I bought a house less than a year ago in Perth. 1970s double brick and tile 3x1 on 806sqm 10km from the city (Bassendean). By my estimation (based on following advertised properties in the area) it's gone up $80-110k since I bought it. That being the case I have about $200k equity in a house worth ~$500k (although bank valuations are likely to be more conservative).
I've just signed up to a non-binding EOI on a stage 1 t/house out in Midland where in ~3 months you settle on the land (~$170k) and then pay progress payments as the t/house is built (~$250k).
The timing is good because settling on the land comes just after my 12 month intro is up and I want to refinance to fixed interest only. I want to fund the 2nd IP (assuming I go ahead) at under 80% LVR to avoid LMI if possible.
My general goal is to either sell the t/house shortly after completion for a quick profit or, if I can't make that, hold onto it in a very buoyant rental market (where I can probably expect $350-400pw by the time its built).
Ok, to the finance questions.
Firstly, I can either treat each of the loans separately by refinancing my current $300k mortgage and taking a second mortgage for $100k on the first house and the balance of the first house's cost on the second. Alternatively I can refinance the first house to $400k and have a completely separate mortgage on the second. Thoughts on one way or the other?
I've had a look on infochoice and fixed rates seem to have gone up from 7.15% to 7.33% recently (damn it). 12 month intro rates seem to be as low as 6.72% though.
Considering my plan is currently to sell the house on or soon after completion the intro rate tempts me but I could get caught with my pants down if it reverts to a possibly higher variable when I'm forced to keep it.
I've tried to read the fine print on a couple of sites (NAB, ANZ) about early redemption fees but really can't make sense of what I'd have to pay to close out the loan early. I may be in for a higher penalty if I take a 2-3 year fixed rate and sell after 1 year.
Or are certain isntitutions amenable to the possibility of rolling over that loan to a new IP and waiving any penalties in doing so?
My plan for the first property is to wait until the council rezones my house R20/25 and lets me battleaxe it. It's by no means guaranteed and when I bought it I thought I may need to wait 3-5 years for that to happen. The house is situated such that this could be done with demolishing the first house. Thus a 3 year fixed rate seems about right (in a few months). So the early redemption question applies then too (although in that case there may be a further delay of 12-24 months for subdivision approval and building a second house, etc which makes it less likely).
So, any starting points on how best to finance these projects in light of the above information? Any particular gotchas to watch out for?
For what it's worth, I'm using the 6 year rule on the first house to retain its CGT exempt status (I'm currently renting elsewhere for less than the house is rented out for).
I've just signed up to a non-binding EOI on a stage 1 t/house out in Midland where in ~3 months you settle on the land (~$170k) and then pay progress payments as the t/house is built (~$250k).
The timing is good because settling on the land comes just after my 12 month intro is up and I want to refinance to fixed interest only. I want to fund the 2nd IP (assuming I go ahead) at under 80% LVR to avoid LMI if possible.
My general goal is to either sell the t/house shortly after completion for a quick profit or, if I can't make that, hold onto it in a very buoyant rental market (where I can probably expect $350-400pw by the time its built).
Ok, to the finance questions.
Firstly, I can either treat each of the loans separately by refinancing my current $300k mortgage and taking a second mortgage for $100k on the first house and the balance of the first house's cost on the second. Alternatively I can refinance the first house to $400k and have a completely separate mortgage on the second. Thoughts on one way or the other?
I've had a look on infochoice and fixed rates seem to have gone up from 7.15% to 7.33% recently (damn it). 12 month intro rates seem to be as low as 6.72% though.
Considering my plan is currently to sell the house on or soon after completion the intro rate tempts me but I could get caught with my pants down if it reverts to a possibly higher variable when I'm forced to keep it.
I've tried to read the fine print on a couple of sites (NAB, ANZ) about early redemption fees but really can't make sense of what I'd have to pay to close out the loan early. I may be in for a higher penalty if I take a 2-3 year fixed rate and sell after 1 year.
Or are certain isntitutions amenable to the possibility of rolling over that loan to a new IP and waiving any penalties in doing so?
My plan for the first property is to wait until the council rezones my house R20/25 and lets me battleaxe it. It's by no means guaranteed and when I bought it I thought I may need to wait 3-5 years for that to happen. The house is situated such that this could be done with demolishing the first house. Thus a 3 year fixed rate seems about right (in a few months). So the early redemption question applies then too (although in that case there may be a further delay of 12-24 months for subdivision approval and building a second house, etc which makes it less likely).
So, any starting points on how best to finance these projects in light of the above information? Any particular gotchas to watch out for?
For what it's worth, I'm using the 6 year rule on the first house to retain its CGT exempt status (I'm currently renting elsewhere for less than the house is rented out for).
