All Topics / Finance / Loan for deposit?

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  • Profile photo of kateej03kateej03
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    @kateej03
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    Hi,

    We are looking to buy another IP, however we have not saved enough deposit. There is a great cashflow positive deal I have found and very keen. Is there anyway we could borrow the deposit and stamp duty? I know the interest rate will be quite high but with such a great deal we would be able to pay it off quite quickly.

    Thanks in advance.

    Kate

    Profile photo of TheFinanceShopTheFinanceShop
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    Hi Kate,

    You can either cross securitise (i.e use the equity in other properties which you own) or you could possibly take out a personal loan to cover the deposit and stamp duty. The latter option is obviously dependent on a number of things but I would need more information.

    Regards

    Shahin Afarin – Property Finance Consultant
    http://elitepropertyfinance.wordpress.com

    TheFinanceShop | Elite Property Finance
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    Profile photo of Jamie MooreJamie Moore
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    TheFinanceShop wrote:
    Hi Kate, You can either cross securitise

    Why would she do that?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of TheFinanceShopTheFinanceShop
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    I think Kate is looking to borrow the total property purchase plus other costs such as stamp duty hence the cross securitisation.

    TheFinanceShop | Elite Property Finance
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    Profile photo of Solomon10Solomon10
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    I would not cross the properties. if you meet serviceability and could get it organized in a short time frame you could set up an LOC against one of your existing properties and use this money to fund the deposit and purchase costs. 

    Profile photo of jmsracheljmsrachel
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    I agree with Solomon10, If something should happen to the new property the bank can only sell that one particular property

    Profile photo of j21j21
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    TheFinanceShop wrote:
    Hi Kate,

    You can either cross securitise (i.e use the equity in other properties which you own) or you could possibly take out a personal loan to cover the deposit and stamp duty. The latter option is obviously dependent on a number of things but I would need more information.

    Regards

    Shahin Afarin – Property Finance Consultant
    http://elitepropertyfinance.wordpress.com

    I am in the same situation as Kate.

    How do I go about taking a personal loan?

    Cross securitise is not the option to go for me, as my current residential property do not have equity yet)

    Profile photo of TheFinanceShopTheFinanceShop
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    Solomon10 wrote:
    I would not cross the properties. if you meet serviceability and could get it organized in a short time frame you could set up an LOC against one of your existing properties and use this money to fund the deposit and purchase costs. 

    Based on an average purchase of $300k the cost of stamp duty and 20% deposit is $80k. For me personally, I would rather use the equity I have built in my current asset rather than take an additional loan and pay interest on $80k which works out to be $400 per month in interest. Later when the loan comes down or the value increases or both and the LVR is 80% you can release the additional security.

    TheFinanceShop | Elite Property Finance
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    Profile photo of TheFinanceShopTheFinanceShop
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    j21 wrote:
    TheFinanceShop wrote:
    Hi Kate,

    You can either cross securitise (i.e use the equity in other properties which you own) or you could possibly take out a personal loan to cover the deposit and stamp duty. The latter option is obviously dependent on a number of things but I would need more information.

    Regards

    Shahin Afarin – Property Finance Consultant
    http://elitepropertyfinance.wordpress.com

    I am in the same situation as Kate.

    How do I go about taking a personal loan?

    Cross securitise is not the option to go for me, as my current residential property do not have equity yet)

    Hi J21,

    Taking out a personal loan is not an issue. The issue is your specific scenario and ensuring that it fits with the lender’s policy criteria. Are you looking to borrow the minimum deposit of 5% plus stamp duty or the 20% plus stamp duty? What is the property purchase amount?

    Regards

    Shahin Afarin – Property Finance Consultant
    http://elitepropertyfinance.wordpress.com

    TheFinanceShop | Elite Property Finance
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    Profile photo of TheFinanceShopTheFinanceShop
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    St George is an example of a lender that will lend 95% of the value of the property as long as you can come up with the 5% deposit and stamp duty. So in a case where the purchase is $300k – you need to come up with $25k. This can be by way for any type of non genuine saving such as sale of a car, gift, or even personal loan. There are certain policy conditions that have to be met such as the ability to demonstrate that you have paid the rent continuously for the past 12 months (this doesn’t need to equate to 5%).

    Regards

    Shahin Afarin- Property Finance Consultant
    http://elitepropertyfinance.wordpress.com

    TheFinanceShop | Elite Property Finance
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    Profile photo of kateej03kateej03
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    Thanks for the replies. I am the same as j21 don’t have equity so would need a personal loan. Is there any kind of security required? I have seen a few loans around 15% does this sound about right?

    Thanks,

    Kate

    Profile photo of Solomon10Solomon10
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    TheFinanceShop wrote:
    Solomon10 wrote:
    I would not cross the properties. if you meet serviceability and could get it organized in a short time frame you could set up an LOC against one of your existing properties and use this money to fund the deposit and purchase costs. 

    Based on an average purchase of $300k the cost of stamp duty and 20% deposit is $80k. For me personally, I would rather use the equity I have built in my current asset rather than take an additional loan and pay interest on $80k which works out to be $400 per month in interest. Later when the loan comes down or the value increases or both and the LVR is 80% you can release the additional security.

    Not sure if you realize, but even if you use an equity loan as opposed to a LOC you will still be incurring interest on the same amount. A LOC is still against the value of your current property,but a good way of keeping things separate.

    Profile photo of TheFinanceShopTheFinanceShop
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    kateej03 wrote:
    Thanks for the replies. I am the same as j21 don’t have equity so would need a personal loan. Is there any kind of security required? I have seen a few loans around 15% does this sound about right?

    Thanks,

    Kate

    Hi Kate,

    You would need to get an ‘unsecured’ personal loan. Bendigo Bank have one at 13.49% and ANZ have one at 13.99 %. Make sure you get an pre-approval for the new loan before taking out the personal loan.

    Regards

    Shahin Afarin – Property Finance Consultant
    http://elitepropertyfinance.wordpress.com

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Profile photo of TerrywTerryw
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    Avoid cross securitising at all costs. It is not necessary and can be avoided.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of luke86luke86
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    Whatever you do don't cross securitise. Do yourself a favour and give a mortgage broker who knows what he is talking about a call- Jamie who has posted on this thread certainly does.

    Cheers,
    Luke

    Profile photo of Jamie MooreJamie Moore
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    Terryw wrote:
    Avoid cross securitising at all costs. It is not necessary and can be avoided.

    Agreed – it's a nightmare.

    If the bank will do the deal via cross coll – than there's no reason why it can't be done as stand alone. It requires a bit of extra work – but it's worth it in the long run.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Profile photo of Mick CMick C
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    1. Don’t cross! if you have enough equity to cross your loan…you have enough equity to do it as 2 separate loans with a split loan or LOC.
    Plenty of topics regarding crossing etc…

    2. 95% LVR non-genuine saving loans is available- but i can tell you now it’s close to impossible to get this approved if it’s done using a unsecured personal loan- i have done soooo many non-genuine saving loan in the past and the LMI people will not touch your loan if it’s done using a personal loan- especially if your borrowing the stamp duty as well ie zero savings…

    3. All non-genuine saving lenders has a max cap of 95% — so you will need to have some money for the LMI.-

    4. Also if you need to resort to getting a personal loan and potentially borrowing 105% of the money + LMI cost to get the deal done …i would say your NOT ready to buy. As not only are you getting a mortgage your also got a massive personal loan to take care of now as well…no matter how POSITIVE the deal is…it won’t make up for the lack in cash flow…

    4. You will make a lost every month using a personal loan, unless you buy something over 11% in yield

    5. Doing the math; Say you purchase at $300,000 with a rent of $600 p/.w ( yes it’s high….but lets presume best case scenario?) with a gross yield of 10.4%

    – $15,000 for the 5% deposit
    – $13,000 for stamp duty ( VIC)
    -$3,000 for another closing cost and searches etc..

    = $31,000 personal loan – 14% interest over 5 years = $721p/m

    —-

    -2850,000 loan at 95% ( presuming it get’s approved)
    – $7,500 for LMI ( also presuming it’s get approved and can be capped over the 95%)

    Loan – $292,000 – rate of 7% (sample rate) = $1,942 p/m



    Rent = $2,600 p/m ( presuming you get something at 10.6% yield )
    Out going on loans = $2,663

    * Your breaking even on a 10.4% yield
    * have not taken in consideration management fees and another cost
    * If rates goes up…..
    * No tenants….

    6. To find something with over 9% yield it would most likely be a security not located in the metro, unique security or should i say it most likely wont be acceptable or approved at 95% LVR lending, unless you have a past history or some good backing in security/equity….

    Out of 100 properties that has over 9% yield i can say at least 85% of them are done at a LVR of 90% or less, and we were able to get 95% LVR for the remaining part because it was a strong file..and having an personal loan will weaken the file.

    Sorry for a negative post, but we in the past have dealt so many 1st time investors who thought this would be an easy deal simply because they had a good income…

    There are plenty of good deals out there, but it may NOT be the right deal for you at this point in time. Learn to save up first.

    Regards
    Michael

    Mick C | Shape Home Loans
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    Profile photo of kong71286kong71286
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    Interesting discussion and comments here

    Just wondering if there are any other options available that would allow this great deal to go through

    I.e. if you could get the vendor to provide financing for 30% of the purchase price maybe as a balloon payment after 5 years, would there be any lenders happy to provide a loan for +70% of purchase price?

    Profile photo of kateej03kateej03
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    Thanks everyone for your posts. The one I’m looking at is a 16.4% return and would still be cash flow positive with a loan for stamp duty and 10% deposit with a 15% interest rate. Also taking into account pm fees and insurance costs it would still be cash flow positive. It is in a regional area and obviously has risks however for the return I think it’s worth going after. We already have an ip in this area so we do know quite a bit about the place.

    Kong-great idea, does anyone have any ideas for vendor finance or something similar?

    Thanks,

    Kate

    Profile photo of weathjessweathjess
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    You could look at a Joint Venture with someone that does have the deposit but doesn't have the serviceability on the loan. You could share the profits – so you wouldn't make as much, but at least you would be getting into a property that you couldn't otherwise afford and it reduces your risk.

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