- chetnik73Participant@chetnik73Join Date: 2007Post Count: 47
We currently own an IP valued at approx 520k. We owe 380K on this property.
We are looking to buy our first PPOR and have approx 350k as a deposit.
After talking to our original lender, they are saying that we can draw the equity in our IP to use as a deposit for a 2nd IP of up to 500k. The thing though is that they will draw up one loan for 90 k (deposit) and a 2nd loan for the the residual 410k.Not quite sure why.
We would use this money to perhaps buy a house and add a granny flat in the back for cash flow.
At the same time as all of this we are looking to buy an PPOR of up to 900k in Sydney's south.
My question is
1) Is the proposed structure for the IP loan suitable and does that mean I am cross collaterelising the first IP Property. Is there a better approach?
2) Do you think we are taking on to much by getting a PPOR loan of 550k. We are on a joint income of about 180k to service all of the above.
ThanksRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Would be very unlike a lender to tell you can get a better deal elsewhere or structure the loan in a manner more favourable to you than them.
I have to query why they would suggest what the have.
When we work with forum clients in situations like this we try and work backwards.
Let us assume that you intend to buy an IP for 500K.
To make it an 80% lvr you are going to need 100K deposit and say 20k to cover your acquisition costs etc.
You would look to establish the 120k by way of an interest only sub loan secured against your PPOR.
The initial PPOR main loan would be linked to a 100% offset account and the 120K sub loan would sit there until you needed to draw upon it for the IP.
At the sort of total loan amount you are looking at you should be able to shop around for not only a good rate but flexible terms and costs.
Did a similar size loan for a forum client a week and must admit was pleasantly surprised the deal we could negotiate.
Hope this helps.
Yours in Finance
Richard Taylor | Australia's leading private lenderchetnik73Participant@chetnik73Join Date: 2007Post Count: 47
Thanks for the response.
Not sure why i would secure the sub loan against the PPOR.
As we haven't yet purchased the PPOR, would it not be more beneficial to draw down the equity from our IP instead?
Given we are trying to put as much deposit as we can against our PPOR, I'd like an option that means no extra money directly out of pocket if possible.
Happy to hear the options and contact you if the above solution works bestRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Yes sure but that assumes you buy your next IP before the PPOR.
If you do it the way they suggested you will either incur LMI or have to put cash in on the next IP deal which doesn't make any financial sense.
Buying your PPOR and structuring the way i suggest means you use none of your own funds for the next IP at all.
Yours in Finance
Richard Taylor | Australia's leading private lender