All Topics / Finance / Lowering the mortage to 80% debt for the next purchase

Viewing 15 posts - 1 through 15 (of 15 total)
  • Profile photo of Work Ur MoneyWork Ur Money
    Member
    @work-ur-money
    Join Date: 2010
    Post Count: 13

    HI All,

    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??

    Regards

    Jon

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Jon

    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).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Work Ur MoneyWork Ur Money
    Member
    @work-ur-money
    Join Date: 2010
    Post Count: 13

    Thanks Jamie,

    Would have thought the bank would take into consideration of the currently debt level situation.

    Jon

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    No worries.

    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.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    Pop Jamie an email and he will sort you out.

    Doesn't hurt to get a personalized  expert opinion.

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

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

    Hi Jon,

    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%.

    Cheers

    Yours in Finance 

    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 Work Ur MoneyWork Ur Money
    Member
    @work-ur-money
    Join Date: 2010
    Post Count: 13

    Thanks for all your help, i'll keep on saving for a for deposit for the next place!

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

    WUM Sometimes a deposit it not required and 100% borrowing is available in certain circumstances.

    Cheers

    Yours in Finance

    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 PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    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?

    Cheers

    Pagey

    Profile photo of PLCPLC
    Participant
    @plc
    Join Date: 2012
    Post Count: 400

    Hi Pagey,

    The lender will recalculate repayments to cover the increase.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
    Email Me | Phone Me

    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    pagey_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?

    Cheers

    Pagey

    A bigger loan means bigger repayments :-)

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of PageyPagey
    Participant
    @pagey_1
    Join Date: 2012
    Post Count: 34

    Thats what i thought, thanks guys

    Profile photo of siewlinsiewlin
    Participant
    @siewlin
    Join Date: 2012
    Post 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

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi siewlin

    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.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

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

    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.

    Cheers

    Yours in Finance

    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

Viewing 15 posts - 1 through 15 (of 15 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.