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  • Profile photo of Henry AdamsHenry Adams
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    @henry-adams
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    September 11, 2011 - 10:02 am

    Richard and Jamie,

    I am with Bankwest now and just wondering if what I’m doing is right.
    I have been told by the mortgage broker that i will not need to pay the fee for valuation suppose the value of my home is lesser than what I need to borrow. If it is more then the cost will be capitalize in the loan.

    Profile photo of Henry AdamsHenry Adams
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    September 11, 2011 - 12:43 am

    Yes, I’ll check that with Bankwest, because my current loan is just Home (P+I) Loan not the investor IO loan.

    Profile photo of Henry AdamsHenry Adams
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    September 11, 2011 - 12:23 am

    Cool, Thanks for the reply JacM

    Profile photo of Henry AdamsHenry Adams
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    September 11, 2011 - 12:22 am

    I’m with Bankwest and yes I’m still on the special rate (1% discount) until june 2012
    So I was wondering if I should be paying for the valuation or it should be no charge at all.

    Thanks for the reply Terry and Richard.

    Profile photo of Henry AdamsHenry Adams
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    September 11, 2011 - 12:18 am

    Richard,

    Thanks for the advise, from my understanding is that the broker told me to pay for the bank valuation fee if the value of my property has gone up greater than the buying price. So if it doesn’t then I do not have to pay for any fee.

    Profile photo of Henry AdamsHenry Adams
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    September 10, 2011 - 3:44 pm
    JPS25 wrote:
    Hi Henry

    I think your bank would have to do a bank valuation and you are more than likely going to find that it will come out lower than an RE valuation. Before you assume too much and start looking I think you would be better off talking to your bank first as to what your lending critteria may be. A lot will depend upon your servicability as much as equity.

    JPS25

    Hi JPS, yes I’ve just contacted a mortgage broker and they told me to prepare to pay $350 for bank valuation so that I can use the current equity (from the Bank valuation price – buying price). From there I will then be able to split the loan to buy another IP using LOC.

    Profile photo of Henry AdamsHenry Adams
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    September 10, 2011 - 3:25 pm

    yes the TGR Property is a very good compendium of smaller books to give you a bigger picture of what to expect in property investment world.

    Profile photo of Henry AdamsHenry Adams
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    September 10, 2011 - 3:24 pm

    Yes I’ve been to the seminar today and I got the copy of TGR Property book. it is very great book to read which opens my mind to invest in property now.

    I wonder what is the other book contents eg. TGR Cashflow

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 3:17 pm

    AH IC so that the interest generated from this LOC account can be tax deductible.

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 2:59 pm
    Terryw wrote:
    Also, you should be taking IO so that you could be paying off your PPOR faster. Or if you don't have one so that you can save up for one faster.

    Once you have paid off your PPOR you can then start paying down debt on the investment properties as well. (or save into an offset and then have the choice of buying more or paying off loans)

    ok, cmiiw so in this case when using IO loan, we paid off the interest component only (the largest part of the loan), while the principal can be paid off somewhere after the loan become CF Neutral or CF+ ?

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 2:08 pm
    Terryw wrote:
    Henry Adams wrote:
    , so does this means the only way to pay it off is to make sure that the IP is always double in value every 10 years ?

    Imagine you had purchased a house in Sydney 30 years ago for about $30,000 and you had only ever used an IO loan. You would still owe $30,000 today.

    Now what would you expect to pay in rent for a Sydney property? Maybe something like $30,000 pa today.

    So you could pay off the loan in full in one year (almost) by the rent alone.

    ok, now I got it so the IO loan will be paid off by taking the assumption of increasing rent rate per annum, assuming I can still be granted the terms of interest only with the bank.

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 1:08 pm
    Shape wrote:
    It all depends on your overall strategy…easy for me to say but ill give you an example.

    Mr and Mrs smiths strategy is to make $100,000 in capital growth…to further invest into another IP.

    – 2005 buy a $400,000 property with I/O to improve cash flow so can purchase another IP sooner etc…
    – Since it was done as I/O rent = so only need to fork out a bit extra each month form their own pocket.
    – 5 years later they decide to sell at a gain of $530,000 — CGT paid…profit of $100,000

    Use $100,000 into another IP purchase…

    —-

    So to answ your question; when you pay it off depends what “purpose” this IP serve in your overall strategy; sometimes you will NEVER pay it off but instead sell…. but either way make sure your progressing financially and not getting into further debt and heading towards a dead-end.

    Regards

    Thanks Michael thanks for the reply however by first looking into the interest only calculator (Online) and from my statistic findings of rental property in the location that I want

    monthly repayment http://www.comparehomeloans.c?om.au/interest-only-loan-calculator/

    Borrowing $450k, interest 8% (pessimistic), 30 yrs loan
    Interest only cost me about $3000 per month

    which means if the rental property get rent for $500 p.w x 4 = $2000

    then I’ll be “bleeding” out $1000 for the shortfall as the negative gear components, so does this means the only way to pay it off is to make sure that the IP is always double in value every 10 years ?

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 12:20 pm
    Terryw wrote:
    This is how I would do it.

    Value x 80% = X                           e.g $300,000 x 80% = $240,000

    X – Existing loan = LOC limit         eg. $240,0000 – $150,000 = $90,000 LOC

    Set up the LOC on this property and only use that LOC for deposits and costs for the next property.

    Buy $300,000 property. Get a 90% IO loan of $270,000 and take $30,000 from the LOC for this. = 100% borrowings.

    Terry, thanks for the advice, so where does the figure 100% borrowing comes from ?
    I thought if I got $90k LOC, by just using $30k that means I only use 30% of the total LOC value.

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 12:08 pm
    Jamie M wrote:
    Terryw wrote:

    Henry, what is a "semi fire-walling method"?

    Good question. Is this in one of Steve's books?

    Do you just mean setting up a second loan against a property which is used as  the deposit/purchasing costs on another – and then you source the remaining funds for the second property from the same bank or another? This is what we do to keep properties uncrossed.

    Cheers

    Jamie

    Yes, and it is been used in various books about investment property of course.

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 5:34 am
    Shape wrote:
    Hi,

    This is the first time i heard of this term….reading your response it doesn’t make sense…if the borrower is having financial problem with one of the loan then they most likly would have problem with the another one as well given it’s with the SAME lender and SAME security? just a different loan type….

    Regards
    Michael

    ah OK, so is there any way to totally separate the loan using different type of security rather than using the home as the security ?
    in another word “How shall we not cross collateralize to invest in another IP ?”

    Profile photo of Henry AdamsHenry Adams
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    September 6, 2011 - 5:28 am
    SallyFarrow – YourShare.com.au wrote:
    Hi Henry,

    Some other good questions would be:

    What is the best suited type of loan with features such as offsets, redraws, etc
    What the best rates are and what are the restrictions the lender enforces for those lower rates (no self employed applicants etc)
    How much the broker is being paid for your home loan and for how long they get paid

    Did you know that you are actually able to collect trailing commissions from your Mortgage every year (around 0.2% of your loan, every year)
    It’s a great way to get back from additional cash every year – considering you are a property investor, it’s obviously all about the money.
    Example: A mortgage through of $400,000 could be generating around $800 a year in fees and commissions, that you could be getting back (pay for rates or water bill or some additional mortgage repayments)

    Cheers,

    YourShare.com.au
    1300 554 774

    Many thanks for the reply Sally,

    wow that is good to know, but is that listed in the ATO ruling ?
    “to collect trailing commissions from your Mortgage every year” –> does that means I can tax claim/deduct as negative geared components for that part ?

    Profile photo of Henry AdamsHenry Adams
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    September 5, 2011 - 2:24 pm
    Tommy1 wrote:
    Looking for a few idea’s in how to structure the finance for my next few properties.
    Situation is as follows:
    PPOR value $275,000
    Owe $45,000 Principal/interest
    Equity $$235,000
    Cash $20,000 (would rather not use any of this. Currently sitting in offset account on PPOR, PPOR loan is therefore effectively $25k)

    IP1
    value $300k
    LOC Loan limit $170k
    Available $92k
    Rent income $280 p/Wk
    Therefore equity on IP is about $222k

    Income approximate $65k

    Any suggestion on methods of structuring for at least another 2 properties at approximate $300k each would be greatly appreciated !
    Thanks in advance.

    Yes thanks for sharing the case study here Tomy, is it possible to share the result of the loan restructurization here please ?

    Profile photo of Henry AdamsHenry Adams
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    September 5, 2011 - 2:23 pm

    Terry, sorry to cause confusion around.

    the term firewalling is when we set a loan after we have enough equity and transfer it to another bank.

    semi firewalling is when the bank/lender is the same (within the same bank) but the loan is split across two different facilities, therefore with both method if somehow the borrower having difficulties in servicing the debt, the property affected is just the one that is attached to the loan not the whole lot (not cross collateralized).

    Profile photo of Henry AdamsHenry Adams
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    September 5, 2011 - 2:19 pm

    Cool, thanks for the reply Michael

    Profile photo of Henry AdamsHenry Adams
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    August 30, 2011 - 1:08 pm
    Shape wrote:
    More hits = desparate ( as Terry mentioned )

    MOST ppl once they get their first approval- they normally go with that.

    Normally 2 outcomes with active credit file
    1. You got rejected by the another banks (something to hide? something we don’t know?)
    2. You may have gotten accepted but is shopping around on your own accord – so why waste our time on your file …if your not serious or not certain.

    The big 4 banks has a credit scoring system, if your file is to active the system will AUTO reject you.

    Regards
    Michael

    Thanks for the suggestion and explanation mate,
    :-/ Hopefully I still can get a pre-approved loan from any of the two mortgage brokers that I’ve just registered with.
    since in the last few weeks I almost got into trap with one of the most convincing spruikers from Bundall Queensland.

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