Hi everyone, I’m after some advice please. I joined this site to gain some unbiased, helpful advice (which I have been struggling to find elsewhere) to help me get the most out of my situation.
I am hoping to buy another investment property this year for 380 – 450k. My fear is that a bank wont loan me the money.. so the usual story.. It has been a while since I got help with crunching numbers and perhaps my chances are better this time round, so I’m hoping you guys could offer some advice if you think I can do this. I’ve heard people get help from brokers who source the money for them? Im not sure, in any case here is my situation.
I brought a property in Mitcham, VIC in May 2008 for $428k. I lived in it for approx 6-8 months with my x girlfriend, we broke up, I chose to keep the house as an investment property and I brought her out. The property was valued (by a company sent by the CBA) at $460,000 (February 2009).
I am still with the CBA, I am on their ‘Wealth Package’, my current rate is 6.56%, (I have already negotiated a lower rate which applies despite rate rises or falls). My loan type is interest only/variable. There is 26.5 years remaining on this, I owe $406,110, $8823.80 of this is in an offset facility. My monthly average repayment amount is around $2260.00
Tenants moved into the property in April 2009 and to date they contribute $1531 per month (after the real estate agent takes a 7% fee). They are reliable tenants. I have put up the rent up twice; I will put it up again in April 2013 by $10pw.
To date, I have been getting my tax return in one lump sum. This year I plan to put the majority of the return into the offset account. Based on last year’s return, I’m estimating that I’ll get approx 7k.
After tax, the Mitcham property costs me roughly 3k a year. So based on this, I feel confident that I can manage another property. However in the past when I have seen bankers (I was on less income 56k) they have told me that I don’t make enough money.
I don’t have a car and I have no other debt, I have no kids, my only other major expense is that I rent with my fiancé and a housemate, I pay $520 per month.In terms of income, I have a government job, it’s relatively secure, I currently make $67,722pa (I clear 4500 a month). I am 33 years old.
I am able to save 10k pa, my fiancé is able to contribute 6k pa.
My accountant tells me (when I meet with him once a year) that when I have enough money in my offset account, it would be a good idea to get another investment property. Last year I got the Mitcham house valued again to see how much equity I have (22 June 2011) and the real estate agent advised that the figure is approximately 515k.
My fiancé and I would like to live close to the city in the not so distant future, we are trying to put measures in place now so it wont sting us so much when that time comes around. We figure that if we use the equity from Mitcham to acquire another investment property (which we will eventually move into) now, it will be cheaper than paying for it in 5 years or so…This is the plan in any case, I am far from an expert. I’m happy for you guys to tell me its full of holes, im really just trying to get some advice, think about and then take an educated risk… I really want to do this.
What do you think?
Hi Anthony
Firstly welcome to the forum and I hope you enjoy your time with us.
You are right Mortgage Brokers source funds from a panel of lenders and most of us dont charge the client anything for our services as we are remunerated by the lenders with who we deal with (This includes lenders such as CBA etc).
All Broker on the forum here have numerous investment properties so understand what most investors require.
In regards to serviceability this is not a straight forward calculation as there are many variables involved in assessing a clients loan.
Lenders such as CBA have a fairly poor serviceability model when it comes to investors so the amount you might qualify with your Bank and another lender could vary considerably.
Regretfully to provide you with a more accurate assessment we would need a little more hard data.
Promise we Brokers dont bite so if you wanted to flick me an email i can give you an indication of what you can likely go upto.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Anthony_Black,
As Richard mentioned; would need a bit more details to provide you with an exact borrowing capacity + is your fiancé going to be on the loan?? if so do she make an income etc….
Just a few comments:
1. What the agent says in term of your property value is pointless- get CBA / a bank to do a valuation on the place, since you haven’t done one for a while
2. Depending on your LVR; it may be worth while to stay with CBA given the LMI cost- but as Richard mentioned CBA has a poor serviceability model ; so it may pay to swap lender who are willing to offer a higher borrowing capacity OR higher valuation for equity release purposes
3. Your accountant is a smart cookie
Save up via the offset, your almost there…4. Saving up for a 10-20% deposit is not easy + it’s a slow process and property prices may have increase faster then your saving ability. So for your next IP lender it may be worthwhile NOT to go with CBA and choose one that offer a discounted LMI cost OR equity release from your current IP as much as possible ( equal balance)
Sometimes it’s cheaper to do a 85% loan for one and another 85% loan for the other….COMPARED to 80% and a 90% Loan- find a equal balance based on cost- something a broker can calcu and work out for you
5. Don’t cross your loans
6. Since you get back 7k in tax every year…get a PAYG Variation done- so instead of waiting to see this money at the end of the year; you get to access it every month.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hi Anthony_Black,
##### Hi Michael, thank you for your advice, most appreciated! Would you mind replying to some questions I have below please?
As Richard mentioned; would need a bit more details to provide you with an exact borrowing capacity + is your fiancé going to be on the loan?? if so do she make an income etc….
##### My fiancé is going to be in on the loan. Although technically she is a student who works part time. This is her last year of uni however, so more help is coming. Not sure how the lender will view this though
Just a few comments:
1. What the agent says in term of your property value is pointless- get CBA / a bank to do a valuation on the place, since you haven’t done one for a while##### I will organise for the CBA to do an evaluation shortly.
2. Depending on your LVR; it may be worth while to stay with CBA given the LMI cost- but as Richard mentioned CBA has a poor serviceability model ; so it may pay to swap lender who are willing to offer a higher borrowing capacity OR higher valuation for equity release purposes
##### Am I right in guessing that once a broker has my details i.e. evaluation of the Mitcham property, he will be able to determine which course of action would be most suitable?
3. Your accountant is a smart cookie
Save up via the offset, your almost there…4. Saving up for a 10-20% deposit is not easy + it’s a slow process and property prices may have increase faster then your saving ability. So for your next IP lender it may be worthwhile NOT to go with CBA and choose one that offer a discounted LMI cost OR equity release from your current IP as much as possible ( equal balance)
Sometimes it’s cheaper to do a 85% loan for one and another 85% loan for the other….COMPARED to 80% and a 90% Loan- find a equal balance based on cost- something a broker can calcu and work out for you##### Pardon my ignorance, but would this also be something that my broker would be able to better advise me on once I get the evaluation done?
5. Don’t cross your loans
##### What does this mean exactly? I read once that crossing my loans would be beneficial as if my situation was to turn sour in the future, bank # 2 could not take the money I owe from bank # 1. It would offer me protection. Or have I got this confused with something else?
6. Since you get back 7k in tax every year…get a PAYG Variation done- so instead of waiting to see this money at the end of the year; you get to access it every month.
####%Ive been thinking of doing this. Hypothetically, if I was to go ahead and purchase a second IP of equal value to the first IP, would I be receiving two lots of approximately 7k from both houses as a tax return?
Save up via the offset, your almost there…You must be logged in to reply to this topic. If you don't have an account, you can register here.
