Hello fellow property investors!!
I am often reading this site as a budding property investor, although I havent actually posted many questions. I find it harder to type my thoughts/questions out rather than actually speaking to someone!!! But anyway here goes.
Ok, I have two investment properties in Victoria both units. One with a loan of 210k (worth around $400k) the other loan $347k (worth around the $400-$410k) My question is I want to buy a house and land package with my girlfriend for around $650k. We have 20k saved up. Can i borrow the rest of the deposit from the equity off one of my units to secure the land and then to build the house? Will it cost me alot in mortgage insurance even though i paid mortgage insurance when i purchased my 2nd IP? Is it worth selling the property with less equity to get ourselves the deposit so Im not cross-securitising all my properties? Any advice would be greatly appreciated. Please let me know if ive left any info out.
Cheers
Squidgie
In theory you could do it. It depends on the lender and the LVR (loan to value ratio). For instance: if you were to refinance your entire portfolio with a lender that is offering an LVR of 80% it would look like this:
Proposed PPOR : $650k
IP #1 : $400k
IP #2 : $400kTotal value of properties = $1,450,000
Lender would be prepared to loan 80% of this which is 0.8 * $1,450,000 = $1,160,000. You would be expected to come up with the remaining $290k.
So let's see then:
You have $190k of equity in IP #1 (ie $400k-$210k).
You have $53k of equity in IP # 2 (ie $400k – $347k).
And you have $20k saved up.So in effect, the amount of money that you have to pitch into the entire portfolio is :
$190k + $53k + $20k = $263k. So you've not quite got your $290k which means you couldn't go with a lender that offers 80% LVR. You'd need a higher lend (eg 90%). Also you mustn't forget that there will be buying costs associated with buying the $650k house…. ie stamp duty, solicitor fees etc. And that will require further money. I figure you'd make it through with an 85% LVR. All this said, you'd then want it structured in a manner that all the debt was on the IPs where the mortgage interest is a deductible expense at tax time. So you'd want your entire $290k to be on the $650k house, and the IPs to have 100% debt.With a bit of luck one of the finance chaps will post on here as well and give you a better answer.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
squidgie wrote:Hello fellow property investors!!
I am often reading this site as a budding property investor, although I havent actually posted many questions. I find it harder to type my thoughts/questions out rather than actually speaking to someone!!! But anyway here goes.
Ok, I have two investment properties in Victoria both units. One with a loan of 210k (worth around $400k) the other loan $347k (worth around the $400-$410k) My question is I want to buy a house and land package with my girlfriend for around $650k. We have 20k saved up. Can i borrow the rest of the deposit from the equity off one of my units to secure the land and then to build the house? Will it cost me alot in mortgage insurance even though i paid mortgage insurance when i purchased my 2nd IP? Is it worth selling the property with less equity to get ourselves the deposit so Im not cross-securitising all my properties? Any advice would be greatly appreciated. Please let me know if ive left any info out.
Cheers
Squidgie
You could access equity in property 1 at 80%LVR and avoid LMI there. That would give you $110k funds toward settlement new purch. The purchase could be done at 85% LVR with around $8,000 in LMI capitalised (see http://www.genworth.com.au LMI calc) and with your $20k you would have enough funds to settle buying a house and land with about $15,000 in change out of your $20,000. You could in fact borrow a little more on the purchase perhaps and keep your $20k to deposit into an offset acc. In essence we can do this without using the $20k.
No need to cross secure and theres a great loan product out there at 6.90% with a 100% Offset account which would suit your investing needs very well. In fact it could reduce your costs considerably if you refinance (depending on your existing loan rate and fees etc)
If you shoot me an email I will send you the full analysis.
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