Deposit?

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PropertySeeker
Participant
@propertyseeker
Join Date: 2006
Post Count: 43
January 18, 2007 - 1:38 pm
Hi All,
i recently bought a $300k home and now thinking of purchasing an IP. i have a saved up a abit of cash for a deposit. however i have read that i can use equity in my current home? would this be better than using my cash?
Thanks
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
January 18, 2007 - 1:53 pm
Yes certainly using equity in another property and borrowing 100% + costs would be better than using you own cash which can be used to better effect.
In saying this ensure that you structure your loans correctly to avoid your lender X collaraterilsing the loans as this could certainly slow you down from moving forward in the future.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
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duckster
Participant
@duckster
Join Date: 2004
Post Count: 1,674
January 19, 2007 - 4:06 am
Enquire with your current lender about a line of credit and make sure it is only used for an investment deposit rather than for purchasing personal items like cars, boats, pools, extensions on ppor., ect. Instead use it for creating equity in next loan. A line of credit is called a portfolio loan at St George Bank so it may be a different name when you enquire with the loans officer at the bank.
Consider using your savings as a large repayment on your non tax deductible home PPOR loan and thus increasing the equity to borrow against. Or maybe using an offset account on your home loan as another possible method of reducing your non tax deductible house loan.
Cross colateralisation has the risk of losing all your houses if one of your house investments doesn’t work out.
You may need to ask your accountant if you need to setup a trust to buy the second property in the name of the trust. If asset protection is important to your requirements. it is difficult to negative gear through a trust and the bank may not lend money to a trust.
Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.