2nd Investment Property

Hey guys,

First question is whether you guys see any problems with switching my IP to IO for a 5 year term, have the option to change it to a line of credit that I can draw back on but have to pay +0.1% IR for the privilege. Doesn’t seem to be any reason to when I can make extra repayments and then redraw as required?

Looking at purchasing my second investment property from equity in the first. House is conservatively bank valued at 560k

Property – $560k
Loan – $480k
Equity – $80k

Bank Manager tells me that 95% + LMI is not a problem on both properties.

95% of property is $532k so looking at accessible equity of $52k. This would mean in theory without stamp duty, LMI etc that I could borrow $1 040 000 in terms of using the 52k as deposit. The property we would be looking at would be around 300-400 mark for serviceability but just wanted to check the figures.

Also wondering about how including the fees goes into working out these numbers.

If I am looking at a 400k property I need 20k for my 5% then I need 8k for stamp duty and ~10k for LMI, + I will need LMI on the initial Invest prop to get it from 485-532k ~2k (Big Guess). So in order to make this work I would be looking at 40k to achieve the necessary result?

Just wanting to get my numbers straight.

I understand I want to avoid cross collatirilaztion (or similar?!) but is there any other common pitfalls here to avoid?

Cheers