Hi,
I have been reading alot and now i think i need to ask some probably basic questions but i need to get my head around what i need to do.Situation
My partner and I are looking to buy an investment property range in price 375,000-450,000
We currently are paying off our PPOR and owe $340,000 and its set up P+I loan with a 100% offset account.
We have had it valued previously at around 500,000-510,000 range.
We also have around $30k in savings which is currently being used to offset
We would remain living in our PPORQuestion
We currently bank with St George and what i was looking at doing was taking the equity out of loan so i might get around say $50k. Use this as my Deposit and Stamp duty and any assoicated costs then approaching another bank to get the remainder of the Loan as an Interest Only.Obviously never been down this path before. Are we looking at this the right way. Is there something we should be doing differently.
Thanks
TimHi Tim
No – what you've described sounds good.
Keep in mind, you could stick with STG and still keep both properties uncrossed.
It's when you get to around the $1 million mark with one lender it's time to start diversifying. I think a couple of uncrossed properties with one lender doesn't normally cause any dramas – and is a good way to organise a decrease on the rate across your total borrowings.
Having said that though, STG can start acting a little funny once your total borrowings hit $750k such as refusing to capitalise LMI so it might not be a bad idea to look elsewhere. I'd speak with a good broker about your options.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Tim
Welcome to the forum and congratualtions on deciding to take the step forward.
Cant see an issue in what you have suggested and remember that LMI if charged on the new IP is a loan cost and a Tax deductible expense.
In saying that there are a couple of lenders who will waive the LMI charged upto 85% or indeed charge a fee alternative which might prove to be a cheaper option. Of course you need to weigh up the costs with the rest of the package but your Broker should be able to give you some alternatives.
Being an IP loan you wont need any frills and would suggest on the surface a Basic rate style loan with No application or ongoing fees would be the way to go. There are some fairly competitive products out there in the marketplace at the moment so certainly worth considering.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Jamie M & Qlds007,
Thanks for taking the time to answer my question. I have a meeting with St George this morning so it will be good to see what advice they will/can offer.
If all else fails it looks like that Jamie is from Canberra which would make it a little easier to see him if all else fails.
Once thanks and if the bank pushes me in the wrong direction i will surely be seeking further advice.
Tim
Hi Tim
Even if the Dragon gives you the go ahead why not get onto Jamie and get him to do the SGB Increase for you.
At least you will get it done properly and doesnt cost you anything.
Apart from that he isnt a bad fella.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Tim
Just a bit more info for you…
Let’s say you buy an IP for $400,000.00 and your Gov. legal and Bank costs total $20k. I would seriously consider leaving SGB for a low cost LMI provider (as per Richard's suggestion) and almost certainly a better rate with lower fees.
Approx numbers as follows:
Purchase price $400k +Costs $20k* + Payout SGB $340k = Loan required $760k
*These are an estimate only.
Consider refinancing to ING or other low cost LMI product (subject to eligibility) and borrow 85% LVR against each ppty with the following structure Loan 1 Home Loan $340,000.00. Convert to Interest-only. PPOR as security. Then
deposit your Offset money into Offset Acc.
Loan 2 IP Loan $85,000.00 Interest only Inv. Loan (using PPOR as security)Loan 3 Investment $340,000.00 Interest-only with preferred lender (using Inv ppty
as security)This keeps all your loans uncrossed and easy for your accountant to reconcile.
Make sure the fees are around $20k. If they are more, you may need to contribute some cash.
St George is lagging a little on Interest rates for higher amounts so make sure they do you a deal if you stay with them. Anything around 6.60% – 6.70% variable (after the latest rate reduction) is about right.
Good luck!
Tim McGrath
Tick Mortgage Solutions
[email protected]Not sure if I'd be refinancing to ING – accessing equity can be a painful exercise….that's just me though.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Totally agree Jamie
Supporting documentation with the Dutch includes a blood sample but have a place where you are looking to reduce LMI on high lvr.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
ING can be a little anal at times. However on borrowings of $750k, the potential LMI savings for the customer might be too significant to ignore.
Tim could use his Offset account cash for a deposit (negotiate with real estate agent for <10% deposit), provide a Contract of Sale to ING and all would be good.
Tim McGrath
Tick Mortgage Solutions
[email protected] | (03) 9877-7077Thanks for everyones replies. Had the meeting with SGB and all went well. I have spoken with my partner and agreed that before we commit to anything with SGB we will organise a meeting with Jamie and get an independant analysis of our situation and what we can do to make us save some pennies.
Once again thanks for everyones input and i will contacting Jamie most probably now in the New Year to see how we can get the ball rolling with things.
Excellent Phrix good to hear.
Jamie is a good fella so i am sure he will see you right.
Keep us updated.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Tim@Tick wrote:ING can be a little anal at times. However on borrowings of $750k, the potential LMI savings for the customer might be too significant to ignore.
Tim could use his Offset account cash for a deposit (negotiate with real estate agent for <10% deposit), provide a Contract of Sale to ING and all would be good.
Tim McGrath
Tick Mortgage Solutions
[email protected] | (03) 9877-7077If the aim of the game is to reduce LMI on an 85% lend then why not just use Citibank who won't charge any LMI at all….
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Gidday Phrix,
Sorry for joining this party late, however I was on deadline for an article.
St George are an interesting lender and I use one of their mortgage broker training flyers on my facebook page – the course is called "Customers will do as they are sold".
Although it's currently legal for any mortgage broker to claim independence there is legislation due through next year that will outlaw most from making that claim due to commission bias because commissions vary between around $1960 and $26,000 just among the big 4 banks.
If you really want to save some dollars the only way to side step clever selling is to continue to grow your knowledge and get advice from either a borrowers agent or a pro-consumer mortgage broker rather than old fashioned commission driven brokers.
You should also make sure your lender/broker/agent gives you quotes on your options for your Total Individual Cost, not Comparison Rate etc.
Take care,
Michael
Tim@Tick wrote:ING can be a little anal at times. However on borrowings of $750k, the potential LMI savings for the customer might be too significant to ignore.
Tim could use his Offset account cash for a deposit (negotiate with real estate agent for <10% deposit), provide a Contract of Sale to ING and all would be good.
Tim McGrath
Tick Mortgage Solutions
[email protected] | (03) 9877-7077I am sure that if Jamie looks over the finance he will recommend you don't use cash as a deposit- Using a line of credit or a split loan to pay the deposit will save you loads in tax benefits.
Cheers,
LukeGood point Luke,
Tax advice, estate planning and asset protection are all critical considerations in any investment decision.
It's great to bandy about ideas however when the rubber hits the road, get individual advice and make sure that this advice is independent and from a suitably qualified professional offering a written opinion.
Mortgage brokers arrange loans and when it comes to actual loan/lender selection, it still pays to remember the serious anti-borrower bias that can weigh into the advice of traditional brokers.
Borrowers agents don't suffer this problem at all and pro-consumer mortgage brokers don't suffer bias within their lending panel. Both are licensed professionals for the purpose sorting out your mortgage.
All the best,
Michael
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