Forums / Property Investing / Creative Investing / Using Equity as Security for Purchasing IP #2

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  • Profile photo of new2investnew2invest
    Participant
    @new2invest
    Join Date: 2010
    Post Count: 36

    Am about to organize my finance soon for my IP #2 but before I do I was doing some calculations to find out how much equity I currently have now.

    This is what I came up with so not sure if this is how broker/lender will work it out.

    No Cross Collaterisation for IP#1.

    No Cross Collaterisation for IP#2.

    Ok here we go

    PPOR:

    PPOR value = $480k

    Mortgage = $298k

    Yr 2011

    IP# 1 has 2 loans:

    Investment Split Loan (topup) = 40k (funded using equity from PPOR)

    Investment Loan = 270k

    Yr 2013

    IP#2 to be financed scenario(Equity available to fund IP#2)

    To work out the equity available it would be 298k + 40k Split Loan = 338k

    Equity Available = 80% * 480 – 338 = $46k

    • Is that how it will be calculated?
    • I believe they will have to use that 40k from investment property #1 as it was secured against PPOR and add it to what I currently owe on my PPOR to work out how much equity is available?

    Is this correct or not? frown

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,065

    Yep that's right – $46k if you take the PPOR up to 80% LVR.

    Some lenders will allow you to go up to 90% LVR as well – that would give you a bit more to play with if needed.

    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 trickeymickeytrickeymickey
    Member
    @trickeymickey
    Join Date: 2012
    Post Count: 19

    Your situation is similar to mine new2invest…. I have just purchased #2 and both properties were financed this way. I want to save up to spend some money on PPOR, which should increase it’svalue, so I can do another equity loan against PPOR in 2-3 years time. Our bank accounts now have several loans/accounts but at least there’s no cross collaterisation. Whilst both properties have only just settled over the last 8 months, Jamie I have a question for you…. For #3, would you suggest the same principle or perhaps try to release equity from #1 and 2, (since they are financed with the same lender), rather than a PPOR equity loan?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,065
    trickeymickey wrote:
    Jamie I have a question for you…. For #3, would you suggest the same principle or perhaps try to release equity from #1 and 2, (since they are financed with the same lender), rather than a PPOR equity loan?

    It depends. 

    I'd look at accessing equity in whichever property has the lower LVR so as to mitigate any LMI expenses. It also comes down to who the lenders are and what their policies are like.

    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]

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