LVR = eh??

You can borrow up to 80% of the value of the property without paying LMI (Lenders mortgage insurance).

If the new property is valued at $200,000 you can borrow $160,000 on that property.

OK property 1 is valued at $400,000 and has a loan of $300,000.  You can borrow up to 80% of the value of $400,000 which is $320,000. So you can borrow another $20,000.

 Set up a separate loan for the deposit (don't just draw it out of the existing loan) and then get a stand alone loan of 80% of property 2 against property 2. That way they aren't cross collaterised.  You can do the new loan up to 90% LVR but you'll have to pay LMI.

Hope that makes sense. If not ask further questions.

Essentially yes, though you would then need additional money to pay for stamp duty, building and pest inspection, solicitor/conveyancing and bank fees.

Would be good to understand what your objectives are though.  It might be that you are focussing your eyes on the wrong kind of property for reaching your goals.

Hi Gilly

Welcome aboard.

If you've got a house worth $400k and a loan of $300k then you could take out $20k in equity without having to pay any Lenders Mortgage Insurance (LMI). It's calculated by taking the value of the property ($400k) multiplying it by 0.8 (80% LVR) which equals $320k and subtracting the existing loan amount ($300k). 

Normally you'd use this equity release (the $20k) to cover the deposit/costs on your investment property purchase and then take out a loan for the remaining portion.

However, $20k might only just be enough to cover the deposit/costs on a $200k purchase using a 95% loan on the investment property.

Therefore, you could look at accessing more than $20k and taking your current loan above 80% of the properties value. Some lenders allow you take the loan up to 90% of the properties value – which in this instance would provide you with $60k which would be more than enough to cover the deposit/costs on your $200k purchase.

This part is where a decent broker/banker comes into play. They'll work out how much equity you need to access in your current property to cover the deposit/costs on your investment property whilst keeping your LMI costs as low as possible and also avoiding cross collaterising your current property and investment property.

Hope that helps.

Cheers

Jamie

No worries at all – glad it helped

We throw these phrases around all the time that it becomes second nature – so it's good to take a step back every now and then.

Cheers

Jamie