Just bought 1st apartment

Hi Avalonesa

Congrats on the first purchase.

Some banks will allow you to access equity up to 90% of the properties value (some will actually go up to 95% but they're not easy deals to get across the line).

So on that basis, if your property was valued at $290k – the bank may let you take your current borrowings up to $261k which is 90% of the properties value.

Let's say, for arguments sake, that you had a loan of $200k against the property – then the equity you'd be able to access would be $61k. We come to that figure by subtracting the $200k loan from the $261k = $61k

You would then set up another separate loan to cover the remaining balance of the IP. So all up you have three loans.

PPOR

Loan 1: Existing loan ($200k)

Loan 2: Equity release for IP deposit/costs ($61k)

IP

Loan 3: Remaining balance for IP (can be the same bank as the two loans above or a different bank)

As your current property is a PPOR – you really want to set up a second loan split for the equity release so you can identify which is non deductible (your PPOR loan) and which is deductible (your equity release for the IP deposit).

Hope that helps.

Cheers

Jamie

It is very unlikely that the valuation on this property will be higher than $290k unless you have done some extensive renovations on it and even then there is no guarantee of a higher valuation.

Therefore lets assume that the valuation is $290k. If this is the case then your current LVR is 86.20%. This means that you can draw upon the equity at either a 90% or 95% LVR. If we assume that you can do it at a 95% LVR then the equity available would be $25k minus the LMI payable. The LMI payable at a 95% lend will be around $6k so the equity would be $25k – $6k = $19k.

Who is you current lender?

Regards

Shahin 

Ok so your equity at a 95% lend (which is hard to achieve but let's park that for the time being) is approx $19k.

What is the purchase amount of the new IP?

Regards

Shahin