Can I borrow stamp duty and closing costs?

[Harileong]

Hi, brand new to the forum had a scout around and couldn't find this information so forgive me if it's hiding in plain site.

27 yo Male
Debt: 0
Cash on hand: $25k
Income: $50k per year
Partners income: $55k per year

My girlfriend and I have spent the last 2 years getting our finances sorted, eradicated all the bad debt, and have done well for ourselves. We rent in inner city Melbourne and have found an excellent balance between dedicating a fixed amount to savings/investments and living a good lifestyle.

For the past 8 months we have put away $600 weekly without fail, and this is an amount I can comfortably say we could do inevitably.

I have read about a dozen property investment books and all have solidified my confidence that a good solid plan will have us out of our low income jobs within a decade, or at least cutting our high workload.

I am by nature, patient. I was (And am) very happy to wait until we have enough actual cash to buy a property (preferable a house) within 20km of one of Brisbane, Sydney, Melbourne or Perth and if it's in the near future probably Brisbane. This morning I saw an advertisement from citibank for personal loans at the low rate of 5.9%, albeit only for two years before the interest rate gets hiked to credit card like levels.

Is it a smart strategy to take an extra 25k loan from citibank to bring me up to my ~50k which would be enough for a 5% deposit loan plus lmi stamp duty and closing costs (which I figure to be about 12% of the purchase price all up) on a 400k property in middle ring Brisbane?

Will lenders take an unfavourable position to me if I am not supplying all these costs with my own money?

The cost of paying off this 25k personal loan works out to be around $275 a week, substantially reducing the $600 I would be dedicating to investment, however the exposure to a strong Brisbane market greatly outweighs the cost of not being invested for the extra ~year it would take me to save up the funds I need in cash.

Any comments would be greatly appreciated.

 

[HD_ACE]

Get in touch with a good broker and see if adelaide bank still do the 20k credit card with the loan to cover stamps and closing costs lmi can be added to the loan so all youll need is the deposit in genuine savings to get the ball rolling.

 

[Rolf Latham]

Credit score will be affected possibly

This will possibly be further impacted due to previous enquiries and unsecured debt.


Be very choosey , you will likely only get one or 2 tries and u will be sitting out for 6 to 12 mths


Ta

Rolf

 

[Terry_w]

It will be very hard to qualify for a 95% loan at the best of times, having a personal loan on top would make it harder.

But from a tax point of view it may be a good idea to borrow 103% of the price - however the citbank loan would be PI.

 

[Jess Peletier]

Adelaide still do the credit card but have Max LVR of 95% including capped LMI. So no good in this situation.

 

[Redom]

Hi, brand new to the forum had a scout around and couldn't find this information so forgive me if it's hiding in plain site.

27 yo Male
Debt: 0
Cash on hand: $25k
Income: $50k per year
Partners income: $55k per year

My girlfriend and I have spent the last 2 years getting our finances sorted, eradicated all the bad debt, and have done well for ourselves. We rent in inner city Melbourne and have found an excellent balance between dedicating a fixed amount to savings/investments and living a good lifestyle.

For the past 8 months we have put away $600 weekly without fail, and this is an amount I can comfortably say we could do inevitably.

I have read about a dozen property investment books and all have solidified my confidence that a good solid plan will have us out of our low income jobs within a decade, or at least cutting our high workload.

I am by nature, patient. I was (And am) very happy to wait until we have enough actual cash to buy a property (preferable a house) within 20km of one of Brisbane, Sydney, Melbourne or Perth and if it's in the near future probably Brisbane. This morning I saw an advertisement from citibank for personal loans at the low rate of 5.9%, albeit only for two years before the interest rate gets hiked to credit card like levels.

Is it a smart strategy to take an extra 25k loan from citibank to bring me up to my ~50k which would be enough for a 5% deposit loan plus lmi stamp duty and closing costs (which I figure to be about 12% of the purchase price all up) on a 400k property in middle ring Brisbane?

Will lenders take an unfavourable position to me if I am not supplying all these costs with my own money?

The cost of paying off this 25k personal loan works out to be around $275 a week, substantially reducing the $600 I would be dedicating to investment, however the exposure to a strong Brisbane market greatly outweighs the cost of not being invested for the extra ~year it would take me to save up the funds I need in cash.

Any comments would be greatly appreciated.

Hi Hareilong, sit down with PT - if it can be done, he'll sort you out. This is the sort of one where i'd be making a few calls...

Re your scenario: your servicing is strong, so your borrowing power should be fine even with a 20k card attached. However, getting LMI with 'borrowed funds' used to fund the deposit can be very tricky. You can get around the genuine savings hurdle with your 25k cash savings, but getting through LMI providers is tricky.

Alternatively, you can consider taking advantage of FHOG and buy in Melbourne. You'll get in and you'll be able to purchase reasonably easily today and there's a neat ING product that could save you thousands on LMI.

RAMS could be another good bet - they're great on high LVR loans. Tobe (also melbourne based) from the forums is with them i believe.

Cheers,
Redom

 

[Redom]

Hi, brand new to the forum had a scout around and couldn't find this information so forgive me if it's hiding in plain site.

27 yo Male
Debt: 0
Cash on hand: $25k
Income: $50k per year
Partners income: $55k per year

My girlfriend and I have spent the last 2 years getting our finances sorted, eradicated all the bad debt, and have done well for ourselves. We rent in inner city Melbourne and have found an excellent balance between dedicating a fixed amount to savings/investments and living a good lifestyle.

For the past 8 months we have put away $600 weekly without fail, and this is an amount I can comfortably say we could do inevitably.

I have read about a dozen property investment books and all have solidified my confidence that a good solid plan will have us out of our low income jobs within a decade, or at least cutting our high workload.

I am by nature, patient. I was (And am) very happy to wait until we have enough actual cash to buy a property (preferable a house) within 20km of one of Brisbane, Sydney, Melbourne or Perth and if it's in the near future probably Brisbane. This morning I saw an advertisement from citibank for personal loans at the low rate of 5.9%, albeit only for two years before the interest rate gets hiked to credit card like levels.

Is it a smart strategy to take an extra 25k loan from citibank to bring me up to my ~50k which would be enough for a 5% deposit loan plus lmi stamp duty and closing costs (which I figure to be about 12% of the purchase price all up) on a 400k property in middle ring Brisbane?

Will lenders take an unfavourable position to me if I am not supplying all these costs with my own money?

The cost of paying off this 25k personal loan works out to be around $275 a week, substantially reducing the $600 I would be dedicating to investment, however the exposure to a strong Brisbane market greatly outweighs the cost of not being invested for the extra ~year it would take me to save up the funds I need in cash.

Any comments would be greatly appreciated.

This may not be your cup of tea - but what about an OTP in Brissy? If you see the market moving, pay 5% now, get the growth to kick in over the next 18 months while you save. Save on LMI. Etc etc.

It may not be the best strategy all round, but it is effective if you want to get in and see the market moving in a short space of time. One of my first purchases was simply to 'get in'. It was an OTP in Sydney and i sat in a very similar position to you before buying. Soon after it was built, i had 80k from equity gains.

Cheers,
Redom

 

[Mick C]

This morning I saw an advertisement from citibank for personal loans at the low rate of 5.9%, albeit only for two years before the interest rate gets hiked to credit card like levels.

^ Having an unsecured personal loan ( Taken out recently ~within 12 month) + Applying for a high LVR loan is bad combo, chance of rejection increase greatly, not"im possible as such"- the rest of your file just needs to be super strong for this to pass.


With your $25k savings you have enough for a 95% loan...you just need to save ~$12-13k for closing cost and you be set ( not easy i know...But def better than trashing your credit file )

Adelaide still do the credit card but have Max LVR of 95% including capped LMI. So no good in this situation.

^ The Credit card is now only available for LVR up to 80% only

 

[Harileong]

Credit score will be affected possibly
Be very choosey , you will likely only get one or 2 tries and u will be sitting out for 6 to 12 mths

Just to clarify, if the application fails I'm likely to be out of the market for at least 6-12 months because no other lenders would touch me? Considering I'd be waiting 12 months plus anyway to save up more cash how negative is this for me?

This may not be your cup of tea - but what about an OTP in Brissy? If you see the market moving, pay 5% now, get the growth to kick in over the next 18 months while you save. Save on LMI. Etc etc.

I'm not adverse to off the plan, so this may be worth consideration, however for now I would like to buy something established.

Hi Hareilong, sit down with PT - if it can be done, he'll sort you out. This is the sort of one where i'd be making a few calls...

I'm happy to talk to anyone! Who and what is PT?

Re your scenario: your servicing is strong, so your borrowing power should be fine even with a 20k card attached. However, getting LMI with 'borrowed funds' used to fund the deposit can be very tricky. You can get around the genuine savings hurdle with your 25k cash savings, but getting through LMI providers is tricky.

And if I only borrow the stamp duty? What if I had the deposit and LMI on hand, get loan approval, then take out said personal loan to pay Stamp Duty on settlement. WIll this affect my chances of application? Does a bank need to see I can pay stamp duty?

Alternatively, you can consider taking advantage of FHOG and buy in Melbourne. You'll get in and you'll be able to purchase reasonably easily today and there's a neat ING product that could save you thousands on LMI.

I rent an inner city apartment 7 minutes walk from the Crown Casino where both myself and my partner work, the fact we have 0 transportation costs has been a big reason why we have been able to save so effectively and still have exceptional lifestyle, and buying an apartment in Southbank is really not a good idea because of the massive oversupply, if this wasn't the case we would definitely look into this.

Thanks for the replies!

 

[Redom]

I dont think you'll be ruled out per say, lots of lenders don't go through a computerised scoring system. But it would limit your options if you try and fail over multiple lenders.

PT - Peter Tersteeg. Melbourne based and finance guru. See other finance threads - his big on SS.

Bank will ask for proof of funds at 95% lends - so they'll need to see that you can finance it. Unlikely to accept borrowed funds, especially the LMI provider.

Great work with the OTP/PPOR comments - clearly you've thought it through really well.

Cheers,
Redom

 

[Jess Peletier]

^ Having an unsecured personal loan ( Taken out recently ~within 12 month) + Applying for a high LVR loan is bad combo, chance of rejection increase greatly, not"im possible as such"- the rest of your file just needs to be super strong for this to pass.


With your $25k savings you have enough for a 95% loan...you just need to save ~$12-13k for closing cost and you be set ( not easy i know...But def better than trashing your credit file )




^ The Credit card is now only available for LVR up to 80% only

There you go then. When did that change Michael? I must've missed the memo

 

[albanga]

The savings based on transport though is usually offset by the location.
For example you may be paying $550 for a 2 bedder in south bank whereas that same apartment in say Brunswick might be renting for $450. Point being if you currently rented in Brunswick and we're paying less rent you would be paying more on transport which would put you equal anyway.

This same principle sort of applies to buying as well. A new 2 bedder in south bank sells for what? Say roughly 600k? OTP in Brunswick you can get for 475. In terms of that additional amount in a loan it would more than offset the additional travel costs.
Not to mention Brunswick IMO is a far better purchase than South bank.

 

[sumterrence]

Hi, brand new to the forum had a scout around and couldn't find this information so forgive me if it's hiding in plain site.

27 yo Male
Debt: 0
Cash on hand: $25k
Income: $50k per year
Partners income: $55k per year

My girlfriend and I have spent the last 2 years getting our finances sorted, eradicated all the bad debt, and have done well for ourselves. We rent in inner city Melbourne and have found an excellent balance between dedicating a fixed amount to savings/investments and living a good lifestyle.

For the past 8 months we have put away $600 weekly without fail, and this is an amount I can comfortably say we could do inevitably.

I have read about a dozen property investment books and all have solidified my confidence that a good solid plan will have us out of our low income jobs within a decade, or at least cutting our high workload.

I am by nature, patient. I was (And am) very happy to wait until we have enough actual cash to buy a property (preferable a house) within 20km of one of Brisbane, Sydney, Melbourne or Perth and if it's in the near future probably Brisbane. This morning I saw an advertisement from citibank for personal loans at the low rate of 5.9%, albeit only for two years before the interest rate gets hiked to credit card like levels.

Is it a smart strategy to take an extra 25k loan from citibank to bring me up to my ~50k which would be enough for a 5% deposit loan plus lmi stamp duty and closing costs (which I figure to be about 12% of the purchase price all up) on a 400k property in middle ring Brisbane?

Will lenders take an unfavourable position to me if I am not supplying all these costs with my own money?

The cost of paying off this 25k personal loan works out to be around $275 a week, substantially reducing the $600 I would be dedicating to investment, however the exposure to a strong Brisbane market greatly outweighs the cost of not being invested for the extra ~year it would take me to save up the funds I need in cash.

Any comments would be greatly appreciated.

Does you or your partner's parents in Australia that actually own a property or currently financing a property?

I'm not sure about other banks but St George bank has something call Family pledge loan, go look it up online.

Basically a family pledge home loan is to allow people that have the serviceability but doesn't have the initial deposit to purchase either their family home or investment properties without worrying any of the LMI or Stamp Duty cost as you are basically borrowing 100% + Stamp Duty within your loan, guaranteed by your/her parent's existing property or mortgage.

The good thing is your parent's or her parents does not need to fork out actual cash or equity to help you with this, the only risk to them is if you guys defaulted on the loan the bank will ask them for the guaranteed amount which whatever you guys agreed on the loan document.

St George also have another home loan product which are specifically designed for professionals (such as doctors or lawyers, accountants etc) which they allow these people to borrow 90% without LMI, again consult a lending manager for more information.

And in regards to taking a personal loan to help with the deposit, don't do it because the bank will assess you least favourable if you are exposed to un-secured debt which will reduce your serviceability and decrease the amount you can borrow. Only do it if the lender justify why, which I've seen this being done before but again it's not favourable.

P.S. the reason why I knew so much because I used to work for St George but not anymore now so I have no conflict of interest in suggesting these but to share what I know

 

[Redom]

Does you or your partner's parents in Australia that actually own a property or currently financing a property?

I'm not sure about other banks but St George bank has something call Family pledge loan, go look it up online.

Basically a family pledge home loan is to allow people that have the serviceability but doesn't have the initial deposit to purchase either their family home or investment properties without worrying any of the LMI or Stamp Duty cost as you are basically borrowing 100% + Stamp Duty within your loan, guaranteed by your/her parent's existing property or mortgage.

The good thing is your parent's or her parents does not need to fork out actual cash or equity to help you with this, the only risk to them is if you guys defaulted on the loan the bank will ask them for the guaranteed amount which whatever you guys agreed on the loan document.

St George also have another home loan product which are specifically designed for professionals (such as doctors or lawyers, accountants etc) which they allow these people to borrow 90% without LMI, again consult a lending manager for more information.

And in regards to taking a personal loan to help with the deposit, don't do it because the bank will assess you least favourable if you are exposed to un-secured debt which will reduce your serviceability and decrease the amount you can borrow. Only do it if the lender justify why, which I've seen this being done before but again it's not favourable.

P.S. the reason why I knew so much because I used to work for St George but not anymore now so I have no conflict of interest in suggesting these but to share what I know

Parental gaurantor loans are useful in some occassions, but best be avoided in this scenario. Its involves cross collateralising your assets with your parents assets. Can get messy. If you've got the time and relationship, best to borrow from the bank of mum and dad direct and set up a private contract for repayment.

Cheers,
Redom

 

[Harileong]

The savings based on transport though is usually offset by the location.
For example you may be paying $550 for a 2 bedder in south bank whereas that same apartment in say Brunswick might be renting for $450. Point being if you currently rented in Brunswick and we're paying less rent you would be paying more on transport which would put you equal anyway.

This same principle sort of applies to buying as well. A new 2 bedder in south bank sells for what? Say roughly 600k? OTP in Brunswick you can get for 475. In terms of that additional amount in a loan it would more than offset the additional travel costs.
Not to mention Brunswick IMO is a far better purchase than South bank.

I'm familiar with all these principles however we love living so close to everything, and the minuscule commute has to be factored in as well. Also seeing as we work evenings often we have to get taxi's home or ride bikes or god forbid buy a car, its quickly worth the extra rent for us to live locally.

 

[Qlds007]

Jess AB MM withdrew the C/C on 80% + around a fortnight ago.

Had a couple of SS member deals approved on the last day.

Such additional access to cash will come in useful on their next IP reno purchase.

i am told that it is a matter of balancing the books and then it may return next year.

Cheers

 

[Jess Peletier]

Thanks Richard!