Hi all,
After some ideas (or to even know possibilities) from some wise people!
If we have a house purchased for $405k with current value at around $420-430 and a mortgage of $400k… what are the possibilities of taking out a loan for an IP?
More info…
Currently paying $3000 per month off mortgage (joint)
Paying P&I at around 5% rate
Have deposit of $20k for IP
Combined income of approx $120k net per year
Let me know if you need anything else.
Advice or ideas on what our options are?
Should we pay off $20k to mortgage to reduce debt there and open up further borrowing capacity?
I've heard some things about family trusts (which I don't fully understand)… is it worth looking into – will it help borrowing capacity situation??
Should we keep current mortgage at P&I or change to I only?
Are we even likely to be able to borrow anymore given the high mortgage??
Should we knuckle down and hold off buying an IP for a little while longer (get loan down and save more for deposit)? (would be our 1st IP)
Not sure if I've given enough info, but your thoughts would be appreciated from such a knowledgeable bunch
Thanks!
Hi Alexandra
Firstly welcome to the forum and i hope you enjoy your time with us.
Ok if you have 20K in cash which you intended to use as an deposit on a new investment property I would paying it off your current PPOR loan and then looking to take a separate loan for the same amount by way of a sub loan.
This way the interest charged on the 20K becomes a Tax deductible expense whereas using your own cash reduces the amount you can claim is reduced.
In saying this remember you cannot borrow more than 95% of the purchase price on a standalone investment property so would need to come up with both 5% deposit as well as your acquisition costs.
Stamp duty in certain states tend to be more expensive for an investment purchase and this would need to be either borrowed using your own PPOR as security by way of a sub loan or from external sources.
Buying a property in Trust will not increase your borrowing capacity as you will still need to provide a Guarantee for the loan.
If you believe there is any chance you may one rent out your current PPOR then certainly you might want to consider switching it to an interest only loan although many lenders will not allow this on a PPOR.
Initially i think you challenge is going to be a lack of access a sufficient deposit.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard – yes my concern was having trouble getting a deposit together which is why I've been saving extra, rather than paying extra off the mortgage. We'll keep working at that one
Ok, so you're saying that one way to do it would be to put the 20k towards the mortgage – then loan it out again for tax benefits… and use that as the deposit still (but that it probably won't be quite enough… depending on the IP we buy & other costs)?? Just trying to make sure I understand what you are saying.
I know there are many other factors, but do you think we would get a 95% loan for an IP even though we have such a high mortgage on our current house (I think we'd aim for only an 80%max loan anyway, so more reason to work towards a higher deposit)?
I realise it would be wise to chat to a financial planner for specifics, however thought I'd get a few opinions from here first – so thanks for your response.
Alex
Hi Alex
Yes subject to serviceability 95% + LMI maybe possible.
Hate to say although i am a Financial Planner if i didn't also hold a Credit License i couldn't provide you with credit information.
A Financial Planner alone is not licenced to provide such an assessment.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
alexandra.v wrote:Ok, so you're saying that one way to do it would be to put the 20k towards the mortgage – then loan it out again for tax benefits… and use that as the deposit still (but that it probably won't be quite enough… depending on the IP we buy & other costs)??
Yep spot on – but you're probably best off waiting a few more months until you've got a larger sum of cash to inject into the loan and reborrow because at present it doesn't look like you'll be able to buy much.
Why are you aiming for an 80% lend? Is it simply to avoid LMI? If so – that's not always a great decision.
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]
Get a valuation or two done on your property as it could be valued at more than you think or less.
Consider a 90% lend on both properties. Can go to 95% as I've seen it work but really needs to be in a moving market imo. or if you intend to hold for an extended period.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
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