Finance for new PPOR

[Nemo30]

Im sure this is a common question...

I have a friend who is looking to sell her PPOR and buy something a bit bigger.

She has found a house that she is interested in buying, however all of her equity is in her existing house, which is not yet on the market.

If they sold their existing house they would have enough for a 20% deposit (120k) on the new property (600k).

What is the best way to structure their finances to get into the new house?

Their current house is in a rural area outside of Canberra not sure of value - perhaps 400 - 450.

Their current loan is with IMB.


Thanks

 

[Aaron_C]

Bridging loan.

 

[Nemo30]

Thanks Aaron.
I've heard of bridging loans, but no idea how they work. They are quite costly aren't they?

 

[Shahin_Afarin]

They may be able to finance both properties at the same.

Regards

Shahin

 

[Aaron_C]

Thanks Aaron.
I've heard of bridging loans, but no idea how they work. They are quite costly aren't they?

Not that costly. Speak to someone about it and it will work out.

 

[Rolf Latham]

Hiya

if their serviceability is up to scratch you can do this the same as any investment loan with "bridge" regs and issues

Draw 20 % +costs secured to the old PPOR, sole security being PPOR

Draw 80% secured only to new PPOR

done.

Sell old PPOR when you want,not when lender forces you to

As with all things in finance...........manage and minimise risk

ta

rolf

 

[rowena]

sunset clause in buying property 2 that it only goes through when their property 1 sells?

but it does mean someone else could put a contract on the house in the meantime.

 

[Rolf Latham]

sunset clause in buying property 2 that it only goes through when their property 1 sells?

but it does mean someone else could put a contract on the house in the meantime.

you need a keen vendor to accept such an open condition.

Typically, if the purchase is exchanged subject to cooling off or finance etc, a new purchaser is locked out

ta
rolf

 

[Nemo30]

Thanks guys.

I'm not sure they have enough equity to get a loan for 20% deposit for new house and keep existing house under 80% LVR - so I guess they just look at the best combination that will cost the least in LMI.

Existing house is in a rural area resulting in an issue obtaining LMI when they initially bought it.

 

[Aaron_C]

With a bridging loan you will not need to pay LMI if the vals stack up.

 

[tobe]

Thanks guys.

I'm not sure they have enough equity to get a loan for 20% deposit for new house and keep existing house under 80% LVR - so I guess they just look at the best combination that will cost the least in LMI.

Existing house is in a rural area resulting in an issue obtaining LMI when they initially bought it.

They most likely have to sell first then. Bridging is usually restricted for such properties, and it needs to be well under 80% to work, as they sensitise the sell price and costs to include capitalised interest during the selling period.

 

[Nemo30]

I just read a bit about bridging loans - seems the bank gives you a time period of say 6 months. Is there an option to extend if you haven't sold your house in that time?

 

[Aaron_C]

I just read a bit about bridging loans - seems the bank gives you a time period of say 6 months. Is there an option to extend if you haven't sold your house in that time?

Try Heritage. You get 12 months to sell and you can extend it.

 

[tobe]

I just read a bit about bridging loans - seems the bank gives you a time period of say 6 months. Is there an option to extend if you haven't sold your house in that time?

Not if there isnt any equity. My rule of thumb for considering bridging is if the applicants own at least 40 or 50% of their existing property. Unless they are downsizing, bridging isnt possible as the 'peak' LVR is over 80% and mortgage insurance isnt avaiable.