Hi All .i will get streight to the point
ok i have a large amount of Equity in a property that is positivly geared
am looking at bying a nother property using Equity to bye
can someone please explain how this works and wheather my understanding as follows is correct
My example say your home is worth = 250.000
your current mortgage = 80.000
Equity = 170.000banks only alow 30% of 170.000 = 51000 max
new property = 250.000
equity used to bye = 40.000
maintance float for both propertys = 10.000my asumption is new mortgage total for both propertys
property one = 80.000
property two = 220.000
total = 300.000both propertys returning rents of 270 pw
alowing up to 8% interest on mortgage
both propertys positvly geardedPlease can you tell me if i have this correct THANK YOU[biggrin]
kiwi guy
Hi Kiwi
I think the theory is correct but maybe the numbers are not.
Lenders will go upto 95% LVR of an existing property but will want to have the loan mortgage insured which will involve a 1 off premium deducted (sometimes capitalised) from the loan amount.
It is for this reason most investor try and keep the LVR to <80% to save on the premium.
You would therefore utilise the equity in one property to fund deposits and costs in another.
i.e Property value – 250K x 80% = $200K – existing mortgage $80K which leaves $120K. Assume that the new IP purchase = $250k as well you would take a loan of $200K and add $50K plus acquisition costs from the first property.
This leaves $120K – 50K – $10 (assume acquisition costs) $60K to be used on the next IP property.
If equity is tight then you may need to go to 90% / 95% LVR to purchase your IP.
Structure is also important as depending on your circumstances you might with to purchase IP’s in Trust with an individual or Corporate Trustee.
Easiest thing is to get a independant broker to go over the figures and make some suggestions to make sure you are set up properly.
Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.19%**
Licensed Financial Planner
http://www.yourstatefinance.com
[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
Another thing that should be mentioned is that if you end up being stuck with having to pay Mortgage Insurance it only protects the lender NOT you. It is however able to be claimed as a deduction over the first five years of ownership of the property. Eases the hurt, but you still have to pay it and you don’t get it all back…
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055LMI sometimes enables you to get a higher loan as well though in some cases doesn’t it?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorIt is actually claimable over 5 years or the Term of the Loan if this is shorter i.e for a 3 year interest only loan the premium is deductible over 3 years.
It is apportioned in the first year depending on when you purchased the property so assuming you settled on the 1st Jan only 50% of the premium would be deductible in that year and then 2 full years and the other half in the 4th year.
Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.19%**
Licensed Financial Planner
http://www.yourstatefinance.com
[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
Thanks for your help I was mainly trying to see if i had the principle of Equity correct and how it afects my final mortgage . Oh and sorry i forgot to mention that the property,s are in New Zealand and the Banks there will only alow you to use 30% of your Equity to purchase Investment Property,s
kiwi guy
Think you are speaking to the wrong lenders if you are only able to obtain a 70% advance in NZ.
Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.19%**
Licensed Financial Planner
http://www.yourstatefinance.com
[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
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