Hi everyone,
I have purchased a few properties over the last couple of years and have not paid much attention to structure of loans. I have some equity that I would now like to release so would like to re-structure loans properley this time.
Property 1 – Low doc 80%
3 Bed house North Nowra
Purchased $225,000
Loan $170,000
Current Value $250,000Property 2 – Full doc 90%
2 Bed unit Bondi
Purchased $350,000
Loan $315,000
Current Value $400,000Property 3 – Low doc 80%
3 Bedroom unit Bondi
Purchased $560,000
Loan $450,000
Current Value $650,000Total Loans $935,000
Total Value $1,300,000
80% $1,040,000
Usable Equity $105,000I would like to purchase a new property. It costs $750,000 and has a recent valuation from the Commonwealth bank for $885,000.
So if I purchase this property:
Total loans $1,685,000
Total value $2,185,000
LVR 77%How does this sound to everyone? Will banks give me the benefit of purchasing the new property under value (better LVR) or will they just want to value it at what I purchase it for – even if their is another independent valuation?
I am planning on switching all loans over to ratebusters on full doc loans (no LMI payable). I would like seperate loans for each property. I am currently paying principal and interest so will change to interest only too. In the future if I want to release more equity when prices increas does releasing equity without changing banks class as breaking a loan and will break costs be payable?
Any advise you can give me would be greatly appreciated. I really want to get structure right now.
Look forward to hearing from you.
Hi Danish83,
"The correct structure" can also be likened to "how long is a piece of string ?"…..
What is correct for you could be very different to someone else, and vice-versa.
However, in my opinion, your suggestions are good ones. In fact, my structure is similar to what you are proposing.
Separate loan and security for each property as a stand alone concept – good.
Total LVR under 80% = no Lenders Mortgage Insurance costs – good.Interest only loans, thus reducing the monthly repayments – in many ways, good.
I know nothing about ratebusters. Are they a mortgage broking service ? If they are, then perhaps a suggestion might be to make it clear to them that you plan to use the available equity over time to fund further purchases, and see what they say.
Or, perhaps visit other mortgage brokers, and seek their advice.
Depending on many factors, including the company policy at the time, refinancing as you have suggested can sometimes involve fees / costs / etc. Understanding this BEFORE you take out a loan will make life so much easier for you if and when you do come to refinance to release equity for another purchase.
Again, in my opinion, I think you are well and truly on the right track.
Go for it !!
Thanks,
BDM
Hi Matt
(BDM)
just wanted to say, I took a peek at your web sites and thought they were……. " Excelent "
I agree you're on the right track with all the above. I would not be giving all the loans to one finance company or bank. Banks are a bigger risk to investors than rising interest rates. We use a different loan or finance for each property that way each bank only has control over one property and not our whole portfolio.
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