Hi Everyone,
I was hoping some knowledgeable person/s might be able to share some light on the following scenario which has me frankly baffled to make a decision (if your bothered to read the entire thread) to buy off the plan or save a little more and buy a house.
We have I.P approx $30k equity (but prefer not to use this to refinance UNLESS absolutely necessary)
$30k cash savingsWe want to buy off the plan, property is $380k, will rent for around $430pw. Now we need to provide 5% ($19,000) deposit and the rest on exchange which is likely to be 2013 sometime. The kicker is that we dont know if in 2013 we will be still able to get pre approval because we are moving back home in the next few months.
– will the pre approval last from now until settlement in 2013, or will we need to do another pre approval 3 months or so before exchange,
– How does guarantor work, if we used parents equity $650k property nothing owing how can we use this to our advantage.
– How does mortgage insurance come into play, is it another 5% which you basically never see the money again?
– Is there anything I am missing in this situation which should be considered, extra cash I need etc? Aside from of course stamp duty?Sorry if this is stuff straight from investing 101, but its causing me a bit of stress and just trying to toss up if we should just keep trying to save when we get home and then be able to buy a house there (expensive town) instead of this off the plan scenario?
joeandchels wrote:will the pre approval last from now until settlement in 2013, or will we need to do another pre approval 3 months or so before exchange,Correct. You won't be able to obtain formal approval until closer to settlement – generally 3 months out.
joeandchels wrote:– How does guarantor work, if we used parents equity $650k property nothing owing how can we use this to our advantage. –Your parents (if willing) could guarantee a portion of the loan (say 25% to cover deposit and costs). You won't have to pay LMI but you will still need to be able to demonstrate that you can service the loan.
joeandchels wrote:How does mortgage insurance come into play, is it another 5% which you basically never see the money again? – Is there anything I am missing in this situation which should be considered, extra cash I need etc? Aside from of course stamp duty? Sorry if this is stuff straight from investing 101, but its causing me a bit of stress and just trying to toss up if we should just keep trying to save when we get home and then be able to buy a house there (expensive town) instead of this off the plan scenario?You generally pay LMI if your deposit is less than 20%. You can usually add it to the loan (so don't have to use your own cash). If the OTP property is going to become an IP then the LMI will be a deductible expense.
Tread carefully with OTP – do your research and be reasonably confident that you can arrange finance when the time comes. Because if you can't, you run the risk of relinquishing your deposit.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Why use your parents unencumbered property as security/guarantor when you have equity in your IP?? it doesn’t make sense to me; the risk are much higher and not needed in your case.
OTP as Jamie mentioned; has it’s benefits and risk- so def do some research + make sure you are stable enough in terms of your job and lifestyle in general to make sure there is not a significant change in your financial when it comes to 2013; some common problems that cause finance to fail with OTP.
– Marriage break down
– Kids
– Job change
– LMI rejection
– Financial stress
– New credit cards/ liabilitiesWith OTP the MAX LVR is 90%; but i would only encourage a 90% LVR if your situation and job is quite stable.
Also lastly if you go ahead with this; consider a deposit bond rather then using your own funds.Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks for the input guys.
I think we are leaning towards it being a no goer.
Looking at this 'deal' – too tight for my liking.
Not a lot of leeway in your finaces, looking at with LMI involved lend and OTP to boot.
Mortgage insurers may find themselves to be 'over exposed' in the development and thus your finance may be declined at the end after having gone 'unconditional' approximately 2 yrs from completion. Throw in moving back home, an unknown property market in two years time, potential for valuation problems OTP with limited cash/equity reserves would make this deal not worth it in my opnion.
Yeah Derek thats the conclusion I have made too…. someone else can have the property lol.
In 2 years time…go to Doman.com.au and i can be 100% sure if it’s a massive development ( over 40 units) then there will be at least 3 up for sale! 3 month before completion and after…and it may be cheaper too ! lol
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Shape wrote:In 2 years time…go to Doman.com.au and i can be 100% sure if it's a massive development ( over 40 units) then there will be at least 3 up for sale! 3 month before completion and after…and it may be cheaper too ! lol Regards MichaelYep, that's when it's time to snag a bargain
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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