Buying a third property with no deposit???

Another one of those "where do I get the deposit from" questions for the finance gurus. Any advice would be appreciated.

I currently own two IP's worth approximately $800k in total for which I receive $755 p/w rental income. I owe approximately $650k on these properties. Both of the existing IP's are fixed loans with the CBA for another 2-3 years. I have no other debt and am currently renting a property myself. I have a reasonable income from my day job of $125k which is very secure.

My question is I wish to purchase a PPOR but have no deposit. Is there enough equity in the IP's for the CBA to lend me 100% of the new purchase (about $600k) or would my only option be to pay the break fees on the IP loans and move to another lender, or is a new purchase beyond my reach for now.

Thanks in advance.
 
Maybe you could top up the IP loans to 90% LVR - giving you a $70k deposit to put towards the PPOR loan.

CBA will lend 95% on a PPOR loan (and capitalise LMI up to 97%) for existing customers (proving your banking history has been perfect over the last 6 months). The $70k will be enough to cover the 5% deposit, completion costs and the portion of LMI that you'll have to cover.

Are the two IPs on separate loans or are they cross collaterised? If their separate, what are the numbers on each (how much is owing and what are they worth?).

Jamie
 
Thanks Jamie,

The loans are separate,

loan one - $297k at 6.99 fixed until March 2012 property valued at $360k
loan two - $353k at 7.59% fixed until Oct 2012 property valued at $440k.

Would I have to to cross collateralise or have to pay break fees on the fixed loans to get the money out for the deposit.

Thanks

Mark
 
I personally dont think you have enough equity. really at your level you wont be going over 80% LVR which is where your at now.

In saying that if you choose to go to 90% and the bank accepts it, then new loans are setup in addition to the existing ones. hence no break fees. there will be 2 loans per IP instead the current one.
 
Hi Mark,

You should be able to top-up the two loans to 90% LVR and take out two separate lines of credit that can be combined to use as a deposit for your PPOR (avoiding cross collaterisation).

Loan 1 - Line of Credit = $27k
Loan 2 - Line of Credit = $43k
Total deposit for PPOR = $70k

As the last poster mentioned, this will effectively place two loans on each IP (the original loan + line of credit).

Note: you may have to pay some additional LMI for topping loans up to 90% LVR.

However, the $70k isn't quite enough for a 90% loan + completion costs on a $600k home so you'll need to go with a lender that will lend you greater than 90% LVR. As mentioned in the previous post, CBA will do this for a PPOR for an existing customer - however, you'd be crossing over the $1m mark with them which I believe has some implications.

Best of luck!

Jamie
 
You'll also find that once you start to hit $1M in aggregate facilities cba can begin to get nervous. Not saying in your case but you might want to cash up to max lvrs and find another lender to use. Doesnt mean x-colling either
 
At a mill the deal will get referred out to Genworth, because the DUA for LMI at CBA is one mill.


Doesnt mean its not doable, just it better be very solid


It wouldbreak one of my "rules of common sense" to even attempt to get the purchase through the same lender. The primary reason is imagine in 2 or 3 years when u want to by IP x, you then have to convince Genworth to give u cash out , blech............

There are other lenders that will use PMI/QBE and go to above 90 %, though > than 500 k lend wont be easy on IO, esp with the busy craa file

ta'rolf


ta
rolf
 
Have you actually done the numbers on this? Your IPs would likely be negative cashflow by at least 15k. IO on 650k of PPOR loan (including costs and LMI) would be around 42k. Add another 5k, at least, for utilities, rates, insurance, etc.

Assuming your 125k is a package, after super it's 115k. Your after tax is probably around 85k v 62k net cashflow above, leaving you with 23k net for living expenses.

Every 0.25% increase in mortgage rates is another 1,500 on the PPOR payments, assuming rent increases to cover it on the IPs.
 
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