Hi All
Depending on who I talk to, everyone seems to have different strategies for buying wraps.
What are you guys doing for deposits.
I am lookin at starting out on my first wrap and have found some great houses around the $180,000 range.
However for a deposit on this at 20% plus costs I am looking at tying up about $40,000. Now we do have equity in our unit to do this but would I be tying up too much. Other suggest financing 95% others suggest financing 100% plus costs.
What difference does each strategy make to the wrap i.e. with repayments, mortgage insurance etc?
Anyone
Delboy[cap]
If you can find wrap finance at 95%, then I think it is generally better to go for a high LVR to use less of your money. It allows you to go further, but does cost more in LMI.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Terry, But wont LMI stop once you hit $1.5m ???
Pelican
Yep. Good point. LMI will restrict you, but I think it is better to ‘get it while you can’.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Delboy, by all means go for the lo-doc 95-100% loans, but just be aware that once you have 1.5 mill worth of property insured, you wont be able to get any more LMI in your/company name……
Obviously going 80/20 avoids that, but, yes, it does tie up your funds……
Going 80/20 doesn’t always avoid LMI. Quite a lot of banks will still have the loan mortgage insured, even though they don’t charge the premium on to you. So be very careful of that.
Keep smiling
Felicity
So I can lend up to $1.5m which will get me a few wraps and not tie up too much funds.
How do you get past that point other then getting your wrapees to buy you out?
Any hints.
I think this is the point people are trying to make between wraps and l/os, is that correct?
Delboy[cap]
There are still plenty of options after that. If LMI is not invloved, then no probs (as long as you can service). It is generally only the securised lenders that have LMI on all of their loans, but many major banks also have LMI on their low docs no matter the LVR. It is best to plan big from the start and this will enable you to go further in the long run.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Keep in mind that you can not cross securitise the the loans for a wrap property. It must be a stand alone financial arrangement. (In Victoria anyway)
Dave Siacci
Hi all
if it is Wrap- ie private vendor financing- how does LMI come in? is not LMI normally involved in where you get commercial funders/ finance cos etc- whether on LoDoc or No doc etc? My immpression is Wraps is from private individuals/companies who want to sell and give you the vendor finance.
2/Q:If i were to become a Wrapor- is it easy to get LMI on the property and get the Wrapee to pay for it?
3/ Anyone knows inwhich state there are a lot of properties available on wraps basis?
TQ/ PiperSiacci
You can’t cross securitise?
Assume you mean you can’t use equity in another property to finance a wrap property.
I never heard this before.
Anyone? What is the case here?
Delboy[cap]
Hi Delboy
You can borrow against another property to supply funds for a deposit, but you cannot cross-collateralise a wrap property with any others. You also can’t refinance the property once it has been wrapped. This includes bringing in an investor for a 2nd mortgage – once it’s wrapped in Victoria, nothing can change basically.
This also creates problems if you buy in a company/trust structure and the bank wants to take a debenture mortgage over the structure – again, that’s basically cross-collateralising.
The purpose of all this is to make sure that when the time comes from the wrap buyer to refinance, the wrapper can’t have increased his/her loans to the point that the buyers loan balance can’t pay them out (ie the wrapper’s loan is higher than the wrap buyer’s loan).Keep smiling
FelicityThe security for the loan must be stand alone. If you want to use capital gains from another property you own you will need to extend that loan, draw the money in cash and use it for the property you intend to wrap.
David Siacci
I am getting a little confused here.
Felicity, you say I can borrow against another property as security to supply funds.
David, you say I have to actually redraw those funds and inturn increase my original mortgage.
??????????????
Delboy[cap]
I beleive that you can use an existing property as additional security for your wrap proeprty, but once you have onsold a property under a terms contract, you cannot then use that property as additional security for another loan – afterall you do not own the equity, it belongs to the wrapees. LOs can avoid this drama.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Delboy
I said you could borrow against another property to supply deposit funds, not as security for the wrap loan.
Dave has explained it better.Keep smiling
Felicity
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