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Yes and no.
Normally depending on the security lenders will take between 60-70% of the Gross rent so that will be added to your income for servicing but the downside being most Commercial loans are done over a 15 year term (odd exception) so the monthly repayments of principal & interest and the higher interest usually associated with Commercial lending will reduce the amount you can borrow.
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Richard Taylor | Australia's leading private lender
Yes in Australia lenders service your loan at 7.25% on a principal & interest basis irrespective of the actual interest rate you are being charged and usually a fairly constant expense for assessing your monthly living allowance. In the UK it is totally different formula.
I think the Honeymoon products are a great way to get started and to start to pay down your loan. Just got to watch the early repayment fees or charges.
No knowledge of the North of England as my properties are down South and all of our clients have purchased in the more affluent towns / cities.
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Richard Taylor | Australia's leading private lender
Trouble is Coogee with my 30 years experience in the UK market you won’t find a lender to touch such securities especially if you are a non resident and not earning in GBP.
We sold a number of excellent properties to forum members about 9 years ago with spectacular returns all of who have doubled their money but that was then and this is now.
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Richard Taylor | Australia's leading private lender
Or you could consider a Mortgage Trust with an income in excess of the standard rental yield and use the surplus funds to pay down any non deductible debt.
With tightening lending standards we are seeing more and more clients follow this route of paying down down in readiness for a market softening and opportunities to rise again.
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Richard Taylor | Australia's leading private lender
Hi Jcam
Not investing in the UK at the moment although I originate from the SE of England and have property over there.
For an IP loan you will struggle to borrow more than 85% anyway so whether you go IO or not probably isn’t up for debate.
Servicing in levels are more stringent than here in Australia even though interest rates are cheaper.
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Richard Taylor | Australia's leading private lender
Rather than contact individual lenders and run the risk of a series of credit hits contact a mortgage broker and get the best of both worlds.
We Brokers can deal with a multitude of lenders offering finance and field daily email from prospective buyers wanting to get a guide on their borrowing capacity.
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Richard Taylor | Australia's leading private lender
Hi Minh
Good on you in wanting to start your property investing journey as soon as possible.
Certainly when I was younger than you I had purchased my first 4 IP’s but have to say that was the 80’s when it was easier to obtain finance and APRA was not controlling the financing scene.
Realistically in 2017 you need a minimum of 10% of the purchase price as deposit as well as all of your acquisition costs such as stamp duty, legal fees. LMI etc. Depending on the State you are purchasing in this could easily be another 8-10% of the purchase price.
Assuming your income can support the level of required borrowing you may well find that the deposit hurdle is the stumbling block.
I would not be in a hurry to rush out and buy and would look to save up as much as possible.
Personally i don’t think over the coming 12 months you are going to miss our on any capital growth so would be looking to build up your cash flow in readiness for the next round of the price cycle.Focus on saving and ensure you don’t collect any bad debt on the way.
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Richard Taylor | Australia's leading private lender
Hard to comment Kevin without seeing your Partnership / Individual Tax Returns.
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Richard Taylor | Australia's leading private lender
Not a lot you can do now and certainly 3.88% is not a bad rate.
Just make sure structure the loan from now on correctly and you will be fine.
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Richard Taylor | Australia's leading private lender
Hi Kevin
Hate to say with a fixed rate loan most lenders won’t allow an offset account to be linked to it so probably not an option going forward.
Not a fan on a LOC for a PPOR loan split as too easy to spend and a strong discipline is required.
If you have equity then you could always look at mixing the investment between an investment property and a diversified investment using the higher rate of return to pay down your PPOR loan.
If you have a non working spouse or partner on a lower Tax bracket then this investment could be in their name as it will free up increased monthly income to divert towards the home loan.
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Richard Taylor | Australia's leading private lender
Another option is to look at alternative investment than property and try and pay down your non deductible home loan as quickly as possible.
Funds borrowed for investment are Tax deductible so if the after tax return you can receive from an investment is greater than the net cost of funds then divert the surplus income to pay down your PPOR debt.
We are starting to see more and more investors adopt such a strategy especially in the current low interest rate environment.
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Richard Taylor | Australia's leading private lender
Hi Kevin
Welcome to the forum and hope you enjoy your time with us.
As the existing loan is a fixed rate loan and on the assumption the expiry date is well off you would probably look to take out the equity loan with your existing lender.
With the equity you would use this to cover the deposit and your acquisition cost on your new investment property.
Certainly try to avoid cross collateralising the 2 securities but structured correctly this should not be a problem.
Unless you need to meet your mortgage broker face to face most of us work thru email and phone communication. I know we have hundreds of clients in VIC that we have never met.
Hope this helps.
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Richard Taylor | Australia's leading private lender
Definitely put your surplus funds in an offset account linked to your PPOR loan split or straight into the loan itself by way of a principal reduction.
You can then set up an equity split for the deposit etc secured against the PPOR.
Yes it will benefit your borrowing capacity in the long run.
Remember it likely if your IP loan is > 80% it will have to principal & interest so why not maximise the deductions. LMI is a deductible expense anyway (over 5 years or the term of the loan whichever is lesser) so if your wealth creation strategy involves buying property then why hold off merely because of the LMI.
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Richard Taylor | Australia's leading private lender
Hi Propertyboy
Many more lenders than just the big 4 but certainly lending is tightening up by the day.
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Richard Taylor | Australia's leading private lender
Hi Propertyboy
Many more lender than just the big 4 but certainly lending is tightening up by the day.
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Richard Taylor | Australia's leading private lender
No regretfully not there is no other choice but to buy in your own personal name.
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Richard Taylor | Australia's leading private lender
Terry makes a number of good points.
We have seen dozens of borrowers who are unable to service for a new investment loan take a small equity loan on their own home / IP and invest in one of our Mortgage Trusts where they can get a Gross of Return of upto 9.09% Fixed with interest paid monthly.
They invest in the name of the lowest Taxpayer and use the surplus interest to repay their non deductible home loan debt.
We have ran a number of models based on say a $50K – $100K investment and the number of months saving is quite impressive.
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Richard Taylor | Australia's leading private lender
what is your opinion on the professional LMI exemption schemes/first home owner grants
If you can avoid it do so as long as the prevailing package doesn’t end up costing you more in the long run.
is there a way to utilise either/both of these whilst still implementing a trust structure?
No
If not, is there any value in purchasing in my own name to utilise the above schemes then transfer ownership to trust?
No as you will incur Stamp duty and LMI again.
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Richard Taylor | Australia's leading private lender
We do a lot of Expat / Foreign National loans and most lenders wherever they are based ask for a copy of a credit search in your Country of origin.
Not disclosure on an application form is actually Mortgage fraud so upto you whether you want to go this route.
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Richard Taylor | Australia's leading private lender
Hi Jcam
Probably going to need 2 Years Tax UK Returns for a lender in Australia to accept the income for servicing.
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Richard Taylor | Australia's leading private lender
