Hello All,
I own an apartment and am looking to purchase a house to move into with my partner.
The apartment is under my name completely. I owe about 240k on the apartment mortgage and it's worth about 360k right now.
I don't have any savings for a house deposit.
I have been told by a close friend that I might be able to have my partner buy into the apartment I own, and put in 50% of its value i.e 150k+ by getting a loan separately for that. Then we can use that 150k to put down as a deposit on a house (we're looking at spending about 800k on a house).
I'm hoping someone can tell me if this is possible, and if I should be speaking with a mortgage broker to do this? Or just go straight to my existing bank that has my current mortgage on it with the apartment? (Bankwest)
Thank you very much
Ok I will respond in point format:
1. First thing to do is change your existing mortgage to Interest Only and have a linked Offset if you haven't done so already.
2.. Second thing to do is order an upfront valuation to determine the exact value of your apartment – it may be more or it may be less. Either way is crucial as it will tell you how much equity you have to play with. Its free and some lenders offer this.
3. At an 80% lend you have $48k in equity (assuming your property is valued at $360k and your loan is $240k).
4. If you add your partner onto the title you/they will need to pay stamp duty. Why are you doing this?
5. Bankwest is one of the worst lenders for a number of reasons.
Can you answer the question to point 4 and also can you advise whats your budget for the next purchase (and which State)?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi Shahin,
thanks for your respone – much appreciated. here's the answers:
1. First thing to do is change your existing mortgage to Interest Only and have a linked Offset if you haven't done so already.
Have not done this. Never even thought about it. But can certainly look into it. Woudl i do this through bankwest (or the bank i re do it with).
What is the advantage of this?
2.. Second thing to do is order an upfront valuation to determine the exact value of your apartment – it may be more or it may be less. Either way is crucial as it will tell you how much equity you have to play with. Its free and some lenders offer this.
My neighbours apartment sold for 360k which is identical 12 months ago, so it's at least that. but can get a fresh valuation done.
4. If you add your partner onto the title you/they will need to pay stamp duty. Why are you doing this?
I don't know. Bad advice… I guess. To get access to 150k as a deposit. Rather than saving a deposit and waiting another 3 years?
5. Bankwest is one of the worst lenders for a number of reasons.
That sucks. I really need to refinance!
House budget is 800k in Victoria.
Thank you again,
Joel
Hiya Joel
You could keep things simple and simply access equity in your current property which will be used to cover the deposit/costs on your next property.
If your property was valued at $360k, you could take your current borrowings up to 90% of the properties value which will give you around $80k to play with.
This $80k would need to be set up as a separate loan so you don't contaminate your deductible IP debt with your non-deductible PPOR debt (the equity release).
Did you pay LMI on this loan previously? If so, I wouldn't rush to refinance as you'll be required to pay a new LMI premium with a new lender if you access equity above 80% of the properties value. If you've already paid LMI with your current lender, then the equity release above 80% would simply be a top-up on the existing premium which is a cheaper option.
However, $80k isn't going to buy you an $800k PPOR in VIC – you're going to need to chip in some of your own funds as well.
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]
1. Advantage of going to an IO loan versus a P & I is predominantly increased cashflow and ability to use the surplus of funds which you have accumulated in your offset to fund you for your next purchase and so on. You want to keep this debt at maximum as it is 'good debt' i.e. tax deductible.
4. Ok so you don't need to add your partner to the loan. Are you purchasing the $800k in both names or just in your name? Why don't you simply use the $150k for the new purchase?
If you are purchasing a house for $800k in Victoria you will need a minimum of $100k deposit. You already have $48k as I mentioned above. Make sure these loans are structured correctly and are standalone loans. If you want to avoid LMI then you will need about $205k. Again you have $48k in equity and sounds like you have $150k deposit.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
HI Shahin,
New house will be purchased in both our names. That's the plan to use the 150k in the new purchase. But just not sure how to get that (well more sure now thanks to the tips here!)
Just to be clear, I don't have the 150k deposit. Only the equity in the apartment – that's all.
Hey Jamie,
Thanks so much for the reply.
I didn't pay LMI on my apartment. My folks were nice and setup a loan on their own house to help out. But that has all been closed now so I can't access it again.
How does the 80k loan work? Would that go through bankwest if i stay with them to get that loan against the apartment? (separately).
We can def chip in some cash and save over the next 6-12 months. I just got a new job and am doing OK.
Thank you again
Joel
Ok so draw upon the equity against your apartment at say 90% – the LMI will not be huge and try and keep the LVR of the new purchase to under 90%. I would not recommend you going to 95% on the new loan.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
dj_siek wrote:Hey Jamie,Thanks so much for the reply.
I didn't pay LMI on my apartment. My folks were nice and setup a loan on their own house to help out. But that has all been closed now so I can't access it again.
How does the 80k loan work? Would that go through bankwest if i stay with them to get that loan against the apartment? (separately).
We can def chip in some cash and save over the next 6-12 months. I just got a new job and am doing OK.
Thank you again
Joel
No worries.
You can either access that equity with BWA – just make sure it's set up as a separate loan, that's very important.
You could also refi to another lender if BWA are causing you headaches.
Given that you didn't pay LMI on this loan – an external refi shouldn't cost too much, but I'd probably have a crack at doing it with BWA firstly.
The IO for the first loan (the IP loan) is important because this loan is deductible – therefore, you want to avoid paying down any of the principle on this loan as you'll have a non-deductible PPOR debt. If you were to pay any loan down first – it should be your PPOR loan.
This blog entry explains the concept.
Cheers
Jamie
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]
I think I understand what you were attempting to do with regards to the $150K. You were thinking that your partner could buy half the apartment property at $150K and take out a loan for it, with the fund proceeds being used for the deposit on the new property.
Unfortunately it doesn't work like that. If she did take out a loan for $150K, with an existing loan of $240K on your part would make it $390K in total, and with a property value of only $360K, the LVR is over 100%. What would happen is that if she did take out the loan, your part of the $240K would need to be paid down with these funds, so you would basically be back to square one.
Cheers
Tom
Yes it can be done.
As the house is in Vic your spouse can buy the whole of the existing property from you (no just 50%). This will release the full $150k which can be used to pay down the new PPOR loan saving you a lot of non deductible interest each year. There is no stamp duty payable in VIC on the transfer between spouses.
Cost will be small, some legal advice, tax advice and conveyance. but the potential savings are much greater.
How much you could save would depend on the spouses income, rents, depreciation etc.
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
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