This may seem ridiculous but we are wanting some advice on our current situation.
We have our PPOR valued at $560000 with a Mortgage of $370K and $50K LOC with $8k available.
Last year to help out a relative we bought their House for $230K with an Interest Only loan for the purchase price of $230k. Property is now valued at $260k. Rent $260 p/w and is negatively geard. We are short approx $70 p/w excluding rates and water.
We have approx $170k in equity, however our lending capacity in terms of serviceability is basically at its limit and our Bank is reluctant to lend to us.
My question is: we need to keep searching for +cashflow properties and am considering now units/ holiday resort units and retirement villages. I am keen to get feedback from other people in a similar situation or advice as to what potential strategies we could consider. I look forward to and appreciate your replies.
Hi there
Remember not every lender has the same criteria and some are a lot better when it comes to serviceability than others.
With carefully restructuring you may find that you can raise substantially more funds than originally though.
First thing i would be doing is getting your IP on a standalone basis.An obvious case where X collataralising is working against you.
Would need more information to make a valued decisions.
Richard Taylor | Australia's leading private lender
Hi Richard,
What do you mean having the IP on a standalone basis?
At present it appears your current lender has the loan secured against the IP cross collateralised over your current PPOR as well which is a common trick tried by the Banks when you ask to borrow 100% of the IP purchase price and where it is not structured correctly.
If the investment loan was secured against the IP on its own it would mean that you could access the equity in your PPOR for your next purchase.
Fear not inexperienced mortgage brokers and Bankers alike have no idea so they recommend what you current have and this is when problems arise.
Richard Taylor | Australia's leading private lender
Hi Richard
Thank you. Does this mean we simply request the Bank to release security over the PPOR and have it now "standalone" on the IP. Sounds too easy – but I am assuming there will be some hoops to jump through and expenses incurred. However, if in the long run this is wise – I will make the enquiry.
Regards
DamienHi Damien
Yes it isnt that easy now.
It won't make any difference on your serviceability if you stay put.
You are probably better to take the whole deal to someone new and establish it properly from Day 1.
Otherwise you are probably just digging a bigger hole for yourself in the long run.
Richard Taylor | Australia's leading private lender
If this is such a comon strategy used by the banks, whats the comon solution and why aren't the banks out there in the market chasing stand-alone converters? Interesting situation to be in shifting your business from a big bank.
I would consider putting some of the equity into a managed fund that distributes good quarterly income (eg Navra Australian retail fund) . The income from the fund can offset the holding costs of negative geared property, as well as offsetting LOC interest and margin loan interest.
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