Hi Guys,
just want to find out, what my options are, and to confirm that i didnt stuff myself up in a loan redraw, i recently did.
Here is my actual scenario…
* this year purchased a property in january for $120,000
* put a 10% deposit and monies for, legals and stamp duty.
* loan amount $108,000 ($12,000 as cash deposit + $6,000 for legals and all other costs)
* a week after settlement refianced property, new valuation. $145,000
* new loan as $130,500 (top up of $22,000) will use $22,000 loan as new property purchase deposit.
* i have the option to now list the property back on the market, as the agent has advise me that i can sell the property for a quick sale of $167,000
what i want to know is, if i sell my property, and with this current loan of $130,500, am i able to purchase another property out right in this loan, including all stamp duties and cost of legals…or will i be specified to buy a property at $145,000, use the existing loan of $130,500 and come up with a cash deposit of $15,000 + legal expenses? (as current loan is 90%)
from experience in cross-collateral, i know that you can, just simply subsitute the collateral, and legals + duties all into one loan (providing that all the cost and property purchases, is with in the loan subsitute, and the profit gained from the sale, can be taken and pocketed into your bank account…but going back to the area that i have highligted in red – will i be advised to put cash up still to keep the loan at 90% LVR, or is there another way round it…
Cheers,
sisFirstly, you are spending either a lot of money on mortgage insurance or paying a very high interest rate. I would stay away from 90% LVRs if possible.
You can only use your existing loan if the lender you are with allows portability. This will only work if the new property and the property being sold both settle on the same day. Unfortunately, you will have to keep within the LVR guidelines as the new security will not be sufficient to provide a buffer. The only exception to this is where they allow 100% loans but you will still need the costs.
Out of interest, how much have you paid in mortgage insurance on the initial loan and then the increase and what is your interest rate on this loan?
Robert Bou-Hamdan
Mortgage AdviserHi Rob,
the LMI fee wasnt much, as far as i can remember, to be honest im not so sure, cause ive done a few transactions like this a few times now.. but my interest rate is 6.84%
though i know that with my LMI its quite good, though because, each time my property goes in value, i actually do refinace, it, up to 90% LVR and redraw the excess funds and uses those excess funds as new deposits…
but thanks heaps for your help Rob, much appreciated…
Cheers,
sisI think you will only be allowed to have a loan at the same amount or less than before and no more than the previous LVR. Any increase will result in a retesting of serviceability.
You may not have to settle on the same day for the sale and purchase. The sale can settle first with the bank holding the loan open for up to 3 months – depending on the bank’s policy.
Terryw
Discover Home Loans
Mortgage Broker
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
I think you should look at your loan contracts and see how much you pay in mortgage insurance. That is why your costs are so high. WHy do you need to keep refinancing to 90%?
Robert Bou-Hamdan
Mortgage AdviserHi Rob,
what i like doing is, buying high growth properties, in which i can predict, or have a good guess that it will double in a 2 year period. (or just have substainal growth)
eg..
property purchase 100k (10% deposit) 90k loan – 10k cash
property revalue- 125k (10% equity) $112,500 loan – 12,500 redraw
property revalue- 150k (10% equity) $135,000 loan – 12,500 redraw againdoing this over and over again.. through out the year, im able to channel the money back into another loan again, as new cash deposits, and when i feel the property has reached its peak, i will just sell the property and re-subsitute the loan again..
but because i work my portfolio in 3 different areas now,
** buy and hold (constant refinance – some are cross collaterilised, but idea to never sell)
** buy and sell – (2-3 times a year, take profit and just continue to reuse loan, loans are under a straight company structure) constant resubstition of collateral
** buy and hold in a trust or individual name (higher lvr used, or 80% gearing (though dependant on what loan structure) geared in effective manner to get 50% capital gain tax, and use most of banks money… to gear, but turnover is similar to subsitute of collateral, or other forms of gearing, but turnover is on a minimal of 1 year and 1 day from date of contract signed (50% CGT discount) (cross collateral or also used)
Cheers,
sisps…
this is what i do, but i would suggest other people not to do it.. (its just a faster game of, trading property and keeping the better property in a buy and hold position…)
I think you will make more money if you only refinance to 80% and save on the mortgage insurance costs with each refinance (assuming you don’t use every cent as soon as you get it). Why throw away a few thousand dollars each time you refinance?
Robert Bou-Hamdan
Mortgage AdviserJust Thinking aloud here..
Here is my actual scenario…
* this year purchased a property in january for $120,000
* put a 10% deposit and monies for, legals and stamp duty.
* loan amount $108,000 ($12,000 as cash deposit + $6,000 for legals and all other costs)
* a week after settlement refianced property, new valuation. $145,000
When SiS refinanced – How much was the associated costs for this new loan- another $6’000?
* new loan as $130,500 (top up of $22,000) will use $22,000 loan as new property purchase deposit.
Taking the above associated costs into account was it still $22’000 in the Hand?
* i have the option to now list the property back on the market, as the agent has advise me that i can sell the property for a quick sale of $167,000Geez SiS if it’s going up that much that quickly and you can get $167K fot it in a Fire Sale..HANG ONTO IT[biggrin]
As Usual it’s great and enlightning reading your Post’s Still in School [thumbsupanim]
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi guys,
ill tell ya the story later on, how it was bought cheap, refinace cost were very low, it was just a one off time of $6000, to cover legals and stamp duty, but the refinance cost was only about a few hundred dollars, but due to the market moving fast and the property well truly undervalued.. (for a very good reason)
… but due to a market boom, valuer, wont value property at what the agent has told me that it can sell for…
other problems having similar problem, another property then recently sold for $270k, but valuer would only value it at $250k…
but its a very interesting story, as the next few.. lol..
Cheers,
sisOriginally posted by Terryw:I think you will only be allowed to have a loan at the same amount or less than before and no more than the previous LVR. Any increase will result in a retesting of serviceability.
You may not have to settle on the same day for the sale and purchase. The sale can settle first with the bank holding the loan open for up to 3 months – depending on the bank’s policy.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]So its not able to be done Terry?
I’m looking at refinancing and drawing out equity but you are effectively taking out a new loan, increasing DSR limits and LVR..My thoughts were refinance, put Equity into LOC..For when needed, thereby effectively keeping loan at same level until drawn down..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorSorry Redwing. not sure what you mean, could you phrase that?
Terryw
Discover Home Loans
Parramatta
[email protected]
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http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Originally posted by redwing:Originally posted by Terryw:I think you will only be allowed to have a loan at the same amount or less than before and no more than the previous LVR. Any increase will result in a retesting of serviceability.
You may not have to settle on the same day for the sale and purchase. The sale can settle first with the bank holding the loan open for up to 3 months – depending on the bank’s policy.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]So its not able to be done Terry?
I’m looking at refinancing and drawing out equity but you are effectively taking out a new loan, increasing DSR limits and LVR..My thoughts were refinance, put Equity into LOC..For when needed, thereby effectively keeping loan at same level until drawn down..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI’m not sure how to rephrase it?
If youre at Your serviceability limits then are you saying that what SiS was proposing (or similair) cannot be done and increasing your loan and LVR
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOh, yes that would be the case.
If serviceability limits have been hit, (or if you have changed jobs etc) you may not qualify for the increase – they would probably require updated payslips etc.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
Thanks Terry
PS-
Is there a simple calculation I can plug into excel to work out DSR?
I realise each bank is different, but there must be some ‘base’ calculation that I can use?
I think I’ve been told no more times than I care to count by banks and brokers, yet with perseverance I’ve been able to move forward each time
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI realise each bank is different, but there must be some ‘base’ calculation that I can use?Yeah, Terry if you can explain this in a way I can understand it, I will put a general calculator up on my website.
**********
Interested in Joint Venture Reno ProjectsOk, lets see
If income is greater than expenses, should be ok.
Income
100% of salary
80% of rentExpenses
amount applied for at 1.5% extra interest (PI over 30 years)
existing loan repayments
3% credit card limits
living expenses (approx $12,000 if single, $15,600 if couple + $2100 for 1 dependent)Some banks want income to be 1.25 times more than expenses.
Anyway, this is roughly how it works
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
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