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Hi all,
Many thanks for your helpful replies – I appreciate it. I did double check this with my mortgage broker today and you are all right, he was trying to cross collateralise.
I told him I didn't want this, so he will get back to me with other products where this can be avoided. However, he did advise that I may lose out in some tax benefits and also may end up having to pay mortgage insurance if I do not cross collateralise.
Tom, that is interesting that you think I could avoid mortgage insurance here. When I get the full figures from my broker tomorrow, I'll let you guys know. Will definitely be borrowing IO for the IP.
With thanks.
Many thanks for your advice, Terry.
I will definitely stress to my mortgage broker to avoid cross collateralisation if this is what he had planned. Will also mention the LOC you advise of and see what he has to say.
I realise I sound like a complete amateur when I post this, but I am new to this and my mortgage broker sounds like he is speaking another language.
These were his exact words, if your good self or any other posters who are familiar with this topic can translate for me in laymens' terms:
"How it would work you would keep your property at $200k and continue to pay that P&I and try and pay that down as you are doing, because there are no taxable benefits involved with your principle place of residence.
Then you would borrow the full amount plus stamp and settlement costs as they are tax deductions on your investment property.
If you bought for $300,000 for example you would borrow $315,000ish. The loans would be $200,000 plus $315,000 : Total Approx. $515,000. Values Approx. : $815,000 Loan to value ratio of approximately 63%, so well out of mortgage insurance territory."
Does this sound like he was trying to set up finance so it would cross-collateralise, or perhaps it isn't clear from his wording?
Many thanks
