Hello All
I just sold 1 of 2 units in a complex as of today (Unit 2). I have owned the Unit 1 for 10 years and have made no capital gains ($375K purchase and still worth approx the same) and had about $100K equity which was used as security U2 for $110K 18 months ago. I have just sold the U2 property for $203K and owe $77K on that mortgage. Obviously the profit will pay of the the remaining owing which is $77K. CBA want me also to lower the $375K mortgage of U1 to $296K, so once I take some CGT out of the sale and pay of the the extra mortgage on U1 there is very little left over. I was hoping to use a small chunk of the $90K profit and purchase something else for about $450K and develop moving forward. Can I somehow get out of paying off the extra mortgage on (U1) wo I have a small cash deposit or does anyone have some suggestions on how I can progress to buying my next IP with very little money down (approx 5-10% deposit). Do I have to start again and draw equity from Unit 1 again?? Suggestions and Help are greatly appreciated.
Cheers
DM
I have clients that are buying with a heck of a lot less money than that behind them. And no property holdings to pull equity from either. Some have been no money down deals. It can certainly be done
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
dangermouse99 wrote:Hello AllI just sold 1 of 2 units in a complex as of today (Unit 2). I have owned the Unit 1 for 10 years and have made no capital gains ($375K purchase and still worth approx the same) and had about $100K equity which was used as security U2 for $110K 18 months ago. I have just sold the U2 property for $203K and owe $77K on that mortgage. Obviously the profit will pay of the the remaining owing which is $77K. CBA want me also to lower the $375K mortgage of U1 to $296K, so once I take some CGT out of the sale and pay of the the extra mortgage on U1 there is very little left over. I was hoping to use a small chunk of the $90K profit and purchase something else for about $450K and develop moving forward. Can I somehow get out of paying off the extra mortgage on (U1) wo I have a small cash deposit or does anyone have some suggestions on how I can progress to buying my next IP with very little money down (approx 5-10% deposit). Do I have to start again and draw equity from Unit 1 again?? Suggestions and Help are greatly appreciated.
Cheers
DM
This has happened because you have crossed the properties as security for the loans. ie cross collateralised.
Not much you can do now.
But, if there has been no CG in 10 years wouldn't you be better off selling the other unit as well?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi DM,
What market (city/suburb) are you talking of?
With 10 years of no/little growth, is it time for these "dogs to have their day?" Or not?
Benny
HI Guys, yes all valid points and I have questioned it seriously myself keeping or selling it. The main reason……it was PPOR on the Central Coast of NSW before moving to Victoria and have had it as a so-called security blanket as after 10 years we are seriously considering moving back to NSW and either moving into it or selling it for a bigger PPOR. That is the only reason I have kept it, plus I bought it at top of market and even though it served its purpose for security and equity to purchase and profit for a 2nd unit in the same complex, plus now it helps outlay some of the + cF I have in a Qld mining down IP. I didnt know about cross security 2 years ago even now I do and it wont happen again, im just dirty on not getting my hands directly on the profit to buy again….suggestions on what someone would do in my situation to buy again?????
I would suggest you seriously look at offloading it as you could possibly put the money to better use and could buy another if you change your mind and come back.
Think of the opportunity cost of holding it -what else could you do and the effect on borrowing capacity.
But, it will probably double in price the year after you sell it!!!. That's how these things pan out.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:This has happened because you have crossed the properties as security for the loans. ie cross collateralised.
Not much you can do now.
But, if there has been no CG in 10 years wouldn't you be better off selling the other unit as well?
Terry is right. By having your loan both with the same bank you have got yourself in a pickle.
The bank now has the right to force you to pay down some of your other loan. It is one of those clauses that no one really knows about and the banks don't discuss.
It happens by default in most cases.
If you haven't sold yet could you consider refinancing unit 2 with another lender (thus ending your cross-collaterisation) and then go on to sell unit 2.
I'm not a mortgage broker so I don't know if you can do this. Terry?
Ryan McLean | On Property
http://onproperty.com.au
Email MeYes, it might be possible. Refinance the remaining unit with a different lender – settle on the same date as your sale settles. Will all depend on the valuation though.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
DM remember just because the unit may not have gone up in value you may still be liable for CGT.
Reason your lender has asked for a cash injection is because the loans are cross collateralised and is this is an investors nightmare.
As JacM has mentioned we have a lot of forum clients with less cash / equity than you so absolutely no reason why you can't go again.
With the right lender you may even squeeze a couple of deals out of your equity structured correctly.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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