G'Day Gents and Ladies,
Stumbled across this site today by accident and really happy I have as I have been looking for some sort of guidance over the past few months
Current situation is my girlfriend and myself purchased a unit off the plan in Inner Sydney in March last year for completion in November 09. Worked out really well because it gave us an early start on our savings and the property increased by $60k between 1st release (March) and what they are now selling the balance for, after completion. At the stage of purchasing this unit we qualified on our salaries for a lending value of just over $750k but decided not to over extend and bought the unit for $330k instead and thought we could just smash the home loan as much as possible by salary sacrificing
So with just over $100k in equity I am dead keen to get cracking on the next property. Our aim is to try and make a few CF+ properties in the next 2 years before the girl is off dropping babies. I have a few questions that I was going to see a pro about i.e. accountant / financial advisor but I figured the accountant would only be able to really help with tax implications where the financial advisor would only really be able to advise on the investment side of things
1) On the point of LMI, I assume you guys try to avoid that at all costs because it is essentially dead money but if we took $80k equity out of the $100k available to cover 20% deposit and stamp duty on the IP, it leaves us with less than 10% equity in our 1st property, so would we be asked to then cover LMI on our 1st loan?
Still on LMI, if we had to pay it, I'm assuming it is OK because if we wait another year before getting the 2nd property and avoid the LMI we would potentially have lost out on the potential growth over that year
2) Are you able to combine both properties under the 1 loan and would this be beneficial in anyway?
3) Do you guys buy your money through Mortgage Brokers or is there some secret place that those 'in the know' go for it and is there any reason to avoid the Brokers. Our current loan is through Rams
I am sorry for the long winded post but this is all new territory to us and it seems, from reading other posts on here, we can get objective advice
Many thanks for your replies in advance
Kev
In response to 2)
Do not do this. The only ones to gain in such an arrangement is the bank (if something goes wrong, they get both properties!) Do not cross colateralize
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Kev
Firstly welcome to the forum and I hope you enjoy your time with us.
Admitedly as a Broker I have a vested interest but i will try and be objective as possible.
1) Unless you intend to remain in the current PPOR for ever and a day I would not try and reduce the principal as quickly as possible. In fact i would do the exact opposite i would look to switch the loan to an interest only with 100% offset account.
2) Whilst where equity allows I would avoid LMI you need to look it as an opportunity cost. Try to gear the IP as highly as possible within reason so that the LMI is deductible as a loan cost (Deductible over 5 years or the term of the loan whichever is shorter).
Personally i wouldnt put off buying an IP merely because i was going to incur LMI on the loan.
Think to yourself would i pay an additional amount of say $3000 for the property (or whatever the appropriate mortgage insurance premium would be).
Normally the answer would be Yes and the cost of the LMi would not change your mind.
3) Seems to be a pet hate of mine Cross collateralising loans but certainly where possible i would aviod it totally. There are more negatives than positives to CC your loans.
4) Rams thankfully no longer accepts business through the Broker Channel as if the truth be known Westpac are running short of money and need to source more profitable funds. The customer service with Rams was non existent and really the product mix reflected their lack of desire to write new business.
Dont use a mortgage broker is all you interested in is the cheapest interest rate of the week.
Most clients use organisation like mine because we can structure the loan for you to suit your needs both now and in the future and enable to carry on purchasing.We like to think we add value to the clients loan rather than churn out another set of forms for completion.
Any Broker can fill in your paperwork but a Broker who specialises in Investors loans can ensure that you have a clear path ahead of you to maximise your property wealth over time.
Richard Taylor | Australia's leading private lender
Kev,
Hi and welcome,
on the to broker or not to broker questions. I really think that if you find a good professional, no matter what their field, they add value to what you are doing (as Richard said). A great accountant is worth every cent he charges, a great broker is definetely worth using, I use an insurance broker who saves me thousands and gets insurance on things I couldn't insure without his help. There are bad ones and good ones of every type, but if you can have a really good professional recommended to you, it will be of benefit to you. A good RE agent can also be a helpful ally.The professional you use should not just be good, but should be good at Real EState type work. For example, Richard continuosly demonstrates a very strong knowledge of brokering for property investors – and he is an investor himself. The accountant you look for should be a property investor too, if you can manage it, or at least should specialise somewhat in tax accounting for property investors. Good advice is worth the money you pay for it – and sometimes it doesn't cost you anything.
S
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