You’ll want to chat to your accountant and FP about the best pathway – I’m not an accountant but it looks like you haven’t correctly calculated the CGT component.

There’s specific rules regarding putting the funds to super etc – with these kind of $$$ figures you’re best getting specific advice for your exact situation, instead of general advice on an internet forum.

Your intuition was right – the bank and broker are definitely being lazy at the expense of your structure/strategy/protection.

Best thing to do is set these up separately, with an equity release on the PPOR solely to cover the deposit costs and government charges and then a second application for a loan for the remaining purchase amount attached solely to the new purchase. The only reason why either party would suggest against this is because they can’t be bothered completing two sets of forms.

Depending how much equity is available, it could be a good time to even setup further equity funds from the PPOR if available, so that way the funds are sitting ready and waiting if/when you want to make any further purchases – I generally do this for clients so they can hit the ground running with any further purchases. I’ve written about structuring property purchase deposits before on our blog.

Hope this explains it – if you need any help let me know.

Professional loans with LMI waivers are still very much there – medico, lawyers, accountants are the main industries which qualify but there are a few other niches. You’ll generally have to be earning a certain amount to qualify for non-medico based professional LMI waivers.

The average interest rate for circa 30 years was near on 7%, however as the economy is maturing in Australia towards a lower inflation environment similar more to the US/EU, I think we’ll see this trend down. I believe a year or so ago the RBA was saying they think we’ll likely see this range dropping nearer towards 6%.

In the end lenders look at these higher interest rate figures no as they believe they are likely to hit that any time soon, but more that should such a situation arise that you can still indeed afford it.

Interestingly most lenders also don’t just look at the 7-7.5% servicing rates internally, but will have caveats that they will increase the servicing rate by 2-2.5% above what the borrowers actual rate is if that figure is higher – for example if you were borrowing at 5.25% today, the lender might say they would increase their stress test model from 7.25% to 7.5% to add a cushion of 2.25%.

I think step back and look at the investment first – if you could buy this property again based on it’s current price/figures would you? If not then that answers whether you should continue to hold it.

Sometimes it’s better to pull the bandaid off, taking the short term pain but opening up your ability to make better long term decisions.

Obviously compare this against getting the IP loan to a cost effective option – so that way you’re accurately comparing apples with applies, but as you’ve noted it’s very unlikely to get the cash flow position anywhere reasonable anytime soon, so you will want there to be strong potential capital growth to offset this.

Let’s say I’m a real estate agent. I’ve got 5 houses to sell at any one time.

One of them is a guy who thinks I clearly can’t get the best deal for him and has another guy to also market it.

I can either spend my time trying to sell that guys house whilst potentially have the other agent find a buyer first – or I can focus on my other listings where I know the effort I put in definitely will translate to getting paid.

Most agents I know would laugh at a lead trying to get a ‘dual exclusive agreement’ – aka a general agency.

They don’t split it, it’s generally the agent who sells gets paid – hence why the agents will generally not bother as they’re there to spend their time making money, not ‘maybe’ getting paid.

These concepts come up in many seminars/books by supposed big names to try make the concept of property investment seem more complex or fancy so they can justify their courses, books, seminars, training material etc, when in reality is that true wealth is generated through property by getting down to the actual reality of buying good quality property at the right time.

propertyboy wrote:

^my concern with taking use of these options is that the market will be artificially inflated and may contract once these options are no longer available to the market

Considering most 2nd tier and alternative lenders have been around for 40+ years if not longer I’d say the market is already priced in – this isn’t a new thing.

This is the very definition of being lead down the garden path.

The accountant is just making money off the referrals which in turn are funded by selling you overpriced rubbish apartments.

A quick look at poor rental growth, declining values of constructed apartments and huge supply issues with apartments should give you more than enough information to understand whether the accountant was giving you advice for your benefit, or theirs.

There’s a few pathways you could go down depending on:

*whether the property would potentially be a PPOR or an IP one day
*what you would like to keep the funds liquid for
*what your plans are for future investing potentially
*where the current PPOR is
*borrowing capacity/personal scenario

You could:
-release equity on your existing PPOR and use this to cover 100% of the deposit costs for the new PPOR
– use some equity and some cash towards new PPOR
– use all cash towards new PPOR and then release equity after settlement

Depending on what your longer term plans are will dictate what is the best pathway. Whatever you do – do not provide your existing PPOR as additional security to guarantee/cross secure your purchase – this is incredibly poor structuring which can leave you stuck with the lender and having to follow what they decide they want you to do in the future with your funds instead of you being in control. A lot of people who work directly with banks/some lazy brokers get caught out with this and can’t always untangle the mess.

Best bet would be to call/email an investment focused finance broker who can listen to your plans and formulate a strategy which will fit not only your needs in terms of buying the next PPOR, but also what flows on from then.