Do I get my understanding on the process (mostly) right?

[EN710]

1) After 25 years you will need to have paid the loan back or refinanced it. However, after the first 5 year of interest-only you will have reverted to P&I anyway and started that process.

Alright, noted - refinance or prolong IO loan every 5 years or so.

2) No they will assume you owe $400,000 and the repayments from that because you could take that $400,000 out tomorrow and blow it at the casino.

Aww, not so much trust there >< so the downside of this method is that will reduce serviceability in a way.

Does bank allow the loan to be under one name if property is under two names if they're husband and wive?
i

 

[Aaron_C]

Does bank allow the loan to be under one name if property is under two names if they're husband and wive?
i

No, all people who are on title must be on the loan as co-borrowers. However, they can have people on the loan as a co-borrower/guarantor if they aren't on title. Classic example is if the wife owns a property in her own name but the husband offers a guarantee for servicing, or if a director gives a guarantee for a property owned by his company.

 

[Terry_w]

Instead of having your PPOR loan around 40% LVR, why not just borrow 80% and keep the spare cash in the offset. This way if you move out you will be able to claim the interest on the 80% LVR - double what you otherwise would.

 

[EN710]

Instead of having your PPOR loan around 40% LVR, why not just borrow 80% and keep the spare cash in the offset. This way if you move out you will be able to claim the interest on the 80% LVR - double what you otherwise would.

Hi Terry,

Yes, that is the plan

$400K figure was just approximate - the actual figure for the borrowing of 80% will be $440K, plus I have another IP loan for $180K. - so total $620K loan under both name in 2014.

Since this amount will affect my serviceability, then I need to plan IP #2 now to make sure I can buy more (I was just going to buy under my name - doesn't seem possible with the above loan under one name since I am jointly liable... ).

 

[jingo]

Hi En710,

Sounds like your hubby is slowly coming round to the investment ideas of yours and offset accounts etc.

I was exactly like your husband to start with. In fact, I insisted on paying off the mortgage on our PPOR. I proudly went down to the bank to make the final payment.

Not sure what I was expecting, but the whole process was a let down. The teller didn't even blink an eye! I thought she may have let off party streamers or something!!

With the benefit of hindsight, we could have geared up and bought IP's earlier than we did - no doubt we'd have more equity now if we had!

Other ideas - perhaps handle the portfolio yourself (sounds like you are) and any problems that arise (and they will) keep them on the low down for a while so hubby doesn't freak!!

I take it you have sufficient cash buffers etc, and have a contingency plan for children (a lot of assumptions here - I don't know your situation at all!), redundancies etc.

If you can demonstrate these to your husband, he will probably start to stress less!

Some great ideas by Terry as always!

yes - use offsets for sure - its also a great way to build up a cash buffer if you need it!

Looking forward to reading how you proceed.

Regards Jason.

 

[devank]

What are you trying to achieve by going alone for the ip2?
Brokers may know better but I don't think it makes much difference to the banks.
If you are going to use equity from ip1 then the interest on deposit component needs to be proportioned.
Life changes all the time. I think it is better to be simple and flexible. So i would go 50:50 on all.

I know everyone is against cross collateralisation. I think it should be fine to have both ip1 & ip2 with one bank. You get better discounts for having larger loan. Go with a 'tough' bank if you have a choice. You can go to those lenient banks at later stage.

 

[EN710]

Hi En710,

Sounds like your hubby is slowly coming round to the investment ideas of yours and offset accounts etc.

I was exactly like your husband to start with. In fact, I insisted on paying off the mortgage on our PPOR. I proudly went down to the bank to make the final payment.

I bet I will be quite proud too if can have all paid off

Other ideas - perhaps handle the portfolio yourself (sounds like you are) and any problems that arise (and they will) keep them on the low down for a while so hubby doesn't freak!!

I take it you have sufficient cash buffers etc, and have a contingency plan for children (a lot of assumptions here - I don't know your situation at all!), redundancies etc.

Yes, I will be the person who deal with all the properties - hubby is there to provide support in case of emergency (e.g. the house is on fire and I need mental support and someone to talk to insurance).

Cash buffer - I have enough to hold, and the property is neutrally geared at the moment, so that helps as well
Child.... don't plan to have one for years. Probably pets if I ever live in property that allow one ?

If you can demonstrate these to your husband, he will probably start to stress less!

He jsut want to make sure the bank don't suddenly take the house and left us with all our stuff on the street.

Some great ideas by Terry as always!

For sure!

Looking forward to reading how you proceed.

Thank you I bet I will have lots of head-spinning questions for the first IP, will posts updates every now and then

What are you trying to achieve by going alone for the ip2?

I am thinking of land tax, and safety for hubby (bank will only chase my rear if worse come to worse)

Brokers may know better but I don't think it makes much difference to the banks.
If you are going to use equity from ip1 then the interest on deposit component needs to be proportioned.
Life changes all the time. I think it is better to be simple and flexible. So i would go 50:50 on all.

I know everyone is against cross collateralisation. I think it should be fine to have both ip1 & ip2 with one bank. You get better discounts for having larger loan. Go with a 'tough' bank if you have a choice. You can go to those lenient banks at later stage.

Will definitely double check with broker (from SS probably if they're not too busy for one more client) once we need to apply the loan for PPOR.

 

[Aaron_C]

Buying in one person's name or jointly doesn't make a massive difference most of the time if both people are working. Generally speaking though if one person is going to cease working (or likely to) it would be best to put the IPs in the main income worker's name and keep the PPOR in the other spouse's name while having both as joint-borrowers.

 

[EN710]

Property settled

Buying in one person's name or jointly doesn't make a massive difference most of the time if both people are working. Generally speaking though if one person is going to cease working (or likely to) it would be best to put the IPs in the main income worker's name and keep the PPOR in the other spouse's name while having both as joint-borrowers.

The plan is I will stop working... once the portfolio can feed me (still long time from now )

Quick update - the first property settled last week with no issue. Insurance is in place (EBM), property manager is in place (using the property manager from prev. landlord and I just received the first rent... it feels good somehow

The only thing pending is repair + quick reno/ tidy up for the house. This might happen in 12 months or so and I will post some pic when I get some.

Now I am imagining to get IP #2 a bit later in 2014 . Currently just exploring and learning, though, the question is, if I am thinking of either:
1. Buy house, subdivide land and sell the land, or
2. Buy house, subdivide land + build

How much deposit do I need to prepare
Let's say, this imaginary house is $200K
Option 1
10% deposit + costs ~ $30K
Subdivision costs ~ $25K
Selling costs?

Option 2
10% deposit + costs ~ $30K
Subdivision costs ~ $25K
10% of development costs (not sure - what is the allowable LVR from bank?) ~ let's say $2000 per sqm for 100 sqm ~ $20K deposit
Total $75K + selling costs?