Hi all, I'm very new to this caper so please excuse my lack of knowledge. Any help would be very much appreciated.
I have just had my PPOR valued at 425k giving 70k worth of equity. Im looking at buying my first IP around 240k.
My broker wanted to go down the cross collateral path and after reading on this site still cant work out why.
My question is "how much can I access" and "how" do I use the equity to put it towards my first IP without crossing loans. What amount of cash will I need to tip in?
As stated i'm very new and any advise would help.
Thanks in advance.
How have you calculated $70K equity? If your loan is $355K then your loan is already over 80% so you likely couldn't borrow anymore.
You can usually borrow up to 80% of your house value. Sometimes up to 90% but you may have to pay Lenders Mortgage Insurance (LMI).
Assuming you DO have money to borrow from your house you set up a separate account or LOC and use that for the deposit and legals etc. Then you get a loan for 80% of the IP as a stand alone loan. That way they are not crossed. Double check this when you sign the documents that ONLY the IP is listed as security for this loan.
More accurate figures will help others give you more info.
Thanks for your reply Catalyst. Any help is much appreciated.
So potentially I could set up a LOC of 90% of 425k less what is owing on the loan = 27,500
And use this as a LOC to cover deposit/legals on IP.
So my next newbie question is, what would the LMI amount be on borrowing 90% of PPOR and would it be worth doing?
Cheers,
Think longer term. If you have an aggressive IP acquisition strategy then go hard go early. $240k is a sweet spot for a 95% lend. LMI is tax deductible for the first five years and you can park the remainder of the deposit in an offset account to be used for subsequent purchase/s, renovation or development.
Many investors hit an equity wall so don't underestimate this and again think long term.
Whatever you do make sure you structure this loan correctly.
Who is the current lender?
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi first timer
Welcome aboard
The way we generally structure these types of scenarios is to tap into equity against the PPOR – and set it up as a separate loan (either an interest only loan or a line of credit). We then arrange a separate loan to cover the remaining balance for the IP.
So it ends up looking like this.
PPOR
Loan 1: Current loan against PPOR
Loan 2: Equity release against PPOR to cover deposit/costs on IP
IP
Loan 3: Separate loan to cover the remaining balance on IP
Depending on your longer term goals, you might want to use the equity release from loan 2 above to stretch over multiple deposits. A decent broker will be able to run through some options for you.
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]
Cheers Jamie this is now making a lot more sense. Really appreciate this advice.
One final question:
For loan set up as above and in particular Loan 2. How much equity can I get off my PPOR. Will banks lend 90% and will there be any LMI tacked on if I do so???
Cheers,
Hi FT
Yes hate to say there will be LMI on a 90% lend on the new IP but this could be capitalised.
Personally if you want to be fairly aggressive and serviceability if evident i would try and take out a 100% standalone loan secured against the new IP.
This can be done in many ways with some of the blended products.
You could also look to take out an LOC secured against your PPOR and use the funds for the next IP.
It is more about spreading the risk and making your buying power go as far as possible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
