Hi all,
I was hoping someone could shed some light on my current situation as in the best way moving forward for structuring of loans etc for an PPOR (to then be turned into an investment property).
Quick background info.
My partner and I (both 27 years old, combined income of 141 – 160k per annum) purchased a 2 bedroom property off the plan in Hughesdale for $485,000 in 2010. This is due for completion in Feb 2013 http://www.lantanaapartments.com.au
We put a 10% deposit down with the real estate agent in trust.
Whilst waiting for this to be completed, we have also purchased a 1 bedroom apartment in South Yarra for $475,000 which is due for completion in 2014 (investment only). The 10% deposit is sitting in a term deposit until required therefore earning us interest.
Since i need to settle in Feb, I need a bit of help understanding the best loan structure moving forward as i am planning to live in Hughesdale for 2 – 5 years and then purchase a place to live in, therefore turning Hughesdale into an investment property.
My partner and I have saved in addition to the deposits a further $89,000 of which i was looking to use 48,500 on Hughesdale to increase my deposit to 20% therefore avoiding MLI.
The remaining 30 – 40k would be used in an offset account against Hughesdale, to be used for startups and then as a bit of a foundation of savings.
In 2 – 5 years time, i was hoping to use the money in the offset account to purchase a PPOR and move out of Hughesdale.
With my Hughesdale loan, is it best to go with an interest only loan, or should i look at P&I?
Also with my initial deposit, is it worth putting the 20% down against Hughesdale to avoid mortgagae lenders insurance or should i only put the minimum required 10% down and keep the other cash freed up in my offset account to be used at a later date on a PPOR?
I understand the basics in that decreasing a non-deductable debt such as a PPOR is favourable but i'm unsure with the nature of a PPOR turned investment.
A bit of direction would be much appreciated.
Kind regards,
BigO
There are three very highly respected mortgage brokers on these forums that would sort this out for you in a heartbeat. Pick one and give them a call. Userids are Jamie M, Qlds007 and Terryw
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks Jac.
Are any of them based in Vic, i understand these days with email and phone it's easy but i prefer to deal with someone local e.g. Victoria
Hi the BIG O,
Firstly welcome and well done on your purchases.
With time being so short, I would recommend contacting the three brokers that JACM have mentioned they are all good, Sure face to face may make you feel comfortable but to be honest, you will get the right advice from these guys.
Sorry this might sound like a stupid question, Have you got a pre approval from another lender or anything like that?
Also with settlement occurring on February are you aware of the forecasted rental returns? Are they going to rent the property from day one or once they find a tenant?
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
Hi bigo
Location isn't an issue these days – everything is done via email/phone.
This morning I wrote loans for two forum customers in Melbourne, one in Sydney and ran some scenarios for someone in Darwin – all from my office in Canberra.
I think I responded to your post in another thread so won't repeat the advice here.
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]
Thanks JP, will do.
I have already got pre approval from NAB and the settlement in Feb is for PPOR, which i hope to turn into an investment in 2 – 5 years time, so for the time being i don't have to worry about tenants.
Hi BigO,
Given you signed the contract to purchase this property two+ years ago I wouldn't be making any grand plans until your valuations are in and both properties have settled.
The Melbourne unit market is a very different beast now to what it was two years ago and there are a number of things that can throw a curve ball at you even at this stage.
While you have/had a pre-approval the bank has, in all likelihood, not done its final checks and balances. You probably had conditional finance approval and the final outcome will only be determined when the bank undertakes valuations and further assessment of your financial situation is completed.
Thanks Derek, valid point on the valuations.
With regards to valuations, this was completed only 2 months ago by the developer (independant valuer) and the figures came out at 505k which is 20k more than what i purchased in 2010.
Not really making grand plans, just ensuring that i have my loans structured correctly from the start and a financial goal to follow.
Even if the property dropped between now and settlement, i would still have 20% deposit should i need it.
Cheers QLDS, i agree with regards to NAB.
I only did a preapproval to "test the waters" on borrowing capacity, along with the fact that the lady i met with was a colleagues wife.
I'm leaning towards CBA but I'm meeting with my mortgage broker next week to discuss other lenders and products.
Thanks to you and Jamie's advice, im most definately going to put down 10% and keep the rest in the offset.
I know it seems selfish getting all this advice for free online but I really just want to learn all the available options so that I am armed with this info heading into discussions with brokers etc.
Thanks again.
Hi Bigo
Congratulations on making the move into your own PPOR.
Given what you are wanting to achieve i am not sure i would suggest the NAB as a perfect fit.
I would be looking to go to 90% lvr and placing the balance of funds in an offset from day 1.
Also suggest you look at a lender who doesn't charge LMI but self insures as this in itself could save you more than few dolllars
Remember LMI or the equivalent is a loan cost and therefore a Tax deductible expense once the property becomes available for rent.
Assume the cost was $5000 and you settled on the 1st July 2013 and then made the property available for rent 2 years later you could claim $3000 over the remaining 3 years.
Getting it right upfront can save $000 in the long run and set you for your future investing.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi bigo
Must admit i personally wouldn't be using CBA either for such a deal but maybe your Broker has a reason.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Qlds who would you lean towards more for this kind of deal?
Only reason I said CBA is at this point in time i've got all my accounts with them, i havent done any review/analysis of home loan products yet.
Without full details bigo difficult to provide you an immediate suggested lender but in the main would depend if you intend too to borrow 100% and use the 20% balance as collateral security.
If so you are going to be limited to lenders but of course down the track could prove the most Tax effective move.
As i say not a matter of plucking a lender out the sky more a matter of analysing your requirements and seeing who would be most suitable.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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