Guys,
I am in the process of getting my second IP and trying to figure out best way to structure ever important finance.
Facts:
First IP bought 151000 current market around 170k; owing 119000 on it.
Second IP will cost around 150000; have 30k cash for 20% deposit + 10k cash for costs.
As I see it I have few options:
1.
Let bank reevaluate my first IP for hopefully 170k. That will get my instant equity of 51k. For safety I will stay on 80% LVR there (34k) and use new equity of 17k + cash of 30k towards my second ip (loan there than 103k).
This would leave me with:
TOTAL loans: 136k+103k = 239k
TOTAL equity: 34k+47k = 81k
LVR: 75%2. No re-evaluation and use the 30k cash as 20% deposit for 2nd IP. That would leave me with:
TOTAL loans: 119k+120k = 239k
TOTAL equity: 32k(on “book value” of first IP) + 30k = 62k
LVR: (against “book values”) 80%Personally I like 1st option mainly because it seems like may baseline actually moved a bit.and LVR is also seemengly lower (on the paper anyway).
However I am not certain how hard would it be to get reevaluation on 1st property given that I only bought it 7months ago.There may be another obvious option I havent thought of; I would apreciate if you could point it out to me.
Thanks for help
Dan
Now re-reading it after myself both options seems ultimatelly almost identical in their outcomes so maybe I just make too much fuss for nothing.
Pls let me know anyways.
Hi Dan
You don’t mention that you have a loan over your PPOR so we will assume that is a NO.
Why not:
1) Get your lender to revalue the 1st IP assume $170K and then taking the purchase price of the 2nd IP of $150K gives you total security value of $320K.
80% of 320K = $256K less existing loan of $119K gives you additional borrowing of $137K. If you put in the $13K to cover the shortfall and cover your own acquisition costs then deposit the balance of your savings in a linked offset account.
This will give you immediate access to your funds as well as saving you interest on your IP.
With that level of borrowing you should be able to negotiate an attractive rate and package.
If you need a hand email us.
Cheers Richard
Ph: (07) 3720 1888
[email protected]
http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Hi Dan,
In your situation i would have the current property revalued, take out the 17K to use as part of the deposit, borrow 80% of the price of the new IP and stick your remaining cash in an offset account.
By doing this you will still have some cash readily available for further purchases etc. and it will also put your total borrowings over $250K which, should qualify you for a greater discount off your interest rate.
Regards
AlistairOk than but how is it with having new valuation done on my first IP? How long does it normally take and cost?
Also my mortgage broker didnt really seem that keen on getting my first IP revalued as apparently bank (ANZ) may be bit difficult on properties held shorter than 12 months. Is that really so?
Hi dan_76
you haven’t posted the structure you have or you are buying in that would also help.
my advice if your broker isn’t to hot get a new broker and see what they thinkhere to help
Ok so I got off my lazy backside and instead of asking you guys here for everything (thanks for patience btw[cap]) I spoke to ANZ mortgage folks who were very helpful and provided following info:
Two types of revaluations:
a) kebside – based on the values of similar properties in the area; less expensive
b) full – evaluator will make full inspection of entire property inside out; suits best to after reno revaluations etcApparently either valuation will only take about 1 week to complete. If done by the bank (well at least in ANZ) as part of new loan application its free of charge (…um well direct charge anyway[biggrin])
Pls feel free to correct / add more info.
Hi grossrealisation,
well at this stage there is not much structure to it as I only have 1 IP so far (as per previous posts) financed by ANZ’s “Money saver” product (.6% of standard variable, interest inly with redraw, no offset).
To my disappointment, I only recently learnt that redraw will not exactly work the same way the offset account does (as the tax implications of either are quite different).
So now I would like to fix that while borrowing for my 2nd IP.
As to my mortgage broker – I am trying to establish “my team” and build some kind of long term business relationship with him, but not sure if he also sees it that way instead of chasing highest commissions….something for me to think hard about I guess.
Dan
LVR in both your original scenarios would be the same – I think you realised this.
And I agree with Richard’s approach. Maybe you could take ANZ’s standard rate for the new loan and get the offset account on that one. You could also approach them about switching over the original one too and maybe going onto their professional package.
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
Terryw thanks for your replies.
Um…..well the first one got me puzzled but the second one put it all back into prospective.
Cheers
Dan
Hi Dan,
The offset is a good idea, ANZ will waive there $10 per month offset fee under there break free package however, based on your level of borrowing I think paying $295 per annum in fees for an offset and a discount rate of 6.72% is a bit rich,An alternative may be the St George pro pack @ 6.62% with an 100% offset and $132 per annum in fees. Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Originally posted by Mobile Mortgage:Hi Dan,
The offset is a good idea, ANZ will waive there $10 per month offset fee under there break free package however, based on your level of borrowing I think paying $295 per annum in fees for an offset and a discount rate of 6.72% is a bit rich,An alternative may be the St George pro pack @ 6.62% with an 100% offset and $132 per annum in fees. Cheers.
Steven,
Its exactly as you say, however $295 pa apparently cover the loan applic fee (normally $600) and monthly fees to both my mortgage and everyday accounts and yearly credit card fees (as you know credit card is a compulsory part of their Breakfree package not something I am really that keen on).
So I guess $295 yealy would save me now $600 plus say $72 (6 * 12) of account keeping fees every year so I will only start losing money on this fee by yr 3 and only in case I wouldnt apply for anoter mortgage. Seems like I fall for all their marketing gimmics doesnt it?Whats quite annoying here is that my mortgage broker never told me about equivalent St George package and now (with ANZ preapproval in my pocket) I am already in full IP buying swing.
Thanks for your help
Dan
Hi Dan,
St George currently has a nil application fee, this coupled with the lower rate and fees takes the gloss off the ANZ break free package, Cheers.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
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