Hi all,
Before I pop into my question, I’d like to say thank you all that have contributed to this treasure trove of a forum. I’m a newbie to property investing and would like your opinion/advice. This relates to me and my girlfriend; we’ve just bought a PPOR together about 6 months ago:
PPOR: 365,000 (P/I Loan w/ Redraw)
Owning: 275,000 (including 20% DP)Reading through the forums, I now understand that we’ve made a ‘mistake’ in going for P/I instead of I/O Offset. We’re looking to get an IP and I believe that there are opportunities here to re-structure.
I’m thinking of a REFI to raise cash for DP on an IP and also to switch to an I/O offset. My question is, say for example our PPOR is valuated at 400,000 by end of this year, how much can I raise from the REFI bearing in mind avoiding LMI? Can a REFI be more than the valuated amount? Would it be a better option to be looking at HEL or HELOCs?
Thanks,
Jon26.Hi Jon
Welcome to the forum and I hope you enjoy your time with us.
Only look to switch your current loan to IO if you believe in the distant future you might rent the property out and then look to buy another PPOR. If this is never likely then P & I is not a crime.
In regards to going forward i am slightly confused by the wording of your post.
You say that you are owning $275,000.
If you mean Own $365K – $275K i.e 90K then i cant see a problem.
If you actually mean Owe $275K then you will more than likely incur LMI where the LVR is over 80%.Might be a couple of ways to reduce or get around this but in the main it is a cost of doing business.
Good luck on taking the first step in the IP world and look forward to reading further posts.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Jon,
If you are new to investing one of the most valuable allies you can have is a knowledgeable, investment focused brokers. One of the best has already given you some advice, I strongly suggest you give Richard a call and get some more benefit from his knowledge and experience.
Regards
AlistairHi Richard,
My mistake. I meant Owing NOT Owning.Yes, we are also looking at converting our PPOR to an IP; so probably switching to an I/O is the way to go.
Yes, I am quite concerned about forking out more for LMI; I would really like to try to avoid it if possible. As you said after REFI to a value of 400,000 and LVR 80%, 80,000 has already gone into avoiding LMI, leaving a measly 10,000. Is this how its calculated?
Perhaps I should be pumping more into the PPOR until there is enough there to cover LMI and raise enough (while reducing interest) for a DP after REFI?
Thanks Richard again for your prompt reply.
Hi Jon,
Dont pump more into the PPOR directly but rather keep it in the offset ( if you have one) , having cash is more beneficial then equity, also as you mentioned this PPOR will become your new IP …if that’s the case pumping cash into it wont help your cause.
Rough Cal on how much equity you could access at 80% , avoiding the LMI:
Loan : 275k
Current Value- $400At 80% – you have $45k to play with.
So the question is, how much cash + redraw do you have??? once you add this 45k into your savings do you have enough for a 20% deposit + stamp duty etc.
Note: 85% LVR with no LMI are available, but not for Refin…just new purchases.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks for that Michael. Clears up a little bit of misconception on my side. I take your point on not pumping into PPOR directly but into offset. Unfortunately, we opted for P/I with redraw.
On the question of cash+redraw, I would say not enough at this point in time. (or at least for the value of an IP that we’re after) Thanks guys. Will definitely consider all the points you raised.
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