Hiya all,
I was wondering this:
My partner and I are looking to buy a 2nd investment property.
Currently, we have 2 houses – 1 PPOR and 1 IP
We brought the IP first nd then brought the PPOR using equity in the IP (used IP as security for the PPOR).
With the new IP we’re looking at buying, do we have to use our current 2 properties as security for the new loan? Or can we use the new house as security for the new loan?
It makes me a little nervous, the thought of our current 2 properties securing a new loan/house.
Also, how does this relate to Lenders Mortgage Insurance?
If we used our current 2 properties to secure a new loan then we’d pay mortgage insurance on all three loans, correct? (I have found out this would be about $11,000 including stamp duty – OUCH!!!)
What if the new loan was secured by the new house, only? What mortgage insurance would we pay then?
$11,000 is so much in Mortgage Insurance to pay!!!
The guy from the Bank said we could always borrow up to our maximum figure (that gets us out of paying Mortgage Insurance) and then get a personal loan for the remainder of the money we need to borrow, what do you all think about this?
cheers,
pasandbecHi pasandec,
I’m not familiar with your financial position and the more informed brokers/etc on this site would be better able to supply suggestions. If you can avoid cross collateralization (let alone having to pronounce that word!) and LMI then defininetly, all the better!
Good luck!
Cheers,
Gatsby.“Sometimes the hardest thing to do in life is often the best thing to do.”
Hi Pasandbec,
I would suggest you have the proposed IP purchase as security over the loan, You could achieve this without the need for mortgage insurance providing you have enough equity in your current property,Basically you would borrow 80% secured against the new purchase and the remaining 20% and closing costs stamp duty etc will come from equity in your PPR or current IP, all loans would be set up independently to avoid xcoll of the portfolio,
If you use the equity in the PPR to raise the 20% then I would suggest you consider a split loan to keep non-deductible debt separate from deductible debt.Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks,
What is a split loan?
We have equity in our current IP, not our PPOR.
Current IP worth about $280,000
Owing $185,000Current PPOR worth about $230,000
Owing $225,000New (proposed) IP purchase price $64,000 (excluding stamp duty, legal fees, etc etc)
thanks,
pasandbec80% of your IP value is $224,000. That means you can borrow an additional $39,000 securred against this property.
To avoid cross collateralising the two loans, you could take an extra loan with your existing lender separate (ie split) to the current loan. Then you could go to another lender, using this as 20% deposit and borrow the rest.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Pasanbec,
Unfortunately the figures in your last post gives a whole new perspective to your situation,You mentioned the bank included the IP as security over your PPR loan, I assume you did this to avoid LMI, if this is the case then your current available equity at 80% LVR is Zero
E.g. Combined property value = $510.000
Equity @ 80% = $408.000
Less $410.000 balance owing = neg $2.000You may be able to access further equity at a higher LVR 90% 95% etc, but mortgage insurance will apply, Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks for all your replies.
I’d rather stay with the same bank with our new loan, rather than borrowing 20% from current bank and borrowing the rest from another bank. But I guess if it avoids LMI, I would do that. However, wouldn’t the next bank want us to re-finance all the loans with them?
Do all you big-time investors always pay lots of $ in Mortgage Insurance? Or do you have enough equity not to?
I how we can avoid it!
thanks,
pasandbecSteven is right. I missed the fact that your loans are cross securitised.
The only way to avoid LMI is to have the LVR under 80%.This is generally hard in the beginning but gets easier to do as values start to rise.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Pasanbec,
Based on the info you have supplied you will be unable to avoid mortgage insurance, Your two current properties are highly geared,If you access further equity in your current portfolio to use as a deposit on the next purchase you will incur mortgage insurance, as the LVR (loan to value ratio) on your current properties will be over 80%. Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Originally posted by Terryw:80% of your IP value is $224,000. That means you can borrow an additional $39,000 securred against this property.
To avoid cross collateralising the two loans, you could take an extra loan with your existing lender separate (ie split) to the current loan. Then you could go to another lender, using this as 20% deposit and borrow the rest.
Terryw
Discover Home Loans
North Sydney
[email protected]Terry,
What type of loan could we get from our current bank which allows us to get a 20% deposit for the house? We are with Bankwest.
If/when this happens, you’re saying we can go to another bank and borrow the remainder of the money we need, without paying Mortgage Insurance?
We have an offer and acceptance on this place for $64,000. We want to borrow $36,000 extra for renovations to this place and renovations to our PPOR, making the loan a total of $100,000.
pasandbec
You would need to increase/refinance your current loan to 90% or 95% LVR and you will incur mortgage insurance.
E.g. Combined property value = $510.000
Equity @ 90% = $459.000
Less $410.000 balance owing = $49.000 available as a deposit on the new loan.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Originally posted by Mobile Mortgage:You would need to increase/refinance your current loan to 90% or 95% LVR and you will incur mortgage insurance.
E.g. Combined property value = $510.000
Equity @ 90% = $459.000
Less $410.000 balance owing = $49.000 available as a deposit on the new loan.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
But this would leave us in the SAME position, i.e. having to paying mortgage insurance, wouldn’t it?? [confused2]
Unfortunately I don’t see how you can avoid paying mortgage insurance, unless you can find the 20% deposit from other means,
To extract further equity for the deposit from your current properties will increase the current LVR to over 80% and as such mortgage insurance will apply, Cheers.Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
“Other means” hmmmmmmmmmm
I wonder if we could get a Personal Loan for the 20% deposit.
I wonder if my Mum will lend me the 20%.
It seems SO silly since my current IP is for sale anyway, and as soon as that sale goes through…..I’ll have the 20% in cash
pasandbec
Originally posted by pasandbec:Originally posted by Terryw:80% of your IP value is $224,000. That means you can borrow an additional $39,000 securred against this property.
To avoid cross collateralising the two loans, you could take an extra loan with your existing lender separate (ie split) to the current loan. Then you could go to another lender, using this as 20% deposit and borrow the rest.
Terryw
Discover Home Loans
North Sydney
[email protected]Terry,
What type of loan could we get from our current bank which allows us to get a 20% deposit for the house? We are with Bankwest.
If/when this happens, you’re saying we can go to another bank and borrow the remainder of the money we need, without paying Mortgage Insurance?
We have an offer and acceptance on this place for $64,000. We want to borrow $36,000 extra for renovations to this place and renovations to our PPOR, making the loan a total of $100,000.
pasandbec
Sorry pansandbec.
I didn’t read your post properly. Unfortunately you can’t increase the loan on your property that easily as they are cross securitised.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If u sell the current IP for say $280 K less selling costs say 10K, and the mortgage is $185K then u would have approx $85K. From this the bank may want u pay down the PPOR loan to 80% LVR. They may want at least $41K leaving u $44K for the purchase of IP no.2.
However, u need the sale of IP no.1 to happen before u could proceed with purchase of IP no.2.
I had a similar situation awhile back so I explained it to my banker (BOM). They gave me the loan without MI on the condition I sell the other propery and paydown part of other loans to keep under the 80%.Talk to your banker ..Good luck.
hrm
Quote:Originally posted by Terryw:
[br I missed the fact that your loans are cross securitised.Hi Terry
Sorry to be picky but you can cross securitise without cross collateralizing. Thiis is an asset protection structure though.
CATA
Asset Protection Specialist
[email protected]Cata
Whats the difference? I use the two terms interchangeably.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw
Sorry for the delay, I missed your reply.
The main difference is getting mortgage 1 up as high as possible
for a deposit on house 2, purchased in a trust using seperate loans. This has some limitations, as property prices keep growing the equity in property 1 in exposed, also reduces deductions for intrest.
A good structure though as you can end up(on paper only) having a negative equity.CATA
Asset Protection Specialist
[email protected]
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