Hi Steve,

Thanks for your response.

1. What is your current income, and what total loan amount do you think the bank will allow you for the next property? This can be determined by simply asking the banks or mortgage brokers.

Something I will defiantly be doing is organizing to speak with a mortgage broker

I am currently on an income of $50,000pa. I am looking to buy a inner city apartment for my next purchase somewhere around $280,000 – $350,000.

2. The bank may not consider the value of the property to be the same as your estimate – Make sure you have some comparable sales for properties in the area, and provide these to the bank when you apply for the new loan. This will determine the equity you have for the next place.

The property was valued by a local real estate agent and getting it valued by the bank is something we are looking to do sometime in the next few weeks. Once this is done I will have a better figure but going by the advice from our agent we are expecting ~$550,000…..other houses in the area / street are selling in the high 500,000 low 600,000s.

3. As you presumably do not have much additional cash at the moment (because you put a fair amount into the first purchase), you will most likely need to borrow over 80% of the purchase price of the next property. Make sure you include Lenders Mortgage Insurance as a cost in your calculations when looking at the next property.

Assuming I am able to obtain ~$100,000 in equity on my first property to buy a property for $350,000 would require say a 25% deposit so say $87,500. From my understanding Lenders Mortgage Insurance would not be required then as i would only be borrowing 75% (please correct me if I am wrong here)???

4. Unless you are on a substantial salary, the tax concessions for the property you already own may not be that significant. This means that the property you already have is likely to be negatively geared, and may make it difficult to purchase another one – Make sure you do all the calculations for the monthly costs against your current income to make sure you don't overextend yourself with your next purchase.

I discussed the tax benefit approach with my accountant last week and he seemed to think that it would be possible, I will have another talk with him and see that he thinks.

Are there any limitations to using the equity in a property (i.e. If i moved in today and had it valued tomorrow could i use the equity there and then or are you require to live in the property for 6 months??) Also I am getting a lease agreement drawn up for my mother for the tax purposes (as advised by my accountant)….could this be used to help obtain a loan with the bank (by showing another source of income) and if so are there any time limitations to this?

Thanks again and please forgive me if I am completely wrong in any of the above but I guess that is why I am here, to learn!