Financing 1st IP from unencumbered PPOR?

[JaymzSA]

Hi all,

This is my first post after sitting on the fence for a while taking in all the combined knowledge of this great forum. Anyway i had to register as im not sure if my MB has my best interest..

Looking to finance 1st IP and have an unencumbered PPOR worth 300k. I thought i was on the right path, but after researching x-coll im thinking again. I don't have a deposit and want to avoid LMI but my MB says i must use my home as additional security.. The property im purchasing is a family deal for 340K, about 30% below market value.

Is there a way to use my house as a security for deposit and fees loan(approx. 85k) and then source a separate 80% loan with another lender? Or is it fine to x-coll for the first and maybe second property until i have enough equity to use as further deposits?

Thanks in advance i thought i knew a bit until i started reading this forum but like they say, "the more you learn, the more you find that you don't know".. So i value your opinions!

James

 

[LoanFinder]

James, It depends on your personal preference.

However, some things to consider

1. Yes you can do a separate loan against your onwer occupied home for the 20% plus costs. The investment loan can be done with another lender to prevent x-col

2. If you want a loan with features, such as a pro-pack loan, then you may consider doing the loan with the same lender to achieve a greater overall discount. ( food for thought ).

3. Just taking the existing property may be a lazier option unless there is a specific reason ( such as in point 2 above ).

Hope this helps.

 

[Rolf Latham]

Hiya

On purchase, xcoll is usually to the benefit of the lender.............but then u knew that.


Keeping it simple and assuming u can afford it, id usually suggest a 240 k facility on the PPOR. Use around 85 k of that for the 20 % depsoit plus costs.

Raise the balance of 80 % with a loan secured only on the new IP.

Use the same lender with the one pro pack fee usually

This structure will give u more flex, in that when u want to buy another IP or buy some shares etc, you dont have to go back to the lender chasing money.

In all of this Im also assuming you have some personal cash buffer. If not, Id look at a separate split of the 240, as rainy day money.

ta
rolf

 

[JaymzSA]

Thanks for your replies. By 'facility' im assuming you mean an 80% LOC secured by PPOR? I think this may suit me as i plan to purchase more IP's in the next year or so. My broker did mention a pro pack so i'll put this plan to him. Glad i asked you guys it seemed as if they were happy to give me what suits them the best without any options or foresight into how x-coll may limit me later on.. Thanks again

 

[Rolf Latham]

doesnt have to be a LOC, and in fact Id prefer an IO term loan with redraw, since these usually have less issues in their wording of the loan agreement.

Some Loc products have "repayable on demand" on them.........and thats not a great way to live unless you need such a product to capitalise interest.

Many term loans can be had with 10 year ( or more ) IO terms, followed by 20 years PI

ta
rolf

 

[JaymzSA]

Hi,
I'm meeting my broker next week to put these into place, if i could just check one thing..

If i use an IO 100% offset secured to my home as my 'deposit for property' fund, would it be ok tax wise to deposit my wages into the offset and pay my credit card 'used for expenses' bi monthly provided wages exceed expenditure?

I don't have a regular savings account and figured my excess funds could sit there until i invest further. Am i off the mark here? Just don't want issues with the ATO.. Appreciate your input thanks.

James

 

[Rolf Latham]

just make sure the offset for the invest loan is is separate to the home loan, and the offsets to each are separated

Dont mix borrowed and tax paid salary in the one offset account, ato will love it ..........not
ta
rolf

 

[JaymzSA]

Just thought i'd post a follow up to this. The brokers said in 20 years of financing he has never seen anybody structure loans like this! This is from a well known broker that specialises in 'wealth management'. He thinks its not worth because then you have to pay 2 app. fees... I would have thought benefits may outweigh this??

 

[Rolf Latham]

Hiya Jay

Sounds like a true blue ex banker rather than a broker.

In fact, sounds like someone that wants to sell a particular loan product rather than a broker per se.

Odd that they dont use a pro pack that has a single fee regardless of the number of loans or properties.

There are always arguments for and against cross collateral, but a wee fee is usually not one of them

ta
rolf