Can you use equity for a deposit for an IP without injecting your own cash?

Hello!

I'm having a look around for my 2nd IP atm and am not to sure if I need to inject any of my own cash.

My 1st IP
Loan amount - $307,000
Value - $440,000
Available equity - ???

If I wanted to purchase a place for around the $400,000 mark would I need to inject any of my own cash to avoid LMI? If so how much?

Thanks!

Oh let me know if you need any more info
 
Presuming you qualify for a loan, and you don't want to bother with LMI.

IP is valued at $440k, you can draw down 80% without LMI, so that would be $352K. You already have a loan for $307k, which means you can get a top up loan of $45k. This would give you $45k to use as a deposit for the next IP.
 
I just got a 100% loan using my equity, and i avoided LMI. - Commonwealth bank.

Nikolina,

To achieve that however, you must be in a conservative LVR position on the equity drawdown to fund the deposit to also allow you to purchase and fund the new IP (at 80 % LVR) and avoid LMI.

I have borrowed on IP's at 107 % without LMI, however that is not security on one asset alone. I had ample equity elsewhere to achieve that.

It appears that Lynchy does not have that luxury (yet). Either waiting for growth and then move forward; or copping LMI (not such a big deal if the deal gets across the line); or revising purchase aspirations down slightly to get into another property.

Lynchy

Be more concerned with your servicibility and not over-extending the portfolio LVR if you do elect the LMI route. Avoiding LMI is not only about the cost saving.......it keeps your LVR at a more modest level. In (a still somewhat) unceratin credit environment that is a more conservative stance.

Not telling you what to do, just my opinion on your options

** Skater's too quick. :) Beat me as I was providing ancillary comment to Lynchy **
 
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Hello!

I'm having a look around for my 2nd IP atm and am not to sure if I need to inject any of my own cash.

My 1st IP
Loan amount - $307,000
Value - $440,000
Available equity - ???

If I wanted to purchase a place for around the $400,000 mark would I need to inject any of my own cash to avoid LMI? If so how much?

Thanks!

Oh let me know if you need any more info

Consider a $200K IP instead :)
 
Well serviceablitity isnt a problem

IP 1 repayments are around $370 a week (self managed) and renting for $400 a week
Wage is $55,000, I live rent free. Parents have retired and are sailing around Aus for the next 3 years so living in there place rent free for a min of 3 yrs :)

Have thought about going a little cheaper, but I do see a lot of value around the $400k - $450k mark in some suburbs around Perth
 
Well serviceablitity isnt a problem

IP 1 repayments are around $370 a week (self managed) and renting for $400 a week
Wage is $55,000, I live rent free. Parents have retired and are sailing around Aus for the next 3 years so living in there place rent free for a min of 3 yrs :)

Have thought about going a little cheaper, but I do see a lot of value around the $400k - $450k mark in some suburbs around Perth

Lucky you to have such generous parents :D
Try talking to your broker to maximise your LVR without incurring LMI. Best of luck
 
Pay the LMI......................its cheap prevention of "fear factor" when u try and untangle the cross collateralised mess later on, or you cant get lmi later due to exposure

I am assuming you will buy more IPs as time progresses.

ta
rolf
 
Quick one.


People suggest only drawing equity up to 80% max to avoid LMI.
Is this LMI to be paid on the drawn equity line only?

If you then used this equity to say put down a 5% deposit on a new IP. The remaining 95% loan would also attract LMI. Is this correct ?

I ask because i used a westpac rocket/equity loan drawn from equity on my PPOR to pay the 5% deposit plus costs on my last purchase. LMI didnt worry me because it allowed me to save more of the loan for the next purchase. But i dont remember paying LMI on the initial rocket/equity loan. Might have a look back. I may have only drawn up to 80 %
 
If you really want to buy another property, pay the LMI. Most investors here realise the cost of LMI is a means to an end.

There are ways around keeping the LMI down and depending on how your loans are structured, you could possibly save $1000's.

Please, research Cross-Collateralisation. I highly recommend against it.

Regards JO
 
Hi devo,

It depends how your loans are structured.

If you then used this equity to say put down a 5% deposit on a new IP. The remaining 95% loan would also attract LMI. Is this correct ?

If the security in question has an LVR of 95% then yes, you would pay LMI.

Regards JO
 
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