Finance

[WebBoard]

From: Mike .


using equity as a deposit
From: JF
Date: 8/21/00
Time: 4:05:32 PM

Hi. i am looking to buy a house off my parents its worth around $120K judging by what similar houses in the area have sold for, they are willing to sell it to me for $100K, but i do not yet have a full 10% deposit saved. I heard that i should be able to borrow using equity already in the house? Can anyone explain to me how this works?

The bank is not interested unless i have $10K of my own money, and i currently have only $5K. My folks do not have the spare cash to lend me. Does anyone have any ideas?

 

[WebBoard]

The Wife

Reply: 1
From: Mike .


Re: using equity as a deposit
From: The Wife
Date: 8/21/00
Time: 7:41:48 PM

...Never ever ever ever buy property or businesses off family. The Wife

 

[WebBoard]

DuncanM

Reply: 1.1
From: Mike .


Re: using equity as a deposit
From: DuncanM
Date: 8/21/00
Time: 4:18:20 PM

With $5,000 and the first home owners grant I think that you would have no problems getting finance if you have a good work history and insubstantial consumer debt. If you've been to a bank who have told you you need $10,000 before they'll even talk to you, go to another bank or credit union. Sign a sales contract with your parents, I find it much easier to talk to Banks etc with a concrete proposal ( in the form of a signed contract ) than with an ethereal 'what-if' scenario.

Should also mention that every financial institution that I've ever dealt with will only loan you x% of the purchase price or the valuation which-ever is LOWER, so you will not be able to use the gap between your purchase price and their valuation as a 'deposit'.

Subsequent to the purchase however you would be able to use any equity to fund additional borrowing for your portfolio, subject to the usual LVR constraints that the institutions will place upon your particular circumstances.

Good luck.

Duncan.

IP Record Keeping Software (www.otter-software.com.au)

 

[WebBoard]

Buzz

Reply: 1.1.1
From: Mike .


Re: using equity as a deposit
From: Buzz
Date: 8/22/00
Time: 1:47:43 PM

First find another bank.

The other thing you can do is get a short term personal loan for $5000 (from another bank) to make up the deposit then have your parents sell you the house for $110,000 which they then give you back $10K. Pay out the personal loan. Note there is a little more in stamp duty to calculate into your sums.

or

Have the property valued without telling the bank what you are paying for it. They do not have to know. If they insist stand up shake his or her hand and walk into the next bank. If they are going to use the buying price as the estimate of its value why should you fork over $300 for a valuation.

or

Simply say your parents are letting you have it for only $120K and if they (Mum & Dad) want to advance some of your inheritance to you thats their right. You now have equity in your home, reduce the loan amount as quickly as you can and before you know it you'll be buying your first investment property.

With my first property it was the 13th bank in 5 days that handed over the finance. Don't be worried if you get a lot of NO's, you will learn a lot about how banks operate which is one of the many skills to be a good property invester.

Warning: This is an aggresive way to start so don't waste any of your finance or monies on "do dads" plus ask yourself why you only have $5000 as a deposit at this point in time.

 

[WebBoard]

?

Reply: 1.1.1.1
From: Mike .


Re: using equity as a deposit
From:
Date: 8/22/00
Time: 9:12:36 AM

Do your parents need cash from the deal or could they finance the property (ie. they lend you the $100,000 and you pay them the mortgage payments in return based on some agreed %)? Later down the track you could then try to refinance with "hard" money.

 

[WebBoard]

JF

Reply: 1.1.1.1.1
From: Mike .


Re: using equity as a deposit
From: JF
Date: 8/24/00
Time: 12:09:46 PM

I dont think they need all the money, but they are looking forward to some of it. I have just discovered govt assisted loans with as little as 2% deposit and of course the $7k grant so I'll look at that option, I guess the loan wont be very flexible tho as it will be a no frills type.

 

[WebBoard]

Frode

Reply: 1.1.1.1.1.1
From: Mike .


Re: using equity as a deposit
From: Frode ([email protected])
Date: 8/28/00
Time: 8:00:08 PM

Hi,

Could you share information about these gov't assisted loans? I'm looking toward buying my first property... soon....

- Frode

 

[WebBoard]

Lee T

Reply: 1.1.1.1.1.1.1
From: Mike .


Re: using equity as a deposit
From: Lee T
Date: 8/29/00
Time: 12:31:39 AM

Hi Frode,

The Government Assisted Loans are from Organisations like KeyStart. You only require a low deposit but the interest rates are higher than other lenders initially.

Cheers Lee T