Hi I'm just wondering how one can recycle the equity or use existing house(s) as collateral or bond to fund the purchase of additional properties without having to put a deposit down. I'm in a position where I should have enough equity, however currently don't have enough for a deposit.
thanks in advance
Increase your existing loan to access the equity to fund the deposit on a new property purchase or refinance your existing loan to access the equity to purchase a new property. Use a deposit bond which will enable you to pay for the deposit at settlement.
Before you rush into using the a Deposit Bond work out the cost of the interest for that period of time and weigh this upto the cost of the Bond for the same period.
Also ensure that any new investment borrowings that you draw down from the existing security are kept totally separate to any non tax deductible borrowings.
Richard Taylor | Australia's leading private lender
The short answer is yes. I did this myself. Approach your present lender to borrow for the second property, the result is your present property would be security for itself and the second property and the second property would only be the security for the second loan. It will only work if the total equity in both the properties is equal or more than 20% of the total value of the properties. This also give you an idea of how much money you may be able to borrow. If the equity is less than this, then mortgage insurers get involved and they generally are too cautious to approve this. Make sure that you keep the investment loan separate from your own home loan or you will find yourself in a mess with the tax office. Once you have had the property for a few years, then you can re-finance and separate the security on the properties. The main problem with this is that it is a bit difficult to sell the first property while it is still tied with the second property. You will need to see your lender first and if they are not keen maybe go to a mortgage broker.
Jamie
Just be very careful adopting that strategy as your current lender will want to X Collateralise the respective securities especially if you are borrowing 100% plus costs.
Mark my words your lender will not structure your loan in a manner that detracts from their security.
A good independant broker familar with Investment & loan structuring would be the place to go even if they put the deal back with your current lender but structure it correctly.
Once you have do it once it is too late to go back with cost and anquish.
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
