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  • Profile photo of rabbierabbie
    Member
    @rabbie
    Join Date: 2005
    Post Count: 1
    October 14, 2005 - 3:38 am

    I would appreciate some advice on the following.

    I have 2 properties and 1 block of land at the moment. (South of Perth)

    I live in one house, which is mortgage free and under offer at the moment which will provide $350K to use to build on the block. ($320 build costs for the block)

    The rental and block are mortgaged. Rental is negative geared. There is approx 80K of equity on these two with a mortgage figure of approx $550K

    The rental and block are secured against the mortgage free property.

    My question is what is the best way to fund the construction on the block. Should I pay down the mortgage with the proceeds from the sale, and remortgage for the construction, or fund the construction from the cash at hand?

    The bit I don’t understand is the security on the rental and block against my home. Once this is sold I’d expect the bank to want me contribute some of that back into the existing mortgages.

    I am about to meet up with a Finacial adviser, but need to be prepare and understand the issues before hand.

    Any help/advice appreciated.

    Cheers,

    Rabbie

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    October 14, 2005 - 10:05 am

    Hi Rabbie

    A Financial Adviser will not accurately be in a position to discuss with you loan structuring so you are always better to consult a mortgage broker for this.

    You mention that the IP and the vacant land are mortgaged and that the PPOR is the security. When you sell the PPOR the lender will require either:

    1) The loan repaid.

    2) A substitution of security to the same value to fit in with the lender LVR ratio requirements .

    3) Possibly lending against cash security.

    Is the new construction property going to be your new PPOR. This is important as it will reflect on your decision for 1 – 3 above.

    If you care to email us the answer we can take it forward for you.

    Out of curiousity i would be interested in what your Fin Planner has to say.

    Cheers Richard

    [email protected]
    http://www.yourstatefinance.com

    Specialising in US & IP finance.

    Richard Taylor | Australia's leading private lender

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