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  • Profile photo of Anthony_BlackAnthony_Black
    Participant
    @anthony_black
    Join Date: 2011
    Post Count: 4
    January 27, 2012 - 10:21 pm

    Hi Anthony_Black,

    ##### Hi Michael, thank you for your advice, most appreciated! Would you mind replying to some questions I have below please?

    As Richard mentioned; would need a bit more details to provide you with an exact borrowing capacity + is your fiancé going to be on the loan?? if so do she make an income etc….

    ##### My fiancé is going to be in on the loan. Although technically she is a student who works part time. This is her last year of uni however, so more help is coming. Not sure how the lender will view this though

    Just a few comments:
    1. What the agent says in term of your property value is pointless- get CBA / a bank to do a valuation on the place, since you haven’t done one for a while

    ##### I will organise for the CBA to do an evaluation shortly.

    2. Depending on your LVR; it may be worth while to stay with CBA given the LMI cost- but as Richard mentioned CBA has a poor serviceability model ; so it may pay to swap lender who are willing to offer a higher borrowing capacity OR higher valuation for equity release purposes

    ##### Am I right in guessing that once a broker has my details i.e. evaluation of the Mitcham property, he will be able to determine which course of action would be most suitable?

    3. Your accountant is a smart cookie :) Save up via the offset, your almost there…

    4. Saving up for a 10-20% deposit is not easy + it’s a slow process and property prices may have increase faster then your saving ability. So for your next IP lender it may be worthwhile NOT to go with CBA and choose one that offer a discounted LMI cost OR equity release from your current IP as much as possible ( equal balance)
    Sometimes it’s cheaper to do a 85% loan for one and another 85% loan for the other….COMPARED to 80% and a 90% Loan- find a equal balance based on cost- something a broker can calcu and work out for you

    ##### Pardon my ignorance, but would this also be something that my broker would be able to better advise me on once I get the evaluation done?

    5. Don’t cross your loans

    ##### What does this mean exactly? I read once that crossing my loans would be beneficial as if my situation was to turn sour in the future, bank # 2 could not take the money I owe from bank # 1. It would offer me protection. Or have I got this confused with something else?

    6. Since you get back 7k in tax every year…get a PAYG Variation done- so instead of waiting to see this money at the end of the year; you get to access it every month.

    ####%Ive been thinking of doing this. Hypothetically, if I was to go ahead and purchase a second IP of equal value to the first IP, would I be receiving two lots of approximately 7k from both houses as a tax return?

    Profile photo of Anthony_BlackAnthony_Black
    Participant
    @anthony_black
    Join Date: 2011
    Post Count: 4
    June 23, 2011 - 4:51 am

    You have very little in super at present and unless you have a smsf you can’t gain any form of control over it. However, if you were in position to, you would be only investing for the long term (at least another 28-33 years time) so it is a long time to lock away your money but the upside is it CGT free once you hit retirement age and income is concessionally taxed up until that time) – super laws change all too frequently so you probably wouldn’t go down that path yet….

    Firstly, thank you for your prompt and honest reply. Thank you for the above info, noted.


    2) Is your gf going to be a willing participant? ie will she join you in your investments, like your ex? This will add to your borrowing capacity. At present, you have around 20% equity in your current IP, the banks may allow you to redraw some of this equity to act as a deposit for your next property.

    My gf is a participant, we have a contract in place that my lawyer friend has drawn up. She has gone back to uni so her saving capacity is limited, however she is putting her savings into the offset facility. She is aiming to have contributed 20k by the end of 2013. We do intend on purchasing another property when she returns to FT work. I was just hoping to secure a property sooner while prices are cheaper etc, I am realising though that there appears to be no magic option than to keep doing what im doing and wait, which is ok.


    3) Is your current loan P&I or IO? Interest only will reduce your repayments (and increase your borrowing capacity) but in a stagnant/falling market will not get you far as the LVR may outstrip your equity, however this works well in a rising market but who knows when that is going to happen?

    It is IO.


    4) Why has your property only increased 40k in 2 years? It is more like $72k over 3 years  or just over 5% annually. Markets do move but are not necessarily as apparent or volatile as equities, as the only time you know how much you are going to make on a property is the day you sell, you may be on a rollercoaster but won’t realise it because you are not in the market.
    I am opinionated. Take me at face value, read between the lines.

    I see your point, thank you for this perspective.

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