Can I buy a 2nd IP?

Hey everyone,

Looking to jump into the Perth/Adelaide market for my 2nd IP. Probelm is at the moment I have no savings due to paying of my credit card and renovating the bathroom on IP 1.

My 1st IP has a loan of $305,000 against it after purchasing in Feb 09
Valuation is around $400 - $425k
I have just signed a 12 month lease on IP1 for $400 a week
I have no other debt except for that loan
I currenlty live rent free and can do for the forseeable future
I earn $53,000pa

I can easily afford repayments of $2000 a month, not forgetting I will be renting out IP2

Looking to get into either the Perth market - $400k house
or
More realistically the Adelaide market around the $300k mark

Would I be able to get a loan for either of the above? Or should I save for the next 6 months? I'll be putting away roughly $2000 a month

Thanks everyone!
 
Whether you have a savings history in a bank account, or a savings history of making extra repayments into an offset or redraw account makes no real diference to your chances of getting a loan. For the second IP, all they will look at is your equity in the property or total amount of cash in the bank.

Your chances are much better if you can keep the LVRS on the new purchase to 80%. I suggest refinancing with your existing lender to their max LVR, and using this and any other money you can put together as a 20% deposit on the next property. It will be this amount, rather than your income that will determine how much you can borrow, as this will determine the likely purchase price, and likely rental yield and negative gearing income which can be added back to your worked income.
So, if your existing lender can refinance to 90%, you will have 20% for a purchase of $300k, and if they can go to 95%, you might squeeze into a $400k purchase.
 
Hi there Lynchy,

You could certainly get a loan based on your exisitng equity in your first IP.

Another 18k in savings would help you achieve a higher purchase price or alternatively save you some money in LMI but this all depends on whether you want to WAIT another 6 months.;)

What you will want to be careful of is the LVR. Insurers are a little touchy over 90% atm.

More details are needed but it seems as if you could get that loan!:)

Regards JO
 
The thing is the bank I am with now, HSBC, has a current LVR of 75% which really is ridiculous. They only approved the loan because the bank valued the place I brought $45,000 higher then the purchase price and because they are a corporate partner of the company I work for.

Hrrmmmmm
 
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