My PPOR is with Westpac Rocket Repay professional package . Purchase price was 420K two years back. my loan is 330K. Interest only in Variable rate. I have 120K in 100% offset account. The PPOR might worth 460K now.
I plan to buy my first Investment Property soon. I'd like to stay with Westpac to leverage the benefit of professional package. Assuming purchase price of IP is 450K , the total cost would be 474K including stamp duty and other fees. There are two options for finance :
Option 1: Cross securing
Westpac will lend me 80% of the total value of PPOR and IP.
Assuming PPOR is worth 460K now, the loan I can get is :
(460K + 474K ) * 80% = 747.2K
330K is my existing loan. The money I can get would be :
747.2K - 330K = 417.2 K
the total cost of property B 474K will be almost 100% covered by loan. I don't need to pay mortgage insurance in this case.
Option 2: No Cross Securing.
Assuming PPOR is worth 460K now.it has 40K more equity.
So I can top up the existing loan 330K to 368K.
460K * 80% = 368K
368K - 330K = 38K
Assuming the total cost IP is 474K and lending ratio is 90%
474K * 10% =47.4K
I can use 38K equity plus 9K cash to cover the 10% deposit. Then borrow 90% from bank. I need to pay mortgage insurance in this case.
It seems like Option 1 is better . But the down side for cross securing is my PPOR will be easily impacted if I cant meet repayment of IP.
In terms of Option 2 , because both loan are with Westpac , I was told my PPOR will be impacted eventually if I cant meet repayment of IP.
Can I ask you opinion about the two options? Any idea would be highly appreciated. Thanks.
I plan to buy my first Investment Property soon. I'd like to stay with Westpac to leverage the benefit of professional package. Assuming purchase price of IP is 450K , the total cost would be 474K including stamp duty and other fees. There are two options for finance :
Option 1: Cross securing
Westpac will lend me 80% of the total value of PPOR and IP.
Assuming PPOR is worth 460K now, the loan I can get is :
(460K + 474K ) * 80% = 747.2K
330K is my existing loan. The money I can get would be :
747.2K - 330K = 417.2 K
the total cost of property B 474K will be almost 100% covered by loan. I don't need to pay mortgage insurance in this case.
Option 2: No Cross Securing.
Assuming PPOR is worth 460K now.it has 40K more equity.
So I can top up the existing loan 330K to 368K.
460K * 80% = 368K
368K - 330K = 38K
Assuming the total cost IP is 474K and lending ratio is 90%
474K * 10% =47.4K
I can use 38K equity plus 9K cash to cover the 10% deposit. Then borrow 90% from bank. I need to pay mortgage insurance in this case.
It seems like Option 1 is better . But the down side for cross securing is my PPOR will be easily impacted if I cant meet repayment of IP.
In terms of Option 2 , because both loan are with Westpac , I was told my PPOR will be impacted eventually if I cant meet repayment of IP.
Can I ask you opinion about the two options? Any idea would be highly appreciated. Thanks.