Whats the advantage of having 100% of your loan serviced by the bank

Viewing 3 posts - 1 through 3 (of 3 total)

nightelves
Member
@nightelves
Join Date: 2010
Post Count: 48
July 8, 2010 - 6:46 am
Hi guys,
As a first time invester I was shocked to hear that the bank had chosen to service 100% of my loan. I still can't get my head around this fundamental.
Say if I had a loan of $300,000(including stamp duty etc) at an interest of 6.71% and rentals per months is $1200.
Based on this figure I will have to put in $477.5. (300000*0.0671)-1200 = $477.5
However if I put 20% deposit, then my loan will be $240,000 which works out to be:
(240,00080.0671)-1200 = $142.
If I decided to get the loan serviced at 100% and put in $60,000 afterwards, does this 60,000 become equity?
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
July 8, 2010 - 7:16 am
I wish the bank would service my loans. I have to pay them myself for some reason.
I am confused by your post, but if you buy a $300,000 property with a $300,000 loan and deposit $60,000 then you would probably have close to $60,000 equity – maybe more because equity = value less loan.
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
laurent
Member
@laurent
Join Date: 2010
Post Count: 17
July 8, 2010 - 7:23 am
I don't see the point of doing such an exercise.
The equity wil be the difference between your amount owing ( the loan ) and the max LVR your bank is comfortable with on the current property value.
This top up/equity release is more likely to attract a LVR OF 90% maybe 95% .
Then again I am not a broker and I suggest you check that out for yourself.
Personnaly with the credit policies being tough nowadays I would borrrow as much as possible and use spare cash as a buffer, but it is only me .
You can also shorten the cash flow shortage with payg variation to help you with the cost of holding if cash flow is an issue for you,provided the investment and your personal situation allow good tax benefits.
Again, please to your accountant in that regards.
I don't know about today's deals with 100% finance , I thought those product were gone .
Which lender allow this???
You might have to commit yourself to 3 years with this lender and an early termination fee could be costly….
As you are aware are you ready to get LMI for lending over 80 %. it could add a few $1000's on purchase cost.
I do not consider LMI a problem . I would go for it at all time but that's because I love borrowing and don't have any cash.
I hope those words get you thinking and please get you own independant professional advice.