Been a while, the site has helped me a great deal when we first got our first place 2 years ago, it's time to think about expanding in the near future.
At the time we didn't have the required deposit amount, we had to have LMI for the remaing 5% of the deposit, so we borrowed 85%.
We would like to purchase a additional place at the end of next year, and keep the current place as a IP.
At the moment all our money goes into the offset a/c (PPOR place is I/O), would it be wise for us to put some money adjust the mortage to bring the debt level down to 80%? I know there is no difference in our payments wheather it's in the offset or paying the mortage down. Just that you have the extra cash, does the bank see differently, when you want to draw down on the equity for the next purchase?
This leads to my next question is equity calculated as Current Market price minus Mortage??
Given that your current PPOR is going to become an IP – I wouldn't pay down any of the debt. I'd continue to do what you're currently doing – park money in the offset – and then move these funds onto your next PPOR when it's time to purchase.
Equity is calculated by taking the value of your property and multiplying it by the lenders max LVR for equity releases which is generally 90% – then subtract your loan amount.
For instance, if you had a property worth $100k and a loan amount of $70k – you could access $20k in equity ($100k * 90% LVR = $90k and $90k minus $70k = $20k).
Would have thought the bank would take into consideration of the currently debt level situation.
The main thing they want to see is that you can service the debt, have a deposit, don't have a heap of bad debt and no defaults on your credit file.
Your overall asset/liability position relative to your age comes into play – particularly for credit scoring. However, I haven't had too many issues in the past where I'm arranging finance for a client who has existing properties at high LVRs. It probably helps to have existing properties lower than 80% LVR from a credit scoring perspective – but no one really knows how credit scoring works across the numerous lenders (not even the credit assessors themselves).
If you're worried about the next loan being knocked back – it might be worthwhile getting a decent broker to look at your options and sort it out for you.
JamieMick CParticipant@shapeJoin Date: 2010Post Count: 1,099
You mentioned you have already paid LMI so when the current property becomes available for rent you will be able to claim a portion of the LMI as a deductible expense.
Paying down your current loan wont save you anything in regards to LMI so don't do if for that reason.
If the property is going to be a PPOR then utilise your own cash funds and if necessary look at alternative products where there is no LMI payable or reduced LMI due to a higher interest rate.
With the correct loan structure and depending on how much you have in savings you may well find out that you can avoid LMI and still borrow more than 80%.
Yours in Finance
Thanks for all your help, i'll keep on saving for a for deposit for the next place!
WUM Sometimes a deposit it not required and 100% borrowing is available in certain circumstances.
Yours in FinancePageyParticipant@pagey_1Join Date: 2012Post Count: 34PLCParticipant@plcJoin Date: 2012Post Count: 400pagey_1 wrote:This may be a stupid question but on the note of equity. If i have a mortgage of say 100k and borrow an additional 40k (from equity) do my repayments increase to cover the 140k debt or do they remain as the same as if i had 100k debt?
A bigger loan means bigger repayments
JamiePageyParticipant@pagey_1Join Date: 2012Post Count: 34siewlinParticipant@siewlinJoin Date: 2012Post Count: 19
hey , A bigger loan means bigger repayments if i'm going for further my study in medicine with the help of help fees which means loan from the government will it affect my eligibility from borrowing money from the bank?? though my husband is working full time with a salary of 100k per annum , i believe since the dependent who is me not working , will the bank limits the loan amount which means we have to delay in expanding our property portfolio . please advice
Your best bet is to have a decent broker listen to your goals and assess your situation – they'll be able to advise on your borrowing capacity and run through some scenarios with you.
Hard one to answer siewin without knowing your current position and your future goals and objectives.
Two incomes are always going to give you an increased borrowing capacity however there is many ways to skin a cat and get the same end result.
Yours in Finance