All Topics / Help Needed! / IP or Mortgage

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  • Profile photo of cremonecremone
    Participant
    @cremone
    Join Date: 2008
    Post Count: 2
    March 17, 2008 - 10:44 pm

    Hi All

    We are currently tinkering around with the idea of getting an investment property.  Our situation is such that we have signed up to build a PPOR which will start in Jul 08.  Our home loan for that property is $340k @ 8.55% (80% loan).  The deposit (20%) is now ready and available.  In addition, we are expecting another $150k of funds in the next few months.

    I have asked a mortgage broker and was told that i can get another loan of $350k for the IP.  He is not aware of the $150k funds at that stage.

    Questions i have are

    1.  Is it worth using part of the $150k as a deposit for the IP or is it better to pay off the mortgage
    2.  Any idea how much can i borrow for an IP ? I would like a 2nd opinion.

    Any help would be appreciated.

    Thank you

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    March 17, 2008 - 11:18 pm

    Hi Cremorne

    Certainly do not use your own funds as a deposit on an investment property whilst you have any personal debt.

    Couple of ways would be to either deposit the $150K into an offset account and save interest on your PPOR or alternatively pay down your principal and then take out a new loan to use as deposit on the IP.

    Try and avoid cross collateralising the 2 securities.

    With regards to the answer as to how much you can borrow without a lot more additional information it is difficult to make such an assessment.

    Richard Taylor | Australia's leading private lender

    Profile photo of cremonecremone
    Participant
    @cremone
    Join Date: 2008
    Post Count: 2
    March 17, 2008 - 11:59 pm
    Qlds007 wrote:
    Hi Cremorne

    Certainly do not use your own funds as a deposit on an investment property whilst you have any personal debt.

    Couple of ways would be to either deposit the $150K into an offset account and save interest on your PPOR or alternatively pay down your principal and then take out a new loan to use as deposit on the IP.

    Try and avoid cross collateralising the 2 securities.

    With regards to the answer as to how much you can borrow without a lot more additional information it is difficult to make such an assessment.

    Thanks for the reply.

    We will planning to put the fund in an offset account while deciding what to do with it.

    Can you elaborate more on "alternatively pay down your principal and then take out a new loan to use as deposit on the IP." Are you referring to a LOC type of loan ? If so, won't taking out an LOC against the PPOR as deposit for an IP create a cross collaterisation scenario ?

    Thank you

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    March 18, 2008 - 1:50 am

    I agree with Richard.

    By redrawing or setting up a LOC  on the main home you will not be cross collateralising because the deposit will come from this loan only, the actual title will not need to be used as security for the new purchase.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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