Hi there everyone!
I have just placed a deposit on a property which will not be completed till at least december ’11. (off the plan) for $630,000. I plan to sell my unit that I live in for approxiamately $400,000 and get finance of $170,000. I have another property which I have $274,000 owing on (Interest only). Currently rented for $400 a week.
I have been advised by friends to sell both properties to finance the $630,000 but I don’t want to do this. On off the plan is it difficult to get banks to agree with finance? If I sell both properties I think I will will be taking a BIG BACKWARD STEP. If need be I would be prepared to let the new property out.
Does anyone have any thoughts on the best way to go forward from here?
Cheers!
Hi Stately
Unless it is more serviceability based there would no need to sell either property.
Lenders wont care that you have sold an asset in order to use the funds as deposit for another property.
With regards to finance more of a matter of coming back in a 18 months time + and looking at an application as lenders wont hold a pre-approval over for that lenght of time.
Just make sure that the property is likely to value up to the purchase price as OTP properties can be notorios at not doing do.
Richard Taylor | Australia's leading private lender
Its still a long way off, so why not wait it out a bit longer.
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
Hi Richard,
Thank for your reply. Firstly, My concerns with just going to a bank to get an extra $570,000 I would think are near impossible taking into account that I already have a loan of $275,000 IO which is at the moment positively geared, until the interest rate start rising above 7 percent. Then it will go into negitive. If I were to let the new property out it will probably bring in $550 a week being $29,000 annually but the debt on that would be $43,000 @ 7.5%, a differnce of ($13,750). However, I could let all three properties out, then I think the rents would pay for the Loans but just. A bit of a gamble.
Yes I understand about banks not holding preapproval for that long. I am not sure that that the property will be finished in two years either. Another gamble I took.
And in regards to the property maintaining it cost value or increasing in value by the time that it is completed is another gamble. I base the value on a block of apartments across the road similar to what I believe would be the condition of the new place. And I always believe that banks are conservative with new buildings.
I do plan to wait out another 12 months at least before going to seek a loan. Just trying to cover my tracks and be prepared. In the mean time I think that it might be a good idea to let this property out that I am living in so that the income is shown on the record.
Any further advice is appreciated.
Thanks for you advice Richard
Cheers
You don’t need to let your property now for a record of the income. If you let it at the time you just give the bank a copy of the lease.
This is the hardest finance market I have seen in 20 year. By the time you have to settle the market should be a lot better. You should wait until you are closer to settlement. What the worst thing that could happen your properties might go up further in value.
Nigel Kibel | Property Know How
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Hi Nigel,
As you say, it’s the hardest finance market in twenty years. I do hope that the market is a lot better when it comes time for me to settle. About six, seven moths ago I was using online calculators to see how much I could borrow and I did the same about a month ago using the same numbers etc only to find that I could borrow around only 70% of what I could borrow back then and thats a big drop, and if you think about that we were in the middle of the GFC.My hope is that property prices keep rising by at least 5% over the next couple of years.
Cheers!
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