Yes wouldn't have an issue with the structure recommended.

No Steve is correct even adding back the negative gearing deduction on the interest into the equasion your income is is going to be a barrier to moving forward and purchasing again.

Whilst some lenders are using 8.25% as their serviceability rate a couple of the Big 4 are using 8.91% or thereabouts and this will dramatically reduce the amount you can borrow.

I think the exercise will be harder than you initially think and will need a little massaging from a good Broker.

There are still some lenders who take only the actual repayment and not a sensitised rate into consideration so using 2 separate lenders maybe the way to go forward.

Subject to other 101 details and timing (When interest rates incresae affordability rates also go up so the amount you can borrow goes down) of your purchase you should be able to show serviceability.

As stated this would depend on you other loans and liabilities, number of adults, children in the family, potential rent on the property etc etc etc.

Very good GOM.

Intersting GOM 7 posts from our friend steve and 6 of them are self promoting.

The last one relates to wanting to find a property investing club presumably to sell his wares there.

Yes GOM and that will almost certainly disappear when the new National Credit Laws come in.

Course you can insure against a lot of these potential risks by fixing all or part of your loans although i am still not convinced you haven't missed the boat.

Also bear in mind that whilst the Mortgage Rate may go up 1 or even 1.5% the Banks use a affordability rate which is currently between 1.5% and 2.25% higher than the current standard variable rate so if they approve a loan they have a large amount of fat built into the deal to ensure that you dont over commit.

Secondly they are working mainly on the fact that they accept 75-80% of the Gross rental income so have allowanced for vacancy maintainance and repairs etc etc.

I have always taken a variable rate and believe if you buy in the right area you eliminate a lot of the issues that come with vacant properties.

Structuring your loans correctly and have flexibility such as lodging your 221D and having a QS report done on the properties upfront can ease some of the case flow burden.

Ok sorry bit clearer now.

From an income perspective and making a couple of assumptions you certainly appear to qualify for both.

Non of the interest will be deductable on your PPOR but i guess what i was getting at was do not mix personal and investment use in a line of credit. If you need to split the accounts and have a series of LOCs.

Yours is a common question and one we get asked a lot especially when clients are looking at releasing equity in their own home.

Every lender is different so it is is hard to comment without knowing who the lender is but Yes most lenders want to control where the funds are going and seem to think that if we or another financial planner produces a FP then everything suddenly becomes all ok.

Now some answers:

Can the bank prevent me from borrowing upto 88% of my house. Yes they can as they have the funds you want.

Can the bank prevent me from borrowing upto 80% of my house (with the increased value)(i have not asked yet  a i straightaway asked for 88% – If they are being problematic i might need to tone it down). Yes they can.

Costs : I have paid LMI once before (9K) ,will the new borrowing (if the banks allow) only be LMI on the differential i.e. to borrow say 110K more LMI = 1.5% of 110K. Yes it will be although bear in mind LMI rates might have gone up since you took out the first loan.

Have you ever heard of the need for doing a financial plan before? To increase borrowings on a house. I thought people do it all the time to invest somewhere else.Yes all the time

Simple answer is tell them you are going to refinance elsewhere unless they agree to it.
 

Hi Paul

I say it ever day Banks and their employees should be held liable like we are as Mortgage Brokers and FInancial Planners.

Clearly the strategy and suggested structure your brother in laws lender has suggested will cause him so many problems down the track it is not true and potentially he could kiss goodbye to the interest deduction not only on the new $150K borrowing but also the current $150K on his present PPOR.

It sounds to me like he is talking to someone without any experience of loan structuring or Tax planning.

This is a minefield and when he moves in it is too late to change.

He needs to think about:

1) The loan structure both now and in the future.
2) The entity or names in which the asset is purchased.
3) Whether he looks at selling the current home to the party on the highest marginal Tax rate and gearing to 100% as eventually this will be the IP and then shifting non deductible interest to deductible.

Try and convince him NOT to proceed as is.

God Bankers make me so annoyed when they are so concerned about keeping the client and not loosing them to a Broker yet they tell clients absolute rubbish and then are never there to pick up the pieces down the track.