How to accelerate purchase of second IP?

Get the property valued and see if you can access the equity in the property.

Depending on the purchase price of the property you might be able to borrow 100% of the new Investment property plus acquisition costs without using your equity or cash.

We purchased a property for a forum member only last week for $121K (No not a typing error) with a 100% loan and managed to add the stamp duty, legals and our property sourcing fee into the borrowings.

Cheers

Yours in Finance

Hi mindseye

An example of tapping into equity.

Say for example that you had a loan of $300k against a PPOR worth $500k and you wanted to buy a $400k IP.

The bank will let you take your loan up to 80% of the properties value so you can use it as a deposit/costs on an IP.

So if it's worth $500k – they'll let you go up to $400k which is an additional $100k.

The $100k needs to be set up as a second loan so you can distinguish deductible debt (the $100k equity release for IP purposes) from non-deductible (the $300k PPOR loan). You would then set up a third loan to cover the remaining balance of the IP.

So it looks like this:

PPOR worth $500k

Loan 1: Current loan $300k

Loan 2: Equity release of $100k (covers 20% deposit and costs on a $400k IP)

IP worth $400k

Loan 3: Loan for 80% of IP ($320k)

Some lenders will allow the borrower to take the loan up to 90% of the properties value. In some rare circumstances, a 95% lend may even be possible.

In your instance, you don't have any equity that you can access as you're already sitting at 90% LVR and it's unlikely that your current lender will allow equity releases beyond this. 

If your current lender allows upfront valuations then it would be worthwhile getting one done – and if the property is worth more, you may be able to access some equity.

Hope that helps.

Jamie 

Nope – cross colaterisation is rarely a good idea.

Cheers

Jamie