Hi there
I am hope someone can help here as we are still babes in the woods when it comes to investment properties. Our home is worth between $320,000 and $360,000 and we owe $105,000 on it. We would like to buy an investment property fairly quickly as we have spent a couple of months looking at properties and have done lots of number crunching and feel ready to buy (have been using an old PIA by Jan Somers I purchased years ago).
Is the best way to do this by approaching our current lender and ask for an investment loan? We are looking at buying something between $129K and $270K depending on the return ( ie we want to have it as affordable as possible). So… the requested investment loan should be 10% of the purchase price + loan costs + legals + stamp duties + insurance etc. Once we have that investment loan we use that for deposit on a property and the other costs and then approach another lender for the balance of the purchase price. Is this right? Can you get pre approval from second lenders even if you have picked exactly which property you are about to settle on?
My husband has only been in his new job for a week less than 3 months and was at the last job for 3 years. Is it still possible to get finance? Or will lenders just say no, not yet? I have been with the same employer for over 2 years.
Also, why do we need to get an accountant now? We have already figured out that for tax purposes it would be best to purchase in the name of the highest income earner. We will definitely seek an accountant who specialises in investment property stuff but my current lender wants us to do it now but I don't understand why. It just seems like another time spending activity that will just delay obtaining finance. I realise I may be way off here but I am one of those people who needs to know WHY. Getting the whys and wherefores has been difficult.
We just want to DO IT and feel like we are getting the run around.
Another query is – if we use an agency that does conveyancing do we need a solicitor as well? (we were unhappy with the last solicitor)
Or are we better to get a solicitor who specialises in investment property/conveyancing?Thanks.
Ooops. Even if you HAVEN'T picked the exact property.
Hi boshy,
You are lucky if you only owe $105.000 that means that you have an equity of $172.000 in your home
If you don´t know it this, it works like this: $320.000 – $105.000 = $215.000 x 80% = $172.000 which is the money most banks will lend you for a loc doc investment loan.
Please read about loc docs to find out all relevant information. You don´t need to show income paperwork to get a loc doc loan aproved, yet you need, of course, to be honest and realistic and to have the necessary continuous founds/money every month to repay the lender. If you think you will not be able to come out with the money for repayments forget about the loc doc loan.
I work with my bank. Only one loc doc with them for every property I buy.
I don´t use a solicitor for the properties purchases, only a conveyancer and all goes well.
If I can be of more help, do not hesitate to ask me,
Cheers,
Tera
Look i am not having a go at any of the authors who have have answered already but just be careful in whose advice you do take.
Firstly the equity in your property is the difference between the valuation and the amount currently owed however that is not say you can utlise all of this amount. Normally you can use between 90% – 95% of the available equity.
Being employed with the exception of the retail lenders you would not find a major bank touch you on a lodoc loan as these are normally reserved for self employed clients. In saying this be careful about gettting pushed into lodoc lending when it is not required. Lodoc lending is available on investment loans to a 95% LVR.
Your periods of employed would be fine for a full documented loan however one of the big consideration when you purchase your first IP is the structure you use and the manner in which you set the loans up.
Try to avoid cross collateralising your loans (although your Bank will encourage you to do so) as you will experience problems down the track.
Rather than go back to your own financier why not engage the services of a good MB. A good experienced IP broker can not only set up your structure correctly now but also for your future investment path.
Remember you pay nothing for their services as their remuneration comes from the Banks they introduce your business to.
Richard Taylor | Australia's leading private lender
Thanks for the replies. I have contacted a mortgage broker through InvestLoan because they supply you with a copy the valuation documents. The broker is in another state so we have spoken over the phone (and he talks at 100 miles an hour). He suggested the investment loan which would be a separate loan to the PPoR mortgage. I think I will need to deal with someone locally although it may mean I get no copy of the valuation.
Hi Boshy,
Br wary, if they are guarrenteeing a copy of the valuation then they are restricting the number of lenders they can use, you therefore may not end up with the one that is most suitable for you. If this is a big issue for you, get a broker to put you through ANZ, they will always get a copy of the val report then.
Regards
AlistairI agree with Alistair i would always be suspicious on a broker who guarantees a copy of the valuation as it means he will not necessarilly be looking after your interests. Altenatiely he could be using a branded mortgage product where instructs the valuation and is marketed under his brokerage.
A good independant MB will use a lender who is best suited to your needs and not his.
Richard Taylor | Australia's leading private lender
Hi Boshy
If the broker can give you a copy of the valuation, then they are probably mortgage originators/managers. ie They rebadge wholesale funds. These sorts of loans are usually covered by LMI no matter what LVR and exit fees tend to be high.
You ask about the accountant. I would say you should seek advice because it is not necessarily the best idea to buy in the name of the highest income earners name. What happens if you make a $100,000 gain in 12 months and decide to sell? = a heap more tax. What about the benefits of using a trust – reduced tax and asset protection – and the negatives (land tax and losses), you need to get advice on these matters so you can then decide which is the best structure to purchase in.
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
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