Hi ,
Just have a few questions regarding finance . My wife and I have a block of land which we will be building on soon and making our first IP .
Although I don’t believe the lender will have an issue with us servicing the loan , I just want to get my personal debt in order first .We have finance on 2 cars , both paying over 22% interest with liberty . We pay $700 per month and 1 has 5 years remaining and the other has 2 years . Is it wise for us to get a personal loan of $15k over 6 or 7 years at 12.99% and pay these off to bring the payments down to around $300 per month OR should we wait till after the home loan is done ?? We have no other debt such as credit cards .
I would have thought the reduced repayments would have a positive impact on lending criteria but maybe the bank wont like the new loan being taken out ?
I would really appreciate any advise .
Thanks,
Brad
Hi Brad
I am assuming the land has little equity in it as if so i would try and pay the Personal loan down at home loan rates.
Split the loan making the land and construction loan interest only and have the P/L portion as a P & I Loan linked to a 100% offset account.Go hell for leather in paying down this part of the loan.
If you dont have sufficient equity then certainly look and see if you cant restructure the personal loans to a lot lower interest rate.
Course normal assumptions in regards to Credit etc stand as using Liberty sometimes waves Red Flags.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
Thank you for the reply !! There is a ” little” bit of equity in the land but we are planning on using that for IP 2 very soon after completion of the construction . I think I will go ahead and look at CUA for the personal loan as they appear to have the lowest rates at 12.99 % .
Brad
Hi Brad
Personally i would try and get the Pesonal loan sorted first and then worry about the deposit for the 2nd IP.
Whilst you are constructing access equity is going to be difficult until the property is complete so you want to be careful how you structure the whole deal.
The cheapest personal loan rate may not be the complete solution especially with Credit scoring etc.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks again for the advise Richard ,
I feel that I am sounding somewhat confusing in regards to my intentions .
Basically the plan was to fix the car loan situation first by way of personal loan thus reducing payments ,
We would then apply for construction loan,
Once the construction was finished and we have tenants in place we would then try access equity for IP 2 .Do you think there is a more effective way to do this ?
Thank you again !! ,
Brad
Hi Brad
Reason for my hesitation is you would hate to find that you cant get the construction loan off the ground because of a failed credit score basis due to the fact you had recently applied for a personal loan.
Would need to know all the numbers first before i could give you a clearer path.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Brad,
That is a huge interest rate. Hope the loans are deductible.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Richard,
The reason we went with Liberty is because we did previously have a bad credit file . Since then , all our listings have been deleted and we now have only our current home loan for our block of land , plus the liberty finance in each of our names.
Some numbers if this helps ;
Income – $105k between us
Land loan – $120k ( joint names ) Value $160-$175k( Paid $152k July 2010 )
Car finance 1 – $10k (joint names )
Car finance 2 – $5k (wifes name only )2 Dependents
No other loans or credit cards .
We need around $190k for construction , house should rent for approx $340 – $350 Per week once finished .
Hope this helps and thank you again ,Terry , I wish these were deductible loans but not ..
Ok assuming the credit defaults have dropped off your credit file and not just showing as paid then you should be fine.
Question you would ask yourself is as the loan is going to be mortgage insured anyway is it worth paying the extra LMI and having a separate loan and rolling in the Personal Loan to the home loan saving you significantly in Annual interest.
If as you have stated the interest is not deductible i think i would be working out the numbers first.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard ,
Thanks again for the feedback !! I Really do appreciated to get such timely and smart advise.
Will speak to the mortgage broker tomorrow and see where we are at .
Brad
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