Hi All,
Due to recent equity gains in my PPOR I’m considering purchasing an investment property. With a PPOR valued at $900k and a loan of $500k I currently have approx $400k in equity.
Assuming I can use this property as a guarantor for the new IP loan, can I assume I’ll be able to get a seperate IP loan which exceeds the IP property value. That being, with the new IP loan covering:
– 100% value of property
– Stamp duty (located in WA)
– settlement fees plus any other purchasing costsFor example:
1. $500 purchase value
2. $18k stamp duty
3. 2k settlement fees etc
4. LMI too?Total loan: $520k
Is this how it works? Also borrowing 100% value, will I also have to pay LMI for the amount over 80%?
Thanks in advance,
Rgds
Wayne
Hi Wayne,
Is this how it works? Also borrowing 100% value, will I also have to pay LMI for the amount over 80%?
Surely it would depend on whether you went for two separate loans or a cross-securitised loan. By going for two separate ones, you would eliminate LMI (I would think). e.g. Borrow deposit/costs against your PPOR. Take out a separate loan from your personal home loan, so it can be considered as “investing”, thus helping tax-wise. Then borrow up to 80% on the IP, eliminating the need for LMI. Personally, I’d use a different lender for the IP than for my PPOR…. but then your mortgage broker can guide you through all this stuff.
Beware of going the “all-in-one” cross-securitised way (some say cross-collateralised). There are warning posts on here re that path. If you can’t find them, just ask – I reckon I can find them…. Usually, that “crossed” way is helpful to your bank, but not so much to you.
BTW, please note I am NOT an adviser of any kind – just a bloke with an opinion and a few runs on the board. So DO check all this out with your favourite adviser,
Regards, Benny
Morning Benny,
Thanks for taking the time out to reply.
I see – that definately makes sense! Can I ask why you would use a different lender for the IP to your PPOR?
Thanks for the heads up re the “cross-security” – I was just reading up on other posts such as the below you’ve commented on: https://www.propertyinvesting.com/topic/5048020-cross-collaleralisation-ever-a-good-idea/
Will continue to research further…
Cheers
Wayne
Using a different lender for IP’s was simply so that, if the proverbial ever hit the fan, my lender would not have the choice of selling my PPOR from under me. Given that it is common to have had many years of paying down its debt before getting into IP’s, and its value is likely to have climbed, if a lender wanted to get their money, the PPOR may have been the one with the most equity available to them.
That is ALSO why (I believe) one should never cross-coll. That allows the lender to dictate how things might happen when you want to pay down dollars, or want to refinance. And of course, it mixes up your Tax-deductible with your non-Tax-deductible debts too (unless ALL loans against your PPOR were for investing – i.e. you had paid off your home loan already). So, yeah, NAH !!! :p Tread carefully.
Oh, but, I DID borrow against my PPOR with separate “loans for investing” as deposits/costs for IPs, so the interest was Tax-deductible (I’d previously paid off the PPOR). Still stayed with the original lender, and used a broker to find funds from other lenders for 80% loans against the IP’s.
Benny
PS good work finding the links re cross-coll – they make interesting reading, eh?
Hi Wayne,
Sound advice there from Benny, it is good to source separate lenders, when mixing up your loans across PPOR and IP purchases. Diversify and minimise your risk where you can. I’m currently going through an equity draw down on an IP, and have been to a number of lenders and different loan structures to get it right. The figures I am getting based on differenet lenders and valuations varies wildly, (well, for my property it has been the case) so it’s good to shop around and make your brokers do the heavy lifting. Dont let them be lazy and push you into an easy deal, ask a lot of questions.
As mentioned ineterest only, and variable may be the best type of loan for what you need, but again, have a chat to a senior broker. Happy to point you in the right direction, for a no obligation discussion. Disclaimer is, I am the General Manager of a finance company and we have 4 senior brokers, that I could recommend. We have access to over 50+ lenders so I am sure we can find a lender which will suit your personal financial situation.
Either way, some great tips on this forum and happy for you to reach out to me directly if you like. All the best, and good on you for taking action!
Cheers, [email protected]
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