Help from Broker

[rstephenp]

Hi,

I have never used a mortgage broker cause I felt I could negotiate with the banks myself. However, since I am looking from my second IP, I am not sure whether I am structuring my loan properly and get better deals on the LVR side. Here is where I can see a mortgage broker can help me
My Current Status
PPOR: North Shore, NSW
Loan: HSBC $720,000
Value: $920,000
Offset: $51,000 + 28650(pay 10% for IP1) = 79,650
IP1: Orange, NSW
Loan: 229,200 (settlement 29 March 2011) with Newcastle Permanent. HSBC wanted to cross collatarise my loans with 70% LVR. I said no way
Value: 286,500
Paid - Stamp duty and 10% paid. I also will pay the next from my Offset
Family base income (excl Super): $221,000
We both (wife & me) Full time employed
I am looking at IP2.
1) How do we structure our loan (trust etc.)? how much it will cost to setup and how complicated it is?
2) I dont have a lot of spare cash $51,000. Want to keep some cash for the rainy day. I heard some banks are offering higher LVR without LMI.
3) We usually save $3000 per month. However, I have booked a trip overseas in June which may cost $8000 to meet family. What is the price range of houses/units I can afford while keeping some cash for a rainy day.
4) In April, I plan do some reno in IP1 and get it revalued. The valuer (charge me around $500) will provide me a depreciation schedule. I am not from Orange hence will ask the valuer local to Orange about what renovation would increase the value of the house and likely rent I can ask. Do you think this is a good step or whats the alternative.

Regards
Steve

 

[Rolf Latham]

Loan: HSBC $720,000
Value: $920,000
Offset: $51,000 + 28650(pay 10% for IP1) = 79,650
IP1: Orange, NSW
Loan: 229,200 (settlement 29 March 2011) with Newcastle Permanent. HSBC wanted to cross collatarise my loans with 70% LVR. I said no way
Value: 286,500

Hi Steve

The base LVR of the property that HSBC hold is 78 % LVR.

Even if you had crossed the new place youd still be paying LMI, and a huge slab of it too because youd be in the highest $ bracket.

Good not to cross though in most cases !

Unless u paid for LMI on the purchase of the HSBC property, there isnt any accesible equity here without committing to LMI with HSBC.

However, lenders like WBC are now doing 85 % lends with no lmi, so there is 63 k available with no lmi cost. Assuming your servicing is strong etc, they would also do the purchase at 85 % with no lmi.

Complicated to explain here, but I would also split out how much of the new loans in such a way so that you maximise the current and future tax deductability AND retain as much of your tax paid cash as possibel to meet lifestyle and risk mitigation needs.

Your current choice of lender mix tells me that you are primarily rate, rather than structure or opportunity focussed. Nothing wrong with that as long as you can be sure that your "end game goal" can be achieved with such a strategy. Have you got your end game goal on paper so u can work backwards from this ?

Id go so far as to say, take your Newc loan to 90 % and pay LMI or, take a WBC or citi loan at 85 % and settle that new ip with less tax paid cash.

You have a substantial non tax deductible debt, and some simple future cash flow analysis may reveal that you are hugely better off borrowing to a higher lvr for your IPS, but I guess the lenders you have used to secure the loans had no focus on things like that..............they too have been blindsided by the immediate surface costs, rates and fees without regard to uncovering your possible "real" needs.

I am making some big assumptions so pls seek personal and specific advice.

ta
rolf

 

[Marty McDonald]

Hi,

I think Rolf has summed it up well as per usual. I used to deal with Newcastle a bit when I was with mortgage choice but no longer on my panel so they may have changed since but my view of them at that time was they could be painful to deal with once you start pushing their boundaries. Great for fixed rates. So not sure how they would look at cash out especially if not getting the related next loan and there isn't that much available In the Orange purchase anyway. I would look to change the Newcastle loan to a 90% lend it's not too late to change it?Preserve more capital then do an 85% with westpac for the deposit on the next IP purchase.