Hi all investors i'm from sydney. i'm new to investing. Currently i'm trying to get my head around how equity works. Would be great if you guys can help me out. What i want to know is in my example. current home valued at 500k, 300k mortgage. i want to purchase a 400k investment property, so max i can use is 100k from my home equity without LMI. So the bank lends me 300k + 100k equity. What i want to know now is how much do i really owe the bank. Is it 600k? or do i also have to interest on the 100k equity as well? making my total loan to 700k. Also can i borrow the investment property loan from a different bank? So i would have two loans from two different banks. lastly if i have two loans can my home loan be variable and my investment loan be fixed?
Current loan – $300,000
Equity loan – $100,000
New loan ( 80% of purchase price $400,0000- presuming we are avoiding LMI ) – $320,000
So total loan = 300k + 100K + 320K = $720,000
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1. Yes you can have the new loan with a different bank
2. You have access to $100,000 equity, and since the new loan is only $320,000- your using $80,000 of the $100,000- but remember you need to pay for stamp duty as well and other cost which can be used from this equity loan.
3. Tax consideration and loan structures needs to be taken in consideration to maximize the profits and cash flow.
Regards
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hi GLK
There's "actual" equity and "useable" equity.
Actual equity is simply the value of your home minus the loan amount – in this case, you've got $200k
Useable equity is what the bank will let you access. Most lenders will allow you to go up to 80% of the properties value – which in this instance would be $100k (note that some lenders allow you to go up to 90% of the properties value).
You would then use the $100k to cover the deposit/costs on your purchase and arrange a separate loan to cover the remaining balance.
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]
So how would i best structure my loan to maximize my profit and cash flow? Is it better to have two loans 400k and 320k or one loan of 720k? Sorry for all these questions but how does it save on tax?
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