Finance

[WebBoard]

From: Mike .


Up front costs
From: Jonathan
Date: 1/7/00
Time: 9:15:36 AM

I am facing "up front" costs of around 7K (stamp duty, mortgage stamp duty etc). My bank will not advance the money before settlement. Is this the norm ? I do have the cash but I thought anybody could start in property investment if they have equity in their home i.e. they do not need 7K in the bank. I am considering using my interest free period credit card to pay these costs. Any advice would be most welcome.

 

[WebBoard]

Richard

Reply: 1
From: Mike .


Re: Up front costs
From: Richard
Date: 1/9/00
Time: 10:23:43 AM

I am currently purchasing a block of land with house to be completed in the coming months. I similarly did not want to use any of my own money and found that the "investment loan" money from the bank was not accessible until settlement on the land when the bank actually would be able to hold the title as security. To get around this I was able to do the following:

a. arrange for solicitor to defer the stamp duty until settlement (I know some solicitors are willing to cover stamp duty, disbursements etc until the loan money is drawn down).

b. to pay the required 5% deposit on the block of land (ex Landcom) I was able to cover with my own savings - which will be reimbursed from the loan on settlement. I could have also used a Deposit Power Bond or overdraft but would have accrued some interest.

Hope this helps

 

[WebBoard]

Jonathan

Reply: 1.1
From: Mike .


Re: Up front costs
From: Jonathan
Date: 1/10/00
Time: 7:36:41 AM

Thanks Richard, I just wanted to check that I hadn't missed anything. I will say, though , that the concept of buying an investment property without using any of your own money only applies to those who have sufficient savings to cover at least some of the up front costs.

 

[WebBoard]

Les

Reply: 1.1.1
From: Mike .


Re: Up front costs
From: Les
Date: 1/10/00
Time: 6:10:06 PM

G'day Jonathan,

I also noticed costs "coming out of the woodwork" when I bought my first property. One way to prevent using your savings (cash, that is) is to arrange a Home Equity Loan or Line of Credit Loan on your own home before looking for property. Thus any costs can be financed via the other kind of savings i.e. the Equity in your home.

Jan recommends some kind of "credit card loan" on your house, or approved credit limits on cards as a way of keeping a buffer against unexpected costs, without having cash "tied up" just in case. So setting up such a loan against your own home can be GOOD VALUE.

Might help for your next ones.

Regards, Les

 

[WebBoard]

Jonathan

Reply: 1.1.1.1
From: Mike .


Re: Up front costs
From: Jonathan
Date: 1/10/00
Time: 11:16:38 PM

Thanks Les, I have financed number 2 with a St George Portfolio loan so I'll be right for costs for number 3 and beyond. My wife already had number one but it was her first property so she had no experience to share re borrowing 100+ percent.

p.s. I think Jan should pay you a retainer

 

[WebBoard]

Sue1

Reply: 1.1.1.1.1
From: Mike .


Re: Up front costs
From: Sue1
Date: 1/15/00
Time: 7:50:20 PM

Dear Jonathon I'm glad that you got your costs sorted out but I have to say that whenever we have bought a property and borrowed 105% we've never had to worry about paying for any costs until settlement when the bank and the solcitor "pay themselves" out of whats left of the loan after the vendor has been payed. Obviously the amount borrowed has been worked out in advance to cover all these costs. Maybe things are different in other states (I'm in Qld) and maybe its different if you are building new. Cheers Sue

 

[WebBoard]

Jonathan

Reply: 1.1.1.1.1.1
From: Mike .


Re: Up front costs
From: Jonathan
Date: 1/17/00
Time: 8:53:18 AM

Thanks Sue, my main problem is with the 6K in stamp duty which neither my bank nor my solicitor will advance before settlement. Anyway, I'll manage but I just wanted to make the point that you do need some cash available up front.