Any reason why you have to sell? Looks like you've got some equity available in the first property that you could possibly access to fund the deposit/costs on another property.
Now what I don't understand is (and it only occured to me just now), how come we are going through a lender when we have usable equity to borrow against in our PPOR? Isn't it just a case of going up to our current bank and getting them to write a cheque type thing?
Hi and welcome aboard
There's a couple of ways to do this.
Most bankers and a lot of brokers will simply cross collaterise your home with your investment. They do this by taking your home and using it as security for your investment property. This isn't ideal – it gives the bank too much control of your assets. It's great from the banks perspective but not yours.
The best approach is to avoid cross collaterisation and avoid using your home as security for your investment.
To do this, you'll need to have three loans set up. The first is your current home loan, the second is an equity release against your home (which covers the deposit/costs on your IP) and the third is the investment loan.
So for illustrative purposes, let's assume you're buying a $100k IP. The loans would be set up something like this:
PPOR
Loan 1: Your current home loan
Loan 2: $25k equity release to cover a 20% deposit and costs (such as stamp duty, etc) on your $100k IP
IP
Loan 3: $80k loan to cover the remaining 80% balance of your IP (this can be with the same or another lender)
Now this is just a general structure – and may need some tweaking depending on your circumstances and longer term goals.
Hey Jamie, yeah I am thinking in the future I will, to be honest don't have a exact time frame but if business succeed and enough capital is gained anything can happen.
Thanks Jamie
Matt
OK – it's important that you set up the loan as interest only with an offset rather than principle and interest. This article I wrote explains the concept.
Thanks New Guy. No there not crossed at all. That's just how it has worked out so far with moving into the property first. I totally agree being married with two kids and hate moving myself, it's just what I've had to do with work for the last couple of years. I could even be in my PPO
R a while longer yet after this year depending on work, but I'm keen to find another IP in the mean time till we get to final place of residency. I'm trying work out what the best way to structure it all, I'll be using a different lender/mortgage broker for my next investment. Any advice in who'd be the best to go talk with in what I'm trying to achieve etc. Accountant, Financial Adviser?
Hiya
You’d be better off seeking advice from a mortgage broker rather than a fin planner. If you’re comfortable with dealing over phone and email then you can choose to use any broker in the country.
In my mind I'm happy to do a buy and hold (I'm in my early 30s), with a combination of yield and growth across the portfolio with the eventual idea of paying them off for a passive income around retirement…
Tread carefully and don't second guess yourself – they will try and convince you otherwise but the fact of the matter is that the advice they are providing is wrong and will cost you in LMI and poor structuring.
I doubt you'll find much value from a fin planner. Be careful if they try to push you towards purchasing property – particularly off the plan stuff.
I don't personally know of any decent bankers in Canberra – but of course I'm also probably quite biased.
If you're looking for a BA for SE QLD you could try Richard Taylor/Jac M or Andrew Allen. I don't know if they're targeting these specific areas but you could always ask them.
There's been a fair bit of activity in West Syd for a while now – I had clients only a year or two ago buying for low $200's – now they seem to be selling for a fair bit more. It's a big area though and there will always be opportunities. Personally, I'd keep my eyes open on other areas too.
There is no reason why the LMI shouldn't be credited – unless they changed LMI providers since you took our your loan(which I doubt). Which bank is this?
Just goes to show the incompetence of some bankers.
From your previous posts, YOU have a better understanding of IP structuring compared to the banker you spoke with.
On a positive note – you may have just saved yourself $6,8000 in LMI by posting on this forum
You may need to look a bit further aboard and use one remotely if you're after extensive IP experience. I can't think of any – but could possibly point you in the right direction in Syd.
All comes down to purpose – what are the funds that are being redrawn used for? If it's for investment purposes it will be deductible. If not, it won't.