Financing/Funding multiple IP's and serviceability

[Psyk]

Hello all,

As a bit of a newbie, I'm wondering how people are servicing payments for multiple IP's and a couple of questions around collaterlisation.

We're about to settle on our second IP at the end of the month, and we're already looking forward and laying down the plans for future IP purchases, however I'm now curious on serviceability of future loans.

Here's the scenario:

[b]PPOR:[/b] $90K loan left with offset on a $550K recently valued house.

[b]IP1:[/b] $250K loan (no offset account associated) on roughly $300K valued IP -
Bought using no money down using PPOR as security.  
It is it's own separate loan however.

[b]IP2: [/b]$380K loan (not settled yet...) -
Bought using no money down and using PPOR as security also.  
It will have it's own separate loan.

One lender for all...

1) Looking to purchase IP3 in the future, is it a matter of waiting until IP1 goes to positive-gearing so as to discontinue having to service the interest short-fall from salaried income? My thoughts are the tax-return for IP1 will probably be better off going to the PPOR at this stage...

2) Are we cross-coll'd? I'm assuming that since we didn't have to have any money down and that words to the effect of "...using PPOR as security..." means that it is. If so, how can we un-cross-collaterelize the properties?

 

[alexlee]

If any loan is secured against more than one property it's cross-colled.

It's really down to what you're comfortable with. If you're comfortable with servicing IP shortfalls from savings from salary, that'll allow you to acquire more property faster. If you wait until IP1 is cashflow neutral, that's safer but will most likely be slower. Another possibility is you can use equity in the PPOR to fund the shortfall. These are just possibilities: I'm not saying advising you use any of them.

Bottom line for me is that I buy when I can afford to make the payments over the long term even if conditions deteriorate (rates go up, vacancies, etc).

There are lots of variables. How much you save from salary, how secure your job is, whether you expect big pay rises in the future, how much other savings and equity you have, etc.
Alex

 

[Spectre]

As options....

If IP2 is stand alone or could be then IP3 should have been lent to 95%+lmi and the 5%+costs against PPR. Or 80/85 lend against IP3 without LMI and a second smaller loan against PPR to avoid the x-coll & LMI.

also depends on your lender and if you think you're not x-coll'd when you really are.

 

[Psyk]

thanks a lot guys...

We will certainly look to future purchases as being un-x-coll'd.

Is there a way to un-x-coll the existing properties a the moment?

 

[Lukey13]

thanks a lot guys...

We will certainly look to future purchases as being un-x-coll'd.

Is there a way to un-x-coll the existing properties a the moment?

Another question along the same lines... I haven't cross-collateralised but similarly have used two separate loans for the purchase of my first IP - an 80% loan held against the IP itself (no LMI) and a 20% plus expenses loan against the equity in my PPOR.

If I sell my PPOR next year (or subdivide it and sell one or both blocks) do I need to payout the 20% IP loan or can I just transfer that mortgage to a new PPOR?

 

[Spectre]

Depends on factors such as
*your lender & as to whether the loans are able to be 'ported' across (its called portability)
*your settlement timeframes.
*If you could run the 20% loan thru a new lender at a cheaper rate at settlement/sale of PPOR
etc