I have recently constructed two houses. One is complete and is tenanted, the other will be completed in a couple of weeks.
Due to some increases in prices the loans I have approved will not cover all the costs of building the second house.
I am in the process of refinancing the loan for the completed house, and I am wondering on the best way of structuring the extra funds (should the valuation come in high enough).Basically my situation is:
House 1 – Cost $355000 to build (including land cost). Loans total $310000. Tenanted for $340/wk.
I am waiting for the bank val but expect it to come in around $370000, so 90% LVR for $370k is $333k so hopefully will have
about $20k to play with.House 2 – Cost $390000 to build (including land cost). Loans will total $350000. No rental income at the moment.
The problem is that the loan will be about $20k short to cover my bills.So what is the best way of borrowing the money? LOC? Or just increase the existing loan?
I have no savings and credit card is already getting hammered, thanks to having to keep on top of building costs (the bank are taking a while to release progress payments) so I will need to borrow to pay the builder.
Any help will be much appreciated.
Should have also mentioned I don't own a PPOR. Currently renting.
Doggity, you are on the right track already.
The product choice should be determined by how you will use the account.
If you want the flexibility to pay in lump sums and draw funds as required, go for the LOC. The cost for this convenience is a slightly higher rate.
If you want a lower rate, choose a more basic loan. ( or one of each ). Most basic loans have very good redraw and IO options, so it will still do the job, just not as conveniently as the LOC.
Cheers
You are just increasing one investment loan to pay another. And the increase is a small amount, so it may be easier just to increase the existing loan. At tax time the interest may need to be apportioned between the 2 properties, but, if the loan is IO it should be easy to work out. If you get it wrong, you won't be paying any more tax anyway.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for you help guys.
I thought I was on the right track but wanted some other opinions.
Cheers.
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