borrowing against equity

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From: Gail Hubble


I'm a beginner and a bit confused. Everyone says you can borrow without a deposit for an IP as long as you have equity in your house. I have plenty (I owe $130,000 on a house worth about $300,000) and would prefer to borrow the whole amount for the IP for tax reasons, but the lenders I have spoken to have all indicated that they want a 10% deposit (which I would then have to redraw off my primary home loan). I would rather leave my home loan as it is. I queried the possibility of a second mortgage, but they all said that because they would be coming in second after another mortgagee, the rates would be really high. So, what does everyone actually mean when they say "use the equity in your home to borrow for an IP". Does that mean a second mortgage, or simply redrawing funds for a deposit? Plus they will only lend me $200,000,even though the IPs I have in mind are all positively geared. I thought I would be able to borrow more. Have I missed something?

Gail
 
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Reply: 1
From: Robert Forward


You can refinance with sub-loans under one piece of collateral.

In other words since you've got $170k in equity, you can arrange your mortgage so you have a $130k mortgage in one sub-loan and say a $100k loan in another sub-loan that you can then draw on for deposits and etc.

But Rolf is the "man", the "loan man", he can explain it to you properly.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.1
From: W W


Gail

You could get a line of credit on your own home up to 80% of its value ie $300,000 x 80% = $240,000. Setup a few sub accounts, ie your home loan of $130,000 and $110,000 in another. Then when you find a property you can draw down on the $110,000 sub account and use that as the deposit. This was the interest is tax deductible and your loans are not cross collateralized.

If you have $110,000 available for deposits you can borrow a fair bit of money. Even if you were not working, using low doc loans you could borrow for about $500,000 worth of property. If you were working it would be even better.

good luck

Passive.
 
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Reply: 1.1.1
From: Glenn M


Passive,


Is it 80% of the $300,000 (current market value) you can draw down on in the form of a LOC or is it only 80% of the equity you can draw down on i.e. 80% of $170,000?


GlennM.
 
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Sim

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Reply: 1.1.1.1
From: Sim' Hampel


The total borrowings must be less than 80% of the value of the property, so 80% of $300,000 = $240,000... now there is already a loan of $130,000... so that leaves $240,000 - $130,000 = $110,000 of extra equity that can be redrawn.

 
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Reply: 2
From: Rolf Latham


Hi Gail

Dont be scared to rearrange finances to suit your changed needs.

When you took out your home loan you possibly had no intention to use it as part of your retirement plan. If this is the case the product no longer suits your current needs.

My suggestion to you you would be to look to someone that specialises in structuring and identifying the most appropriate product for your financial future, that could be your local independent mortgage broker, or your existing personal banker if they are concerned for your future.

Ta

Rolf
 
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Reply: 2.1
From: Gail H


Thank-you everyone, that makes a lot of sense. The mobile borrower that St George sent over knew less than me and had no useful suggestions at all. This forum is a goldmine.

Gail
 
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Reply: 2.1.1
From: Glenn M


Thanks Sim.


GlennM.
 
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Reply: 2.1.1.1
From: Asy .


Or you can try www.asapfinancial.com.au this is Rolf's website, and although he is too modest to advertise for himself I am not too modest to advertise for him!

As he said, speak to a broker who has a particular interest in investing, they are most likely to give you the best advice on structuring your loans.

good luck with it, and keep asking questions, it's the only way to get answers!

asy


There are no problems, only solutions which have not yet been discovered.
 
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Sim

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Reply: 2.1.1.1.1
From: Sim' Hampel


Hmm... do we allow third-party-spam ? ;-)

(I also recommend Rolf's services !)

 
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