Hi All
I currently have a 160 000 loan on my PPOR 6.76%. Currently valued at 255 000. I also have a car loan of 10 000 at 9.8% on my work vehicle (self employed).
I am wanting to build again to the value of about 250 000 for the house and land. Would then want to rent out the house I am currently in and move into the new house.
Since the start of this year my partner and I have worked as self employed contractors grossing 1300 per week. Prior to this we have always been wage slaves in full time employment.
My question is would it be possible to get finance for around 250 000 construction loan (or anything similar) and what finance is available.
Also is there a better way to structure my vehicle payment so it is part of home loan at 6.76% and still be able to claim my interest payments for tax purposes
natwayne
This is a common question which appears regularly on the forum so I do encourage you to do a search and read the previous threads.
With regards to the financing of your new property this should not cause a problem dependant upon your servicebility and a normal land / construction loan would be available.
One thing to consider would be incorpating your car loan into your new borrowing to reduce the rate of interest being charged.
Either way it is probably best to consult an independant mortgage broker to obtain a clear picture of your options available.
Cheers Richard
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Originally posted by natwayne28707:Also is there a better way to structure my vehicle payment so it is part of home loan at 6.76% and still be able to claim my interest payments for tax purposes
You have already stated that the car finance is a business expense, so… if you reduce the cost of the finance (read interest rate) then you reduce the tax deduction, sort of Irish isn’t it.
cheers
brahms
Purveyor of Fine Finances
aka Mortgage Broker BrisbaneHi Natwayne
What ever you do do NOT build your car loan into your home loan.
Yes you can set up a home loan for the car but do not add it to your current facility.Take a split facility. $X for the ppr ad $X for the car. You can still have home loan rates for the home loan that will pay out the car loan.
You will pay stamp duty again 0.4% and Credit Business Duty of 0.03% plus the bank fees.David
Where there is a will there is a way!
Thanks David
That answered my question on the vehicle finance.
Now due to my partner and I being self employed since the start of this year does that rule us out for getting a traditional construction loan.
Would we have to use a low doc product since we have not been self employed for two years. We are self employed but receive set payment amounts each week apart from when there is a public holiday or we have a day off.
Hi
That would depend on the financier as each one has their own set of lending criteria. (I don’t see why not though – as long as you had the 20%+ deposit – anything less will be harder to get approved)
Personally I would go with a broker if you are going down the road of low doc loans as they specialise in the harder to come by loans.
On a major Banks point of view they would be asking to see at least a full 12 months financials. This would then show any seasonal trends.
Looking at the numbers you would be 81.82% LVR – pretty good but if you can get it below the 80% then much better.
Best to go low doc.
DavidWhere there is a will there is a way!
Hi Nat
Here are the options and the Traps
Options
As a previous poster suggested, you would want to look at refinancing your existing home loan, either with your current lender or a new lender.
Also as another suggested, below 80% is best.
While lifestyle and unlimited earnings, are great for self employed, borrowing money is not. Particularly if it’s your first year. You could probably kiss 6.7% goodbye for a while untill the business can show great tax profits, you will be borrowing on a Lo Doc loan which these days is around 1/2 a % higher.
I would be looking at a 3 split loan. One split to pay out your exisiting mortgage, the second would be to pay out the car loan of $11,000 and the 3rd is for the deposit on house 2.
Here are the traps.
1/ Because you have only been self employed for less than 12 months will not sit well with most lenders. If you are in the same industry that you were payg in then play that up, otherwise expect to pay more again.
3/ Even though you have an 11% car loan, refinancing it from 11% to 7% does not mean you will necessarily save 4%. Most car loans are calculated on a flat interest rate basis and early payouts attract large penalties, most often negating any advantage to refinancing. This is particularly true in the second half of the loan term (eg, after 2.5 years of a 5 year loan).
4/ If you borrow against your own home to help buy the second, then move into the second and rent out your first, you may find the additional debt on the first is not tax deductible. The tax office does not care what you offer as security to borrow money, they just want to know what the money was used for. Thats the test. In this case, the money was used to help buy a property to live in. That is not tax deductible. There are ways around it but you really need to get some professional advise on this, it’s a time bomb.
5/ If you are buying to build, make sure you get a builder who enters into a fixed price contract. Your lender will insist on it.
6/ If the properties have a rural element (size, location etc) you will be limited again with who you can borrow from, how much, and at what rate. The prices you are quoting suggest a rural element?
Hope this all helps.
Yes Home Loans Pty Ltd
Is your mortgage advisor accredited with the “Non Bank Lender of the Year?”
(Money Magazine 2005).
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