the sleeve for just in case scenarios and if this means paying LMI and retaining more readily available funds then so be it.
I guess we think differently on this
—- if you want the flyer/promotional material about this i can email it to you.
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