I notice a lot of confusion about how much equity people really have available to them for further investment when they intend holding their existing property. I thouht the following example might help:
House Value: $200,000
Existing Loan: $120,000Many people think they have $80,000 in equity in the above situation. This would be true only if they sold the property to realise the difference between what they owe and the sale price (ignoring sale costs).
From my knowledge of the industry, it is possible to refinance up to 90% of an existing property. This would mean that you may be able to increase your loan in the above example to $180,000. This indicates that there is only $60,000 equity available for further investments.
In most cases, and to avoid paying mortgage insurance, you will only be able to refinance up to 80% of an existing property. This means that your loan would only increase to $160,000 in the above example. This indicates that there is only $40,000 equity available for further investments.
You can still borrow up to 97% of a property value in many cases and sometimes even 100% or 106% if the property is a NEW PURCHASE and all lending criteria for the particular product is met.
I do not know the reasoning behind the restrictions on refinancing but borrowing at such high levels on new purchases attracts rather large mortgage insurance premiums.
Happy Investing!
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Who lets you refinance to 95?
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Never mind brahms, I just remembered ANZ do it up to 95 with LMI cap. There was another one but it has slipped my mind.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
i’ll let you know monday if you haven’t worked it out by then…
cheers
brahms
Mortgage Broker
[email protected]Sounds like you would have needed to ask around mate. Like I said above, never mind… I remembered.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
yeah…. you’ve blown my cover. wish i could get my facts right first time like you – hang on, I DID.
cheers
brahms
Mortgage Broker
[email protected]Brahms, take it easy mate. I am just stirring you like you were stirring me. If one ommission is what you are going to base your opinion of me on, I feel sorry for you mate. I have made many posts and it seems only one mistake or I am sure you would have corrected me earlier.
Anyway, I am here to help people and to learn. I ommitted something tonight and I sincerely apologise for my mistake. I have since corrected myself. Can we move on now please?
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Just as a side note – anyone that wants to refinance to 95% and borrow 95% of the new property who have to be a strong deal. That is, serviceability and employment history would need to be strong.
Mortgage insurance can be costly but if it helps you acheive your goals then its probably worth it.
Cheers
Stu
ANZ will only refinance up to 95% where the new loan does not exceed the old loan.
I think Royal Guardian does, or did, 95% refinances.
And then there is Libert or Bluestone which will refinance to 95% to help clients payout credit card debts etc.
BTW, I had a call from a broker friend the other day. He had a client getting a 95% loan, settling the next week, and he wanted me to lend them the deposit!!
Terryw
Discover Home Loans
Mortgage Broker
Click below to email meTerryw | 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 Terry
i’ve had no probs refi’ing to ANZ to 95 and capping mi to 97.
i don’t think they like to refi multiple debts, but to refi existing mortgage and pull equity (personal inv. purposes etc) up to 95% then cap mi is no problem.
depending on the credit assessor, its still possible to get them thru with multiple debts.
cheers
brahms
Mortgage Broker
[email protected]How many 95% refinances with LMI cap have you done Brahms? I have never been asked to do this and would find an alternative as the LMI premium is way off the planet at over 3%.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Its not common – a hand full a year i guess, as i haven’t done one on a loan amount exceeding $500k none of my clients have paid that level of mi.
sub $300k the mi is often palatable when other options are considered – i think it is simply a commercial decision that is available – and considered with other options.
cheers
brahms
Mortgage Broker
[email protected]The terrifying thing about this post is the fact that you’re putting your home on the bottom line.
If anything goes wrong you’re STUFFED.
You professionals should know better than to push brain-dead dopes into saddling up to their necks with debt.
The idea of buying investment properties this way could be the worst decision they will ever make.
Losing the lot,at worst.
Stuart Wemyss, I read your articals in the API
magazine and are very impressed with all that you write.So this supprises me.Almost like gambling, mortgage insurance.bruham.
Have the courage to take your own advice.Bruham,
Who said we are pushing this on people? I suggest you read the thread again properly.
These types of highly-geared loans are for those who can afford it – ie: strong serviceability. There are also loans out there that allow 100% – 106% for new purchases. The default rate is very low because of the strict guidelines.
Someone can lose their home at any level of borrowing. Usually, it is those with lower levels of borrowing that face problems.
What concerns me most is that you consider the people on this website to be “brain-dead dopes”. Why are you here?
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdOriginally posted by The Mortgage Adviser:Someone can lose their home at any level of borrowing. Usually, it is those with lower levels of borrowing that face problems.
I totally agree with the first sentence Rob,
But if I may ask, in your next sentence you said those in lower levels face problems, could you please explain this to me (sorry, I am totally ignorant of such matters, but would like to know for future reference). Surely if someone owes <50% they are at less risk of losing the lot, than say someone with a 95% debt, or am I missing the point???
BTW I ask this in all sincerity; not trying to be sarcastic or any such thing.
Cheers,
Jo
No need to tread on eggshells with me Jo. You know that!
I believe that those who borrow less do so because of their risk profile and / or knowledge regarding investments. They are the ‘old school’ who believe in one loan and paying it off quickly.
They usually do not seek alternative investments that require high gearing and don’t bother with insurances. For example, I am geared very highly. Should something go wrong and I can no longer work, insurance kicks in. If it is temporary, the payments are made until I can take over again. If it is permanent, all liabilities are paid out and I lose nothing (except my health or life of course).
Most people who get in trouble are the PAYE income earners who lose their job for one reason or another. Education is very important regarding ways to protect themselves. I do an Assets / Liabilities & Income / Expenditure sheet with all my clients applying for a loan and I don’t think I have seen a client yet who has adequate insurance. It is great for referrals to my Financial Planner but it is scary to think how many people can get hurt.
By the way, my Financial Planner is a member of this site and he is great. He is young and passionate about what he does. He knows his stuff! His name is Michael and his username is ‘Financial Planner’…GO FIGURE! You should message him to protect yourselves.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdUnlike my question, my last comment was not directed at you [winking] it was more for others who may have misunderstood my intention for asking.
Anyway, thanks for explaining the differences, and yes I can see where there would be issues by such “old school” mindset.[whistle]
Cheers,
Jo
You are certainly not old school Jo. I know what you get up to!!!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHey!!! Don’t get saucy with me boy!!![grin]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
