- Hello everyone, I have been looking to purcase an investment property since August without much success. After failing as an underbidder for a few properties, I just found it too time consuming and so I appointed 2 buyers agents (one in Sydney and one in Melbourne) a few weeks before last Christmas. Both agents have now shown me a property to consider and I was hoping knowledgeable members of this forum could provide me with their thoughts as to the best way of financing these properties should I be successful.I already have a NAB Portfolio Facility set up which is a LOC and which is secured against my parents home (fortunately my parents have other assets and have generously allowed me to us their PPOR as security). The current interest rate on this LOC is 5.81%. The question I have is whether I should fund the entire purchase of the two IP's with funds from the LOC (which would then leave the IP's unencumbered for use as security for future purchases) or should I just source the 20% deposit required for the IP's from the LOC and open completely new loans. Or is the net effect really the same for both options? One reason I was thinking of using the LOC to source the entire purchase of the IP's is due to the lower interest rate on the NAB LOC. With NAB having not increased their variable rate to the same extent as the other majors banks, I'm not too sure whether the other banks would have a more competitive variable rate. Furthermore, although I provide annual tax returns, I am also self employed so that may affect the rate I can obtain if I was forced to go on a low doc loan with another bank.Also, does the fact that I'm purchasing an IP in Melb and in Sydney affect the situation at all. Finally, I am aware of the advice not to cross collaterise but how does one not do that when there are only so many lenders you can go with? Or is it a matter of going with the same lender but having seperate loan accounts? Any thoughts greatly appreciated.
Personally i would never suggest using a LOC secured against your parents property to fund the entire purchase price of a new IP however in saying that can understand why you have bought up the question.
Being self employed will have NO bearing on the deal you can obtain on the basis that your Tax Returns can show sufficient income to service the new loan.
I guess the other question which arises is if you only use 20% deposit then will this be a gifted deposit as i assume you are either a coborrower to the existing facility or a Cross Guarantee has been used.
Either way if you purchase using your parents equity and they EVER wish to sell or refinance/ borrow again they will not be able to unless you can restructure the loan now.
The rate is about right although i find most investors want more than just the cheapest rate going around this week they want to structure the facility to enable them to build a long term portfolio in their own names.
Of course without the balance of information it is difficult to comment as to whether the loan could be done elsewhere.
Richard Taylor | Australia's leading private lender
Thanks for the reply Richard. Always appreciate your knowledgeable comments.
Just to expand a bit further, I also have enough cash in my savings acoount to fund the 20% deposit on both properties so i don't need to use the LOC to fund the deposit. However, my plan was to use the LOC to fund the full purchase or the 20% deposit and then dump my cash in the linked offset account to my LOC.
As for my parents equity, they will not require the use of it as they are in the retirement stage, have no debt and have more than enough assets to tide them through so that is not a concern. Anyway, I guess I have some flexibility so I'll send you an email to see what options I can consider.
Cheers
I would suggest you just limit the 20% deposits from the LOC. Finance the remaining 80% on your own. Use an IO loan with a 100% offset account and stash the spare cash there. Finance is getting harder to get so you should get it while you can.
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
Hi all,
How would you feel if the bank of your choice paid you for your business to them? and you got to deal directly with that bank for the whole loan process.
Money for Jam gives 75% of the referral monies back to the client. That's $300 per $100k loan
Check it outthat sounds like advertising!
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
Sounds like the exact same copy/paste rubbish that appears in several other threads to me. Make a productive contribution, ksherwell10. Otherwise nobody is interested!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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