All Topics / Help Needed! / Using equity for first IP

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  • Profile photo of JessePJesseP
    Member
    @jessep
    Join Date: 2009
    Post Count: 1
    December 21, 2009 - 9:38 am

    Hi everyone,

    I’m new here and I’m sure this has been covered before, but I’m hoping to get advice relevant to my specific situation.

    Basically my partner and I are looking at property investing. At this point in our lives we are more concerned with generating a positive cash flow than stronger capital growth and negative gearing.

    Our situation is we have about $100K equity in our PPOR (which is worth about $370K), but little cash for a deposit for our first IP. How easy (or advisable) is it to use some or all of that equity to pay the deposit on an IP?

    Also, if we do use that equity, is it still possible to avoid cross-collatorisation?

    I know that information is basic, but what would everyone recommend in our situation?

    Thanks,

    Jesse.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674
    December 21, 2009 - 11:19 am

    Usually you can get a line of credit loan up to 80% Loan to value ratio.
    So 370,000 * .80 = $296,000 So subtract your mortgage balance from this figure and you get an idea of what you can probably borrow as a line of credit loan if the bank values your property at $370,000
    You can then use this as a deposit for your investment property loan.
    If you wait a while you will most likely have a mortgage broker answer your posting as there are a few on this forum site. Or do a forum search on line of credit.
    P.S.
    Have a nice Christmas !

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    December 22, 2009 - 9:45 am

    Yep, set up a separate loan on your PPOR and use that as deposit and borrow 80% of the value of the new one.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    December 22, 2009 - 11:21 am

    Very easy to avoid cross collateralising the 2 securities and that is to use a separate lender for the new IP loan.

    As terry has mentioned set up the LOC on your existing PPOR to fund the deposit and acqusition costs and then take the majority of the loan on the new Ip.

    Also if you are focusing on positive cash flow why not consider buying the new IP in Trust using a Discretionary Family Trust.

    Richard Taylor | Australia's leading private lender

Viewing 4 posts - 1 through 4 (of 4 total)

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