Hi all,
I just want to ask anyone that has ever dealt with 105% LVR loans for an IP.
I’m just doing my research at the moment and wondering what the PROs and CONs are?
One issue i have is cross collaterisation with another property as security.
Can u have a 105% LOAN without the security of 2 properties?
Your help is much appreciated.
Vluu75[biggrin]
I am interested in knowing why you would want to do a 105% loan for an IP??? I am not sure I understand your logic? Can you please explain to me…
cheers DiSome non traditional enders will lend up to 106% LVR, most no deposit loans only up to 100%.
Be aware however, the costs for LMI to borrow this much. The lender may charge you up to 3.5% (most likely >2%) premium to protect themselves aganist the risk of lending you this amount.
So on a $400K property, you’re looking at $14000.
In, addition, No deposit loans usually have higher interest rates (up to 9%) as well as early repayment fees like 1.5% in repaid in first 3 years.
Your better off:
1) Saving a deposit of at least 5% in order to avoid such high premiums. n.b. LMI will always apply for LVR >80% but as the LVR rises so does the premium % rate especially over 95%.
2) Take a family pledge loan offered by St George Bank & CBA.This allows you to have an immediate family member as guarantor for the 20% deposit and will allow you to avoid LMI. Obviously, there needs to be enough equity in your familt members property. n.b. st george prod allows you to drop guarantor if you build enough equiry or wish to pay LMI in future, CBA product does not.
3) Cross-collateralising with another property in you name.
It sounds like you may have no initial outlay and need $ to pay for stamp duty and legal costs. In which case you will have to assess the risk of whether you will receive a return, when etc. considering the extra costs you will be up for.
It is very risky, but if you are confident that you will receive good capital gains over time and you can afford repayments or positvely geared than it might still be worth it with all the extra money you will pay.
Curious- where you looking at purchasing?
Good luck. Happy Hunting!!![cowboy2]
Once again ???? this all sounds very nice and rosey …
OK giveme an example of a real property that will perform to your committments … what would the investment property have to do inyour perfect world to achieve your outcomes???
Remember the 3d’s
Property does not go up in value every year
What is your fall back position
Is this a strategy that experts are doing now or just an idea
Note; if the numbers don’t work, don’t rework the numbers
D – i’m not being negative on this however this sounds like a out there type of deal and we know these seldom materialise …good luck
Hi All,
Thanks very much for your reply…
To answer some questions, no i do have 10% saved plus stamp Duty ..the reason im looking at 105% loans is i want to keep my cash for a rainy day or as a buffer just in case something happens..ie Loss of income,Loss of rent and use all of the banks money instead of my own. Thats why i was looking at 105% loans. However having said that maybe it doesnt look to much of good idea anymore.
[blink]
Hi Vluu75
You will also find there are a number of limitations imposed on the very high products. Most will only lend against properties in metropolitan regions excluding CBDs, high rise, most country towns, and certain types of properties.
The employment requirements are also higher as is also serviceability requirements.
And, many lenders that used to offer 105% products no longer do so. Once upon a time, like when the market was screaming ahead, some of the risk was covered off by the expected increase in value. Now the market has slowed or stalled, these loans are even more risky than they used to be so many lenders have stopped lending at 100% or greater.
How soon are you going to need your rainy day money? Can you factor additional savings into your investing plan so that you again build up your buffer over the next couple of years?
Mum
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