105% financing - 90% LVR + 15% personal debt
Hi Akumaslair,
I'm surprised no one has suggested using personal debt to make the difference and borrowing 105%, with your deposit held as a 'reserve' buffer in case anything go wrong (eg, you lose your job) and to make sure you can 'sleep easy' at night.
My business, Omega Investments purchased a $360k property in Roxby Downs in September 105% finance - no money down. Here is how it was done:
$324k mortgage secured loan (90% LVR, interest only 5yrs, 8.7%, no LMI)
$45k Fundcorp (subsidiary of Macquarie Bank - 13.5% P&I 7yrs, secured by cavet on property)
$15k major bank unsecured loan (12% P&I 7 yrs)
$360k used to purchase property, $24k used for closing costs (eg, stamp duty etc)
You need a long (at least 60 days, preferrably 90 days) settlement to get this type of deal done, as it can be time consuming and an effort to get it over the line.
Step 1: Fundcorp $45k (secured by cavet)
You firstly apply (through your broker) to Fundcorp for their home loan secured product, which is a personal loan secured not by a 2nd mortgage but by cavet on the property you are buying. A cavet is a notice given to the Land Titles Office requesting that a restriction be placed on your property. (This is automatic and you will need to contest the cavet to have it removed)
Fundcorp will assess you for the loan and provided you can service a $300k loan with a little bit of spare capacity, you should be approved. A maximum of $45k (per property) can be approved. AFTER you buy the property and the mortgage is lodged, Fundcorp will lodge their cavet which prevents you from refinancing your mortgage or drawing any equity out until you have paid out Fundcorp (eg, you could roll Fundcorp's loan into the mortgage as your equity grows).
Step 2: Unsecured bank loan
You then apply for an unsecured personal loan of say $15k. You may need to state what the purpose of the loan is. You can say that you will use it to consolidate existing debt. To do this, you need to have credit card limits of $15k. Withdraw $15k on your credit cards, get the loan approved and cheques made out to repay the credit cards. Immediate pay down the credit cards with the $15k. You will then have a $15k debt (c12%) and no (additional) credit card debt (c18%). Alternatively, just get a St George credit card at 10% (though you mightn't get the $15k limit immediately).
So, now you have $60k in funds for a property purchase ($15k in the bank and $45k from Fundcorp that will be transferred to your solicitor's trust account - you can't directly access this $45k).
Step 3: 80-85% Loan to Value loan
In your case, apply for an 80% LVR loan (eg, $240k). You will still need to pay for the c5% closing costs, so I'd recommend borrowing at 85% and using the remaining funds from the $60k to pay for closing costs. There will be a small LMI charge, which (as in my above case) you can 'add' to the interest rate and not have to pay up front.
So there you have it - your $300k property is 105% financed. The interest rate will be higher than the usual 7.6% deal BUT you didn't need to put any money in. Don't spend your deposit - put it in a separate account and use it (only) when needed to make up any short fall. Assuming you have a 10% deposit on your $300k, your $30k is equivalent to 3yrs short fall of $830 a month in repayments - a huge buffer that let you sleep even though you've borrowed everything, no money down
All the best,
Flynn
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