Forum Replies Created
Jules,
As Kerri pointed out, a bank cannot discriminate. The easy way to get your terms if you want to stay with them is to write a letter regarding the discrimination and that you will make a formal complaint to the banking ombudsman if they refuse to provide the loan over a normal term of 30 years. If age was their only excuse, they have to agree to the longer term.
This would never have happened if you used a mortgage adviser because all correspondence goes through them and they would have jumped on it in seconds if they knew about the anti-discrimination laws.
Robert Bou-Hamdan
Mortgage AdviserIt does not take into account the pay-per-use fees such as redraw and ATM charges. Be careful.
Robert Bou-Hamdan
Mortgage AdviserThere are only two main players in the mortgage insurance game. These are Genworth and PMI…
http://www.mortgagepackaging.com.au/index_files/mortgage_insurance.htm
As well as these two, there are many other mortgage insurace companies but they only insure the lender that owns them or closely affiliated groups. They allow these lenders much more flexibility and to charge a large fee to do the higher risk loans.
I personally would love to own a mortgage insurance company.
Robert Bou-Hamdan
Mortgage AdviserCross collateralisation is also used for multiple loans. It merely requires enough security property to cover the borrowings. This could be one loan or 50 loans.
Lenders sometimes have to do this as a result of their policy especially if there is a high LVR, specialised security or less saleable security offered as security for a loan.
In high LVR cases, cross collateralisation may mean an approval when the mortgage insurers say no. It helps spread the LVR across multiple properties which would reduce the LVR and the cost of mortgage insurance if applicable.
Personally, I would avoid it wherever possible for the reasons outlined above but it is sometimes required to get the approval.
Robert Bou-Hamdan
Mortgage AdviserMMC are pretty good and linked to another very popular up and coming non-bank lender. There is a member of this forum who works for them and I will let them respond to you.
I have never heard anything bad about them.
Robert Bou-Hamdan
Mortgage AdviserANZ may have rejected you because of serviceability. They have one of the higher serviceability rates in the market. There are some good packages out there for multiple property investors like yourself.
I would most likely go to one of the packages to obtain the benefit of higher interest rate discounts for higher levels of borrowing. I would not say Westpac is the best one to go to but they are ok.
Regarding interest only, I would do all the loans as interest only. This provides the most flexibility as pointed out by Steven.
Robert Bou-Hamdan
Mortgage AdviserEstablishment Loan actually goes to 106% and they will also let you include the expensive mortgage insurance ‘replacement’ they charge. They are a great product for those who need it but a little expensive rate wise.
Regarding no money down, you could be eligible for one of the 100% lenders as previously mentioned by mortgageman but this would also depend on many other factors such as your income, work history, credit history, property type and location, etc.
I personally would never give out vendor finance as it often ends with a big headache!!!
Robert Bou-Hamdan
Mortgage AdviserAnother major reason why people sometimes use interest only loans on their non-deductible debt is because it provides a bit of breathing space when things go a little bad.
Consider the following regarding non-deductible debt…
If you set your loan up as principal and interest and then lost your job, you would be required to continue making these higher repayments or you would have to restructure the loan. This would be hard if you currently don’t have a job. If you had no savings and made the minimum payment each month, you would have no redraw available to help you.
On the other hand, if you set your loan up as interest only and made the same repayments as you would if the loan was principal and interest and then lost your job, you would only be required to continue making the lower repayments without the need to restructure the loan. If you had no savings you would have redraw available to help you from the extra repayments you were making until you get into your next job.
Another major difference between principal and interest and interest only is that pumping extra funds into the loan or offset account will not change your minimum repayments if the loan was set as principal and interest. It will only reduce the loan term. The interest only loan structure would reduce the minimum required payments as well as the loan term if you made the same repayments as the principal and interest loan so there is even more flexibility.
A major downside with setting up an interest only loan against non-deductible debt is that a principal and interest loan will force you to pay your loan off in a set period while an interest only loan may see some people paying less than what they should and never paying off their home.
Robert Bou-Hamdan
Mortgage AdviserSuper, what figures did you use to calculate what the compounding rate would be? I don’t recall anyone stating how much they actually had to reach the 3k a week figure.
I know that I can earn $3,000 per week (gross) without working or worry with a capital base of $650,000 which is not very much for many people.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by surreyhughes19905:Hi,
PS: if you fully pay off an IP you no longer reap the gearing benefits that amplify your gains.OR LOSSES!!!
Robert Bou-Hamdan
Mortgage AdviserI think you will be hard pressed getting any capital growth on those units in Brisbane by 2006. I will be very surprised if they even value up at the purchase price you signed for.
I hope I am totally wrong for your sake.
Robert Bou-Hamdan
Mortgage AdviserThanks for the link surrey… good stuff!
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by majoh3:Im looking at buying a property for around 100k with 30k down for deposit and closing costs.
I would only put 20k down and borrow 80% of the purchase price. This would avoid mortgage insurance and require less deposit.
Using a interest only loan with an Offset Account would let you put the extra funds into the offset plus all your income (Instead of just $500 per week) to reduce your interest expense if that is your goal. It would mean that the increasing rental income will increase your tax expense.
You will find your Offset Account will quickly accumulate a deposit for your next property. When you decide to get your next property, you can just withdraw the money and do the same again with the next property. Your deductible interest expense will increase again on the first property plus the new expense on the next property.
If you don’t have enough for a deposit but the property value has increased while you have been saving, you could increase the loan to use some of the equity as well. It is very simple to do all this if you use a good mortgage adviser.
1. Would it be better to use equity in first IP as deposit or save a seperate deposit or does it make no difference?The difference would be the interest expense. Using the above example would leave all options open. If you do not want to decrease your interest expense for some reason, deposit your funds in another account (not the Offset Account).
2. When, in terms of risk, would be be a good option to buy second property (aside from having enough to maintain repayments) ? SHould I partly / fully own 1st IP before purchasing the next one ?This question comes down to your risk profile and comfort level at higher levels of debt. Doing things quicker require higher levels of gearing and hence equate to higher risk. Do you numbers as if you had no tenants and if you are comfortable with the repayments and do not need the money for other things, there is no reason why you should not proceed.
Structuring all this is much easier than it sounds above. Sit down with an adviser – IT IS FREE!
Robert Bou-Hamdan
Mortgage AdviserLoads of tools and calculators…
http://www.mortgagepackaging.com.au/index_files/tools_calculators.htm
I personally would not be looking at the Gold Coast for a positive cashflow property. I would also stay away from units. The Gold Coast is a very transient tourist area with high vacancy rates at most times of the year.
Robert Bou-Hamdan
Mortgage AdviserYou can always borrow money when you have a job. Unfortunately, you may find what you earn is not enough. A permanent job would also serve you much better. $200 per week is not much and most lenders would not let you borrow anything at all because your income would be eaten up on living expenses.
How about the cost of uni?
I would start learning about investing now but wait until my income increased before committing myself to expensive finance. Things could get very ugly very quickly if you have difficulty finding a tenant or the share market drops and your income cannot cover your liabilities.
If you focus on studying investing now, by the time your income is sufficient, you should have some excellent knowledge to take the leap.
Talk to some professionals for more specific help. A lot of them will speak to you free of charge.
Robert Bou-Hamdan
Mortgage AdviserI would suggest sitting down with some experts before making any decision. Get some different ideas and options and make an informed decision instead of one you may regret. You might find you can keep your home and purchase an investment property.
Regarding buying houses, I don’t think you can go wrong buying the right house. There is always going to be demand for the right house in the right area.
Robert Bou-Hamdan
Mortgage AdviserIf you find a good one, let me know.
I think in most States, as is required in NSW, you need a property contract prepared prior to offering a property for sale. The first think a potential buyer will ask for is a copy of the contract. I think a solicitor will be needed to prepare this for you.
Robert Bou-Hamdan
Mortgage AdviserI would not touch most of the Queensland property market with a ten foot pool. I think those who purchased UNITS around Brisbane or the Gold Coast will be in for a huge shock in the coming years. Many other areas in Queensland have also seen the same type of over-developing as has gone on around Brisbane.
For those who purchased Torrens Title homes, not Community Title or similar, will not be affected so badly in my opinion. I think these house prices will be dragged down a little bit as a result of the unit prices dropping.
If history has shown us anything it is that anywhere that a lot of units are being built is a bad long-term investment. Only young people really want to live in units and then only until they can afford a house of their own or have a family. With the population ageing so rapidly and the bulk of our population being an older generation, does it not make sense that demand for high-density units will only reduce over coming years????
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by brahms:equity has to be paid for if you use it, it’s not some sort of manna from heaven.
The only exception to this is where family gives you the money as gift and do not want to be repaid. Unfortunately, not many people are so fortunate.
Rod,
Not everyone can make money from day one. Some people do not have the credit history, income, knowledge, etc… to do this. It takes time to get it right and there are a lot of factors to consider.
I hope no-one thinks that they can read a single book and believe they have all the answers and knowledge they need. There are many professionals out there who can help you achieve your goals and it does not require you to pay thousands of dollars for the secret answer at some seminar or for some magic course.
I do extensive research and look at a lot of different ideas from different people. I have found Steve’s material to be off the better quality and very practical, useful and sound information. I think Steve would be the first person to tell you that you need to do a lot more than just use his materials.
This forum is also an invaluable tool regardless how much knowledge any single individual may have. If you have a question about something to do with property or investing, try a search and you will find that in almost every case, a lot of results will come back and you will find the information you need. Spend a few weeks reading a lot of the posts on this site and you will learn a lot!
Robert Bou-Hamdan
Mortgage AdviserBefore focusing on the cost of LMI, a lot of other things have to be considered. Look at your interest rate for example. You might find that your LMI premium was a little on the high side compared to other lenders but your interest rate was on the low side.
I for one would rather pay a higher LMI premium as a once of payment today instead of a higher interest rate that will cost me more every month for the next 30 years.
You will also find that lenders who only use one mortgage insurer can offer cheaper rates as a result of their exclusivity agreements. There are only two main insurers – Genworth and PMI. Check out http://www.mortgagepackaging.com.au/index_files/mortgage_insurance.htm
There are links to the two main mortgage insurers if you want to know more.
Robert Bou-Hamdan
Mortgage Adviser
