Help - Using my equity in an investment property to purchase another property.

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nalsem
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@nalsem
Join Date: 2010
Post Count: 2
July 14, 2010 - 8:28 am
Hi,
I am getting totally confused by listening to the bank (via email with no visual calculations) and friends. So now its time to ask the experts.
Currently I own an investment property. It was valued today for $245k and currently has a mortgage of $140k on the property.
I work out that I have $56k in equity with which I can borrow against – leaving 20% in the property.
Can someone please tell me how much I could then borrow?
I am currently looking at another property which is on the market for $270k so including fees 10k would be a loan of $280k.
If I calculate 80% of this property is $224k and my equity would cover the 20% (56k) I would escape LMI?
Or do the banks calculate things differently?
Thanks
EMma
Banker
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@banker
Join Date: 2010
Post Count: 371
July 14, 2010 - 9:46 am
Sounds pretty good.
Without LMI you can lend up to 80% against each property – this amount needs to include existing debts.
Your calcs are almost correct. The banks won’t lend against costs therefore it is 80% of the 270k purchase as opposed to 80% of purchase and costs (280k). Drop 10k off the 224k.
Banker
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@banker
Join Date: 2010
Post Count: 371
July 14, 2010 - 9:48 am
Sorry drop 8k off – not 10k…
nalsem
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@nalsem
Join Date: 2010
Post Count: 2
July 14, 2010 - 10:15 am
ThAnks so much, makes total sense now!
duckster
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@duckster
Join Date: 2004
Post Count: 1,674
July 14, 2010 - 10:51 am
nalsem wrote:
Hi,
I am getting totally confused by listening to the bank (via email with no visual calculations) and friends. So now its time to ask the experts.
Currently I own an investment property. It was valued today for $245k and currently has a mortgage of $140k on the property.
I work out that I have $56k in equity with which I can borrow against – leaving 20% in the property.
245k * 80% = 196k – Loan to Value ratio so 196k / 245 k = 80% LVR
196k – 140k = 56k 80% LVR – existing mortgage = what is left that you can borrow
nalsem wrote:
Can someone please tell me how much I could then borrow?
I am currently looking at another property which is on the market for $270k so including fees 10k would be a loan of $280k.
If I calculate 80% of this property is $224k and my equity would cover the 20% (56k) I would escape LMI?
Yes you would escape LMI
If you live in Vic State Stamp duty is $10,757 and then the solicitor fees and bank loan establishment fees!
nalsem wrote:
Or do the banks calculate things differently?
Banks also look at if you can afford to repay the loans especially with the new credit laws
So go and ask the bank how much based on your situation can be borrowed
This is known as serviceability
You have two ways of using the 56k
(1) Line of Credit loan on existing property to get 56k
(2) Bank lumps both properties together and cross secures both properties to give you the loan
(if you want to sell a property it can make things difficult or if you get behind in a payment the bank could sell both properties)
loan one + loan two / property one value + property two value
140 + 280 / 245 + 270
420 / 515
= 81.5% LVR
Thanks
EMma[/quote]