Hey guys I just found this site today and have to say it looks like a great resource.
Anyway a bit of background info i got into the property market about 2 years ago. Built a 3BR house about 30km from the Melbourne CBD with my partner using the FHOG. We lived in it for the 6months required and we have been renting it out ever since (About 8 months).
I found investing in property really rewarding and would like to keep at it. I was thinking this time of buying an apartment closer to the city (Brunswick, Carlton etc.) I have heard good things from people who have invested through ‘John Hopkins Property.’ Does anyone here have any experience with them?
I guess what im after if just any helpful advice from people who have been through this before, and what they would recommend.
Of course you cant really give clear advice without the figures so here they are-Current Investment Property:
Built in 2008 for $300,000
Current loan amount: $255,000
Amount in Offset Account: $16,000
Mortgage Repayments @ 5.96%: $355 pw approx
Weekly Rental Income: $330pw
I am currently living back at home with parents so there are no other major outgoings at this point in time.My Loan is currently P+I and in the short time that i have looked through this forum i have notice that i should really change this to interest only.
Is this a hard or costly thing to do?One again guys any advice is much appreciated All I really need is a push in the right direction.
-John
Sounds like you may be with ANZ?? Just give them a call.
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
I assume you mean in regards to the P+I thing. Yeh ill give them a call tomorrow i think.
Thanks.Yep, you should really change it to IO.
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
A change to IO with Anz will mean a new application and may incur additional or new LMI costs depdning on the current market value.
One of the pluses with Anz is that your Mortgage Broker can order the valuation for you upfront to see how viable it is prior to submitting the deal to the Bank.
Richard Taylor | Australia's leading private lender
Richard,
Just clarifying regarding the up front valuation ordering.
If the deal goes ahead, then the client pays for the valuation right? And if it doesn't then the broker pays for it?
I think Homeside do that now too
not with ANZ. Free under the package.
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
Yes exactly as Terry mentioned 3 free valuations a year under breakfree.
If it client does not proceed the Bank wear the cost.
Under Homeside it is the same for 4 star Brokers.
Richard Taylor | Australia's leading private lender
I just rang ANZ and they said i will have to go into a branch to change it to interest only and it will be something like $200. I will make an appoinment ASAP but does this sound accurate?
In regards to the investment aspect of my post, any pointers?-John
Sounds right. They will need to see all proof of incomes etc again. While you are at it tell them NAB have offered you 5.79% and you may leave if ANZ can't match.
Make sure you get the loan IO for as long as possible, 10 years I think, and with the offset account attached.
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
*smirk* Nice one Terry.
I already have a 100% offset account attached to the which all our savings go into so i assume i will be able to keep it with IO.
Is it the general consensus that Money in the offset account should not be used directly to buy other IP’s, and instead use the equity of the current ones as deposit?
Would it be a good idea to keep loading up the offset account as much as possible to be used as a large deposit on a PPOR in the future?Thanks Terryw and others for the info by the way it means alot.
-John.
Hi JOhn
Yep, keep saving into the offset if you have no other personal debt. Then ideally you will have a larger deposit for the PPOR when you do buy it.
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
Hey guys i have been scoping through other posts gaining knowledge etc and i have come across posts saying not to X-collaterise loans etc.
Im guessing to maximise tax benifits. My question is, is my circumstances (see top) if i wanted to use the equity in my 1st IP as deposit for the 2nd IP, how do i physically go about obtaining it? Is it actually Added onto the 1st loan and taken off the new loan? Or is it more like a guarantee that i have the funds available?
Also a question for those with multiple investment properties (likely many of you) Do you try to stick to one lender to keep things organised?
If not, how do you manage things efficiently?
Thanks again guys and sorry if it looks like im asking too much to quickly.-John.
Yes, never cross collateralise. There are many reasons – but tax isn't one of them.
What you would do it to take out a separate loan on the first property and use that for deposit for the second.
eg. $100,000 House with $50,000 loan (Loan A)
80% value is $80,000
You you take out another loan for $30,000 (loan
Total loans = $80,000
LVR 80%You then find property B
Use $20,000 deposit from loan B
and borrow the remaining $80,000 as a new loan, (loan C).You have borrowed 100% for the second property but without cross collateralising the loans.
The interest on Loans B and C would be tax deductible as they have been used for investments.A few years down teh track Property A has increased to $200,000 so you can take out loan D up to 80% less the existing loans = another $80,000.
repeat the process.
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
What would happen to repayments when you open loan B? Would it increase the repaments on loan A or Would it be structured as its own loan With its own repayments?
The thing with my current investment loan is i have equity in the form of the value of the asset, but in terms of the actual loan it is currently at 255,000 whereas the original loan amount was only 265,000. Let me Explain a bit better:
IP Value: $310,000 – $330,000
Starting loan amount: $265,000 (We saved a decent deposit)
Current loan amount: $255,000What im getteing at is we have only reduced the actual loan by $10,000. Does this matter or is equity the same regardless how much you have paid off? I have money in an offset account but wanted to keep that when when we buy PPOR.
Sorry again I just need clarification of how it is all structured.Loan A and B have no connection. Just think of them as being 2 loans at different banks. Loan B can be a LOC so you will only need to pay interest when you take the money out.
In your situation,
$330,000 x 80% = $264,000
Current loan = $255,000
Available equity = $9,000This is assuming you stay at 80% LVR – you obvously started much higher .
So to get a separate LOC you would have to restructure the loan to lower the limit to $255,000If you wanted to keep the redraw available you would have to do the calculations on $265,000 – or whatever the limit is now.
Because your LVR is relatively high you would need to wait a bit longer to do this.
I agree it is not good to pay down the loan if you are thinking of renting it out. Keep the cash for the PPOR.
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
Hmm maybe i have misunderstood how equity works.
My initial thinking was that Equity: 330,000-255,000
=$75,000Are you telling me that in actual fact its only $9000?
I was hoping to buy another investment in the coming months. Is this not as attainable as i thought it would be?
Thanks again for the help terryw. You seem to be one of the ‘go to guys’ around here.
Just as a bit of extra info i was looking at getting an off the plan unit from the John Hopkins group. They require 10% upfront although the place maybe be a year off completion. My first thought was that i would just take that 10% (between 30 and 40k) straight out of my current investment loan. I am still a little confused as to where this new information leaves me. Sorry to be a pain.
The equity is 330,000-255,000
=$75,000But you cannot use all of it. The banks will only lend a certain %. ie LVR.
They will generally lend 80% without paying LMI
or you can go up to 90% with LMITerryw | 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
80% of 75,000=
$60,000Please excuse my ignorance but what is the $9,000 you posted above?
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