Hi
I have a joint investment with a friend and we were interested to buy our own seperate investment properties using the equity from our joint investment. Current investment has loan of around 125 and we just had it valued at 150k by the bank . We are looking to buy an IP each and were hoping to use some of the equity to hel pwith the deposit although we want to do this with minimal risk and for the original IP to not be tied to our new investment proeprties for ever
The only options I could think of are the following (dont know if its feasable or not)
1) Get 2 seperate lines of credit off the original IP to help each of us with the deposit and when the lines of credit are paid off I assume that will mean the Original IP Is no longer tied to the New investments
2) Use the original property to seperately gaurontour the new properties (we probably wouldnt want to go down this path as we dont want the original IP to be forever linked to the new IPs)
Has any one been in this predicament or can anyone shed some light on this
thanks
For your purpose i would say Option 1 makes more sense, and if done correctly it shouldn’t be tied up.
Regards
MichaelMick C | Shape Home Loans
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Thanks Michael … So It sounds like it is feasable then ……We were a bit unsure
thanks
Jameswood wrote:Thanks Michael … So It sounds like it is feasable then ……We were a bit unsurethanks
It should be possible but it doesn't sound like there's much equity. Did I read that right? $125k loan on a $150k val?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Thats correct
Property purchased for 140k with 10% deposit and revalued at 150K
We still have our own savings and 7k FHOG and only want to buy again for 200k or under
Still cutting it fine though I guess
We were hoping to squeeze out 12 or 13k in lines of credit to throw on top of our own money to hopefully get another loan
Ohhh didn’t see the numbers…
Ur on 83% LVR already…
1. don’t have much equity there
2. It be hard to get 2 loc with the lMI ppl
3. LMi will cost ya- so your investment better make a good return for the cost involved.Regards
MichaelMick C | Shape Home Loans
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I was wondering the same thing, as I am in a very similar situation to James Woods.
Would it be relatively simple to organise two lines of credit and use these as deposits for other properties?
Once the lines of credit are paid back, would that effectively sever any ties between the two parties. (e.g. they will obviously be tied by the joint ip, but any additional ones purchased in individual names would be totally independent of the original joint property).
Please help, I'm struggling with this issue…
Ossi89 wrote:I was wondering the same thing, as I am in a very similar situation to James Woods.Would it be relatively simple to organise two lines of credit and use these as deposits for other properties?
Once the lines of credit are paid back, would that effectively sever any ties between the two parties. (e.g. they will obviously be tied by the joint ip, but any additional ones purchased in individual names would be totally independent of the original joint property).
Please help, I'm struggling with this issue…
That’s right it will be all separate; as long as the bank havn’t cross it- which isn’t easy unless both parties agree etc…
But the main thing is; you need equity to be able to draw on a LOC + you would want to avoid LMI if possible; asit will get complex when mutiple LOC are involved + 2 separate mortgagee.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks Michael.
The main thin I wanted to confirm is that this is an option in order to use the equity in the joint investment without having to guarantee each other, or buy another joint investment. We would like to go our own ways but still be able to take advantage of the equity that is in the joint investment without being forever tied.
So if there if sufficient equity, is the process is quite straightforward? I have never done anything like this before so know very little.
Cheers,
Ossi.
Both sign off on the docs as if your both applying for the LOC together; so in a way your both still responsible for the loan which make sense…
No guarantee as such, but joint owners of all the loans including the LOC- meaning you can not say ” he owns this LOC…and i own this LOC” you both own both LOC.guarantee is the another way- this can be more “clean” but more of a hassle.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
That's great! Thanks for clearing that up for me Michael!
But do you really want to be inexorably linked togerth on LOCs 'forever' – sometimes a clean up first (if possible) might be in order.
Hi Derek,
No don’t want to be linked by LOCs forever.
What I would like to do is access the equity I have in an investment property which is in joint names and then use this equity as the deposit for my next IP. I don’t want my friend to have to guarantee my next IP (which will be in my name only), therefore, I thought I could take out a LOC for 50% of the current equity to use as the deposit. I know we will still be linked by the LOC at this stage, but I was under the assumption that once the LOC is repaid all our links will be severed (apart from the original IP). Is this correct?
The reason I want to do this is because I only have the one IP at the moment (the one in joint names I referred to above) and I want to buy another one on my own, but to do it I would need to draw on the equity in the joint IP. Obviously, my friend and I are looking to pursue different things, therefore, don’t want to be tied to each other beyond the current property we jointly own.
Still all very new to this so any assistance would be greatly appreciated.
Cheers,
Ossi.
Hi Ossi
Firstly, you have little equity and virtually none that is usable. But this will come hopefully.
The trouble with 2 on title is 2 on loans. So you and the friend would need to apply for an increase. Both of you incomes etc would need to be proven again. You would both be jointly and severally liable. It could be possible to get the LOC in one name with the other person guaranteeing it. Its a bit messy, but not much can be done about it. Also, if you friend suddenly had bad credit – you could be denied the loan.
So assuming you set a LOC up in both names, you should also do a loan agreement with him lending you half of the money you have taken out. This may not be necessary, but you never know and it could come in handy if audited down the track.
You can also get a new loan and have it stand alone with the existing propert playing no part. ie not used for security in anyway. Even the LOC won't be secured on this property. You could pay the LOC back although for tax reasons it may be better not to.
If you do pay the LOC becareful because he could withdraw or start using it. This could happen at any stage. so maybe request 2 to sign.
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
Cheers Terry,
You make some good points.
Ossi.
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