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This should be in the Finance Discussion forum, lucky i saw this
.um quick run through of the questions.
A)No one can talk you into fixing or not to fix. Its up to what you feel is right, a broker can only give you the definition between the two, but you gotta make the decision.
When your not an investor C)Broker, not because i am a broker, i just know that if i was a client i wouldnt want to deal with all the crap that occurs with a home loan, their is always a stuff up and you gotta be there to rectify it. Brokers can make it a hassle free transaction and usually dont charge brokerage charges. So its a free service, why not go through one then????
D) your Brokers mobile number
. Not a online tool though .Abit of fun but hopefully some questions answered.
Regards
Joshua McEwen
Finance Broker – WAhttp://www.prestigeloans.com.au
Brokers Lic 1297
Licensee Brett Christie**WARNING** This is a long post and i apologise, i hope this answer some questions and it isnt too confusing to understand the jest of what im saying. **WARNING***
Yes the repayments will be higher as the loan amount has increased. Ring your lender to confirm the minimum repayment amount every month.
I think what terryw means is doing an internal refinance or what we like to call a “Top-up”. grabbing the equity out of your home by increasing the existing loan amount. Loan amount goes UP your equity goes DOWN.
If you wanted to use the first property you bought to put a deposit down on the second one, all we do is dip into your equity by toping up your existing loan, so that the equity you diped into can help you pay for a deposit on the house and maybe cover the cost of the fees incurred in buying the property.
CRASH COURSE IN HOME LOANS TIME!!!
To obtain equity from your house, you must first apply for a home loan to get it. So for instance, that the house was worth $120,000 now and the loan against the house was $80,000. You effectively have $40,000 worth of equity, but here is where it gets abit strange. All loans have a fee called LMI aka Lenders Mortgage Insurance. Now every borrower doesnt want to pay this because it can be a huge fee dpending on the loan amount. To get around this, we only borrow up to 80% of the value of the house, because if the LVR (loan to value ratio) is less then 80% when applying for a home loan, the LMI (Lenders Mortgage Insurance) is payed by the lender. (if it is a Full Doc Loan)
So lets put this into an example. You want to buy your first house. Its sale price is $400,000. Most lenders will only allow you to borrow up to 95-98% of the value of the property, thus making you save up the rest, which is alot because you have to cover for all the fees of the lender and the property and also the deposit on the house to make it fit within the banks guidelines. Now you are asking, well what is the estimated fee for Lenders Mortgage Insurance, LMI is calculated on a percentage of the loan amount, this can range from say 0.5% to 3%. We shall use a figure of say 2.5%. 2.5% x $400000 = $10,000 !!!!!! That is only LMI fee, then you got to consider paying the Stamp Duty on the property, application fees, settlement fees etc etc. Its a very hefty chunk out of your savings. To get around this will only borrow up to 80%. Then this figure of $10,000 will go all the way down to 0! However, the money that you have must make up the difference.
Ok back to the story, you can in fact, dip into this equity whenever you want however it also comes down to the price your willing to pay to get the equity. If you wanted to avoid Lenders Mortgage Insurance, then you will only want to borrow up to 80% of the value of the house. Getting back to the intial example,
value = $120000
$120,000x 0.80% = $96,000.Take this away from your loan 96000 – 80000 = $16,000. You can easily obtain around $16,000 without paying to much in lenders fees. However, if your willing to pay for the LMI then you can borrow up to 95%.
$120,000 x 95% = $114,000.
$114,000 – 80,000 = $34,000$34,000 is what you can borrow up to (depending on Income of course), from this you gotta deduct LMI, application fee, mortgage stamp duty etc etc.
So it all comes down to what your willing to pay to grab the most amount of equity.
END OF CRASH COURSE
Now! Onto Cross Collaterisation. Its quite simple, its using your equity on your current property to help cover the cost of purchasing the next property, but your not increasing your current loan, your multiplying the securities on the new loan, thus have a 2nd Mortgage over your current Property. Let me explain, Cross Collertisation means your placing 2 or more securitys on ONE Loan. An example will help understand this better.
2 Propertys:
Property A = $120,000
Property B = $150,000Total Loans against Property A = $50,000
Property B is the house your buying.You go to CBA and apply for a loan of $157,500 to buy Property B plus a little bit extra to cover the fees incurred……..wait Josh, didnt you say that Lenders will only lend you to a percentage of the property value…… Well yes that is correct.
The LVR in this example is
$157,500 / $150,000 = 105%..But Josh…didnt you say most lenders will only lend to about 95-98% of the property value…well yes……So how do we get this LVR, currently at 105%, to 95-98%….well it lies in the equity existing in the current property. When you apply for the loan, when you say which property will be securing this loan, instead of the loan securing one property, its securing two propertys…..does this become abit clearer??…….sooooo we use this simple The cross collateralise equation:
Total Loans / Total Value = LVR
($50,000 + $157,500) / ($120,000 + $150,000) = your LVR is now 76% rather then 105%, making the transaction alot more affordable.So basically, cross collateralising is securing many propertys against one loan. However this isnt always advisable, as it becomes abit “messy”. As its hard sometimes to remember which property is securing which loan and if you want to “discharge” one of the securities off the loan. Most buyers/investors would like a very tidy loan, One Security Over One Loan.
Like i said, i apologise, i hope i havent confused the hell out of you’se.
Regards
Joshua McEwen
Finance Broker – WAhttp://www.prestigeloans.com.au
Brokers Lic 1297
Licensee Brett Christietwo words
Cross Collateralisation – This can be good and bad, all depends on your situation and what you want to achieve.
Terryw example doesnt include cross collaterisation, however it is the most perfered method when you want to buy multiple houses, as all loans are securitised by one property rather then many.
Regards
Joshua McEwen
Finance Broker – WAhttp://www.prestigeloans.com.au
Brokers Lic 1297
Licensee Brett ChristieIf you are purchasing the property as a investment property then you are not eligible for the FHOG, this doesnt mean your not able to get the FHOG further down the track, its just that intially you wont be able to apply as you need to owned & occupied the property.
Is there anything in particular that you would like to know, finance wise as i could go all day with explaining finance
.Joshua McEwen
Finance Broker – WAhttp://www.prestigeloans.com.au
Brokers Lic 1297
Licensee Brett Christie
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When your not an investor 
