1st Investment Property - How do I structure loan

[KathyArthur]

Hi,
Finally bought our first investment property. We're in our early 30's, owe $16K on our principle place of residence (worth $600K+) and have $40K in the bank. We have bought the property for $375K + Stamp Duty. My understanding is that these are our options:
1) Pay off our principle place of residence completely and use this as collateral to avoid paying the Lenders Mortgage Insurance.
2) Refinance both loans to avoid paying the Lenders Mortgage Insurance;
3) Redraw $40K from the principle place of residence + $40K in the bank so we only borrow 80% and therefore no Lenders Mortgage Insurance;
4) Borrow 95% and just capitalise the $10K mortgage lenders insurance.
Also looking at buying another property in the next 6 months or so.
Finally would like to have another child in the next year or so, which will mean we're on one income. I earn alot more than my husband, so we'll need to budget over this period. Any comments or suggestions would be greatly appreciated.

 

[Bigtone]

Hi,
Finally bought our first investment property. We're in our early 30's, owe $16K on our principle place of residence (worth $600K+) and have $40K in the bank. We have bought the property for $375K + Stamp Duty. My understanding is that these are our options:
1) Pay off our principle place of residence completely and use this as collateral to avoid paying the Lenders Mortgage Insurance.
2) Refinance both loans to avoid paying the Lenders Mortgage Insurance;
3) Redraw $40K from the principle place of residence + $40K in the bank so we only borrow 80% and therefore no Lenders Mortgage Insurance;
4) Borrow 95% and just capitalise the $10K mortgage lenders insurance.
Also looking at buying another property in the next 6 months or so.
Finally would like to have another child in the next year or so, which will mean we're on one income. I earn alot more than my husband, so we'll need to budget over this period. Any comments or suggestions would be greatly appreciated.

don't need to pay off ppor straight away, just get a second loan against current property upto 80% of the value of home with current lender.

then use these funds as 20% plus costs on the 1st and 2nd investment properties which should be with different lenders.

keep your current loan redraw open maybe upto limit of $50k so you have a buffer if required to get through the one income stage.

u r in a very good situation.

good luck

 

[Rolf Latham]

Hi,
Finally bought our first investment property. We're in our early 30's, owe $16K on our principle place of residence (worth $600K+) and have $40K in the bank. We have bought the property for $375K + Stamp Duty. My understanding is that these are our options:
1) Pay off our principle place of residence completely and use this as collateral to avoid paying the Lenders Mortgage Insurance.
2) Refinance both loans to avoid paying the Lenders Mortgage Insurance;
3) Redraw $40K from the principle place of residence + $40K in the bank so we only borrow 80% and therefore no Lenders Mortgage Insurance;
4) Borrow 95% and just capitalise the $10K mortgage lenders insurance.
Also looking at buying another property in the next 6 months or so.
Finally would like to have another child in the next year or so, which will mean we're on one income. I earn alot more than my husband, so we'll need to budget over this period. Any comments or suggestions would be greatly appreciated.

Hi Kathy

Welcome

Pretty much what BT said, I will expand on my thoughts

1. Yep, use some of your 40 k cash to kill the last 16 debt. NO to using your PPOR as collateral on any Investment. Depending on your serviceability get as large a STAND ALONE Interest only facility securedONLY on your current PPOR as you can.

2. Sort of, LMI isnt even an outside contention for you, simply you dont need it

3. No to 3. If redrawing you are mixing deductible with deductible debt on a PI Loan.............blech, best of luck ducking the abuse from ur accountant

4. No. This suggests again you want to use the 40 k cash paid savinsg. Keep as much of this aside for your future kiddie needs as possible.

Speak with a good independent broker that can show you how to meet your unstated, but obvious goals.

ta
rolf

 

[KathyArthur]

Hi Rolf,
Thanks. Can you please expand on "depending on your serviceability get as large a STAND ALONE Interest only facility securedONLY on your current PPOR as you can". For someone who is a 1st timer, what does this mean?
Kind Regards Kathy

 

[Rolf Latham]

Hi Kathy

U currently have a home that almost paid off, which you can pay off fully and be mortgage free for 10seconds

One of the challenges with trying to provide specific advice on fluffy ideas and rubbery numbers is that we have NO IDEA of your "soft data". That being what you want to achieve, your non financial ( say family etc) goals. These are questios that arent usually covered by most mortgage or bank folk, and they often have more bearing on the recommendations than the core numbers.

Anywa,now to answer your question..........

If you have a good income , and have a property with no mortgage, get a Line of credit or similar Interets only loan secured only to your Home. You have a value of 600 k on this. AT a PURE GUESS Id say get a 300 k and 180 k split on this property being 80 % loan to value ratio.

The 300 for investement and the 180 for baby buffer.

The to settle the new ip, getan 80 % loan on the new IP for 300 000 secured ONLY to the new ip.

Take 75 k plus stamp duty from the 300 k set up to settle the

Rinse and repeat purchase x 2 if required

Please obtain some advice specific to your circumstances .

ta
rolf

 

[PHF]

How would you time the above loan applications?
Would you apply for the combined $480K facility against PPOR, wait until this had settled, then apply for the $300K IO against IP?

If you took the path above, would servicability be calculated on $780K debt even if you hadn't yet drawn down on the initial $480K component?

What kind of time frame would you expect this whole process to take?

 

[Rolf Latham]

Hi PHF

A little depends.

if the existing mortgage is with a lender that provides decent serviceability AND has the product you need, we simply wipe the existing loan and pop a new one over the exit mortgage.

With most lenders 1 to 2 weeks to full approval in a typical scenario.

If we need to move lender....................maybe a little more.

If that same lender has he capacity to carry the IP, we can generally run the loans in parallel.

if the PPOR secured lender serviceability isnt so great, then the new IP needs to be with a diff lender and APPLIED for after the formal approval for the 480 is given


ta
rolf