Finance

[WebBoard]

From: Mike .


Hoover
From: What to do?
Date: 5/9/00
Time: 1:49:08 PM

Hi all. I'm new to this site and I am really impressed with everyones keenness to become wealthy.

I got a problem. My wife and I are paying off our house in the Sutherland Shire and we have about 250K equity. We have recently bought an IP with my sister (mostly to help her get in the market) worth 208K.

My problem is that I want to start buying more properties but I'm not sure how to start. We have a mortgage and a second mortgage on our house (the second mortgage to finance the IP).

Have we done the wrong thing here? Should I refinance the whole lot? I would appreciate advice about the best way to go.

Regards Hoover

 

[WebBoard]

Les

Reply: 1
From: Mike .


Re: Hoover
From: Les
Date: 5/11/00
Time: 11:15:42 PM

G'day Hoover,

I think we would all love to help, but from the figures given, all I can tell you is that you have a great amount of equity in your own home (unless it's worth $2m or so, then I'm not so sure).

Mortgages can be negotiated, but it all comes down to "doing the sums" and without the various parts of the equation, it all comes down to "How long is a piece of rope".

Come back with a few more specifics, and we'll see what we can do to advise you.

Les

 

[WebBoard]

Sue1

Reply: 1.1
From: Mike .


Re: Hoover
From: Sue1
Date: 5/11/00
Time: 11:14:45 PM

Hoover it doesn't really matter how many mortgages you have on your house, as long as you have enough equity left to fund a deposit on another IP, borrowing as much as you can against the new property of course. If you borrow with the same bank, which is generally a whole lot easier and less expensive than going to a second lender, all your property (including the new IP) will be lumped together and they will lend you up to 80% of their value.

Of course a lot depends on whether you can service another loan as well. Plenty of equity but not enough income is a no-go.

Sue1

 

[WebBoard]

Hoover

Reply: 1.1.1
From: Mike .


Sounds Good
From: Hoover
Date: 5/13/00
Time: 9:43:36 AM

Okay, sounds good. Les, to give you some more details. The house was valued at 400K leaving us 150K owing (through NRMA Building Society).The IP is worth about 210K, I guess (haven't had it that long), thats through Bankwest. We earn about 130K p.a. between us. I don't think that there will be any prob servicing the loan, but I am concerned about how we go about organising the finance. Both financial institutions seem okay, should I contact Bankwest and put all our future IP's with them?

Thanks Hoover

 

[WebBoard]

Les

Reply: 1.1.1.1
From: Mike .


Re: Sounds Good
From: Les
Date: 5/14/00
Time: 12:35:06 AM

G'day Hoover,

I personally like keeping my house loan with a separate lender. To allow the deposit on the new IP, maybe it is worth looking at setting up a Home Equity loan on your own home (write a cheque for each neew investment - but this gets messy at Tax time if personal funds are mixed up with this). Also, other more experienced noters have warned against Home Equity loans (something like it can limit future borrowings, as they "deem" that you have borrowed the extra, even if you haven't).

You seem happy with Bank West, so by all means go with them for further IP's. Your equity is fine for another, and with your wages, DSR should also be OK. So it is just the deposit. If you require it from your own home's equity, then take a look at your FUTURE requirements - if you are looking at 2 or 3 more, maybe refinancing once (with NRMA?) to allow future "redraws" might be sensible for you. Either that, or buy at a discount, or use vendor finance for the extra 10%.

In fact I heard today (Spann seminar) that some lenders will now do investment loans up to 95% - the full finance segment is tomorrow, so can't help tonight. So maybe your deposit can be halved, and you can handle it on a credit card for a short term (saving setup costs of an extra loan) and cream the card with your income. Run the numbers - a high Interest rate for a short term can often be surprisingly good news when compared to the alternative, especially if the deposit is only 5% rather than 10%.

Hope this helps, Les

 

[WebBoard]

Hoover

Reply: 1.1.1.1.1
From: Mike .


Re: Sounds Good
From: hoover
Date: 5/14/00
Time: 12:56:40 PM

Thanks Les. Seems like my options are almost unlimited. I've got an appointment to see a couple of people in the finance industry, so I'll let you know how it goes.

Regards, Hoover

 

[WebBoard]

Robert

Reply: 1.1.1.1.1.1
From: Mike .


Re: Sounds Good
From: Robert...(NSW)
Date: 5/16/00
Time: 11:06:05 AM

G'day Hoover A new idea that could be thought of is a 100% mortgage (80-95% by a financial inst. and the remainder vendor finance). This way all you need to pay for is the FEES involved in purchase. This is what I've done in Brisbane on a new property.

I've outlayed $8000 for the property of my cash. (This due to being the first one and not having any equity) and this property has already acheived 15% capital growth since December last year when the contract was put down on it. Also getting a new property allows for greater depreciation on building costs when it comes to tax time.