FIRST IP.. help needed
I currently have 2 bedroom apt in Sydney PPOR valued $380K howver i still owe $260K to CBA.My and my partner's current income is around 80K..We are thinking of buying first IP in Sydney. I am not sure how much equity we can use to buy for the property.We have around $12000 in MISA account.Is it wise to wait to build up more equity? Can anyone please adv me how much loan we can get?How the banks will calculate the loan? Do they calculate IP income or not.Sorry i am new here so any suggestions will be helpful. Thanks
Hi Karmark – welcome to the forum! I'm absolutely no expert, but I do know that the banks will only loan you 80% of the equity you have in your home i.e. $120k equity, they'll loan you up to $96k. I believe it also depends on your borrowing capacity which comes back to your income and ability to repay the loan.
One of the finance experts on this forum will be sure to give you some more info!
Good luck!
jessWhile you wait to get that info from the experts on this forum make sure you have all your financials up to date. Collect all your info into one folder ready to head to the banks, YEP BANKS. Pay slips, credit card bills, loan documents, personal debts, repayments on phone, cars, living expenses etc. All those documents are those the banks will ask and the quicker you can produce them and more organised you are when they ask the more professional you come across and more inclined they will be to spend more time with you. Trust me this is a good thing and you will stand out from the crowd, also a good thing.
Another tip, if you want, go to another back for the loan do not under any circumstances let them cross collateralise your loan. You do this by asking your current bank how much is the maximum amount you can redraw off your current loan to purchase another property. At this stage they will tell you because you have not told them you are looking at other banks and there is no reason to (Best way is to say you are looking to buy at auction and want to know how much you can have available). In your case $46k based on your figures at 80% + MISA account.
This amount becomes your equity available and this can be made available after they complete their approval process with no cost to you or increased payments due to interest until you actually withdrawal and use the money (Then you will obviously have higher interest repayments which you will have to take into account if you wish to use equity for IP).
While you wait find the place you want to purchase and ask another bank for a loan on it. They will see you have another property however once again under no circumstances let them sign you up to a mortgage with the other property for security. The reason they can accept this is because the property you want to purchase should be able to stand up on its own feet and their valuation of the IP will prove this.Even if you go with the same bank don't let them sign you up on a mortgage requiring your other property as security it makes it complex and will cost you $ in the future. PM me if you don't fully understand and make sure you do your sums. Food for thought, happy investing.
First thing is dont use your current redraw as the interest is not deductible.
Dont use your funds in your MISA account as you are loosing valuable deductible interest.
You can take out a separate loan on your PPOR to 90% or even 95% with the odd lender however will incur LMI over 80%.
LMi where used for investment is considered a loan cost and as such is a deductible expense.
Many would be investors fall into the trap when trying to correctly structure a new loan for investment so ask your Broker to set out the cleanest way of doing so to maximise your deductions and keep things separate and simple.
Richard Taylor | Australia's leading private lender
Hi guys,
Let me get this right you suggest it's best to keep all IPs seperate and not use the equity in 1 property to purchase another, to go with different borrowing institutions and get loans based on your income alone? I too am new at all this and have just moved out of my PPOR am renting it out now and looking to purchase a new IP soon. I earn about 120k a year so it shouldn't be a problem getting another loan to purchase the new IP.
Cheers,
BethUse your PPOR equity as deposits and legals. Get individual loans for each IP. That way they are not crossed with your PPOR and you can sell any whenever you like.
I suggest to deal with one bank for the first few then switch. It's too much hassle having half a dozen different banks. Most people say don't borrow over $1.2mill with one bank.
It's also easier to get the next loan when they already are dealing with you. I've had approvals in 5 minutes. Just call in and see the person you're dealing with. They crunch the numbers and Hey Presto!!!
Hi Beth
No i dont believe anyone was suggesting this not use the equity in 1 property to purchase another as otherwise you are forced to use your own cash savings and certainly not wise especially when you are starting off.
Your Broker should be able to show you ways to maximise your borrowing yet structure the loans correctly.
Richard Taylor | Australia's leading private lender
Hello,
I too am trying to get my head around this concept. I have a PPOR valued at $420,000 and I currently owe $293k. I was paying principle and interest however having read this forum I now have IO and an offset. I had also been saving (in my offset, for a deposit for first investment property, so far only $7k but getting there – the change from PI to IO will spead this up).
I had planned to use the funds in the offset for the deposit so as to avoid cross coll the IP with my PPOR (definately dont want this). I was thinking I would try to save for a 20% deposit to avoid LMI but with the above correspondence I am confused.
Is it not a good idea for me to use the offset amount for the deposit and legals (I thought this is why I was saving it there?)
Is it worth paying the 20% to avoid LMI or I am now thinking better to get max amount 90% as the LMI is deductable anyway?Hi karmark
Go to google and type in…. the investors club
There you will find all kinds of answers,
Not sure where you live but they have a seminar on this weekend on this subject
on the central coast and it’s all freeYes LMI where incurred for investment is considered a Loan Cost and a deductible expense over 5 years or the term of the loan whichever is shorter.
if you equity galore and dont need to take out LMI then dont do just for doing so sake however if you intend to purchase again and equity is tight you might want to cop in on the chin now whilst the deal can be done.
Lenders under the new NCCP legislation are certainly tightening up policy and often a matter of taking credit when you can get it as when you need it it might not be available.
Richard Taylor | Australia's leading private lender
Catalyst and Richard,
Thanks for your replies; you've spelt it out in my simple mind
Now just a million other concepts to get my brain around!Cheers,
BethKeep reading and asking questions. Only way to learn.
Read heaps.It can also be helpful to go to a few seminars. Just don't get sucked in to paying thousands for courses.
Some of the free ones are Ok. You don't get heaps out of them but it all adds up.I wish I knew this type of forum existed 10 years ago.
Hi Karmark
Did you find an answer to your query or still need help. I have worked for Westpac Bank as a Home Finance manager for many years and if you have any queries with respect to any banking mattersand to get free advice please do not hesitate to email me at [email protected]
Thanks
Now just a million other concepts to get my brain around!
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