Parliament house

Cheers

Jamie

Hi mindseye

An example of tapping into equity.

Say for example that you had a loan of $300k against a PPOR worth $500k and you wanted to buy a $400k IP.

The bank will let you take your loan up to 80% of the properties value so you can use it as a deposit/costs on an IP.

So if it's worth $500k – they'll let you go up to $400k which is an additional $100k.

The $100k needs to be set up as a second loan so you can distinguish deductible debt (the $100k equity release for IP purposes) from non-deductible (the $300k PPOR loan). You would then set up a third loan to cover the remaining balance of the IP.

So it looks like this:

PPOR worth $500k

Loan 1: Current loan $300k

Loan 2: Equity release of $100k (covers 20% deposit and costs on a $400k IP)

IP worth $400k

Loan 3: Loan for 80% of IP ($320k)

Some lenders will allow the borrower to take the loan up to 90% of the properties value. In some rare circumstances, a 95% lend may even be possible.

In your instance, you don't have any equity that you can access as you're already sitting at 90% LVR and it's unlikely that your current lender will allow equity releases beyond this. 

If your current lender allows upfront valuations then it would be worthwhile getting one done – and if the property is worth more, you may be able to access some equity.

Hope that helps.

Jamie 

Yep, Syd is heating up – especially the inner West.

Congrats on your sale. That's great news

Cheers

Jamie

Thanks for the wrap Joe

Seems like a difficult deal to place.

If you've got a 10% deposit and enough funds to cover purchase costs then you could possibly get away with using a lender that allows 90% non genuine savings.

Because it's a family business he'll need to show a couple of years individual tax returns and at least three months of bank statements showing salary credits.

The credit file hits will come into play if they were within the last 6 to 12 months. Ideally, you'd want to use a lender that doesn't credit score and has their own authority to sign off on LMI so the deal doesn't end up in Genworth's or QBE's hands. 

If you're currently renting and have been doing so via a licensed agent for the last 12 months that could possibly open up some options too.

Cheers

Jamie

Hi Matt

Access equity in your PPOR  – set it up as a second loan which is used to cover the deposit/costs on your IP. You then set up another loan against the IP to cover the remaining balance.

So you basically have three loans set up. Original PPOR loan, equity release and IP loan. The first two loans are against the PPOR and the third against the IP.

Jamie

Hi Natasha

Here's how it would work (generally speaking).

Current property (soon to be IP)

Loan 1 – current loan (becomes deductible – on the assumption it hasn't been used for other personal use)

Loan 2 – Equity release to cover deposit/costs on new PPOR (non deductible)

New PPOR

Loan 3 – Loan to cover the remaining balance of the new PPOR (non deductible)

So the end result is that you can still keep your existing property as an IP and buy a new PPOR – however, you won't be able to claim a lot of interest if loan 1 has been paid down by quite a bit.

For that reason, the loan should have set up as interest only with an offset from the beginning – and instead of paying down the principle, you could have parked funds in the offset, which would have have had the same effect, and then moved those funds onto your next PPOR down the track. This would have bolstered your IP debt back up whilst reducing your non deductible debt.

This article I wrote for API mag explains the concept in more detail.

Cheers

Jamie 

Hi Matt

It's a federal grant administered by the states. The states decide on how they administer it – so the polices vary. Generally though, there's been a push towards providing the grant to new properties only.

There's different stamp duty incentives across the different jurisdictions too.

Most state govts regularly review and alter their policies to suit their requirements at the time – which can catch people out.

Best to consult with the office of state revenue.

Cheers

Jamie

Hi kirbonavich

It's because it's not a bank fee – it's a state govt. fee.

Cheers

Jamie

Hi Nicole

I can't speak for this company as I don't know who they are or what they offer. However, there's a number of companies out there spruiking off the plan properties to "astute investors" – they're essentially glorified real estate agents making massive commissions on over-priced, sub standard properties.

If it sounds too good to be true than it usually is.

Cheers

Jamie

Hiya

If you want to save a few dollars, you might do so by sourcing the unit yourself and then paying for a plumber to install.

Ebay actually has quite a few sellers of HWS that deliver nationwide. Their prices are quite competitive.

Cheers

Jamie