How can u afford more than 1 IP in 1 year? don't understand

[Olive]

HiOlive,

You are understnding it just fine actually and your questions are valid.

Revluing is when you get the bank to reappraise how much the house is worth..
sy you bought for $300k... 10 years later, your mortgge is $150k. You ask the bnk to vlue your house nd they come bak with $600k. YOu owe 25% of the house value. Bnak may let you borrow up to 80% ($480k in total). So you could borrow another $130k. The most commonly spoke about way of doing this seems to be Line of Credit, which is what I have used.

So say you did this and now have a mortgage of $150k, an a Line of Credit you can use of $130k.

You find a $300k property you love as an IP proposition.

So you see nother lender and say, I've got the depsosit, it shodl rent for this much (they may change this figure a bit, and will count only 80% of what eer figure they usee), your income and your current loans, inlcuding the Line of Credit (they will ask for it's max value). They will add all that up as if the Line of Credit is fully drawn and see if you meet their lending criteria.

Hi Jaycee, could you explain how you came to the borrowing of $130k? According to the above example. Thanks for your time.

 

[wobbycarly]

Olive,
I think Jaycee meant $230k?

ie. 80% of $600k (prop value) = $480k (total borrowings)
$480k - $150k (remaining mortgage) = $230k (new investment borrowings)

The $230k can be used as a deposit on 1 or more IPs and interest will (typically) be fully tax-deductible.

 

[sash]

Mostyl HC on Newcastle, Nowra, and Central Coast....

Yes...not sure about Mt Druitt as the prices are quie high....though I hear that you can pick up the occaisional bargain. Nathan might be a better person to ask.

Olive.....how emotional do you get about purchases....the reason I ask because some of the stuff I buy most people won't touch!

Sash, would you like to share which regional areas you are looking at? Heard that some of Mt. Druit housing commission is converting to private ownership. Would this be considered as a twist?

 

[ChristianB]

I enjoyed reading all the above. This forum is full of great stuff!

There's another option (that's not for everyone) and that's improvement through sub-division and/or development.

As an example, if one was to purchase a property for say $300,000 and then plan and build a second (dual occupancy) dwelling it can work well.

Purchase for $300,000
Plan and build for $180,000
End up with two properties (after sub-division) at say $280,000 each.
From there sell some of the equity, or build on the equity.

This type of scenario is probably a bit riskier and more compliated than a straight up investment, but it can potentially accelerate the process.

There's much can be done with two dwellings. For example it's possible then to finance each of the properties with different financiers and use equity in each case to gear into more property.

Although most banks will aggregate your position, they are also probably more likely to support your plan if you have split the risks. They won't tell you this, they'd prefer to have all of your business if it's good debt!

Any proposal like this requires good advice from your accountant and solicitor. Good luck whichever way you go.

 

[Olive]

Olive,
I think Jaycee meant $230k?

ie. 80% of $600k (prop value) = $480k (total borrowings)
$480k - $150k (remaining mortgage) = $230k (new investment borrowings)

The $230k can be used as a deposit on 1 or more IPs and interest will (typically) be fully tax-deductible.

Thanks but um...$480k-$150k=$330k isn't it? i.e. bank will lend $330k for the deposit on other IPs is that right?

 

[wobbycarly]

Thanks but um...$480k-$150k=$330k isn't it? i.e. bank will lend $330k for the deposit on other IPs is that right?

Oops, my maths obviously needs some brushing up too! $330k it is.

 

[vsdabhi]

Thank you all,

What does that mean by revalue? What is the difference between refinance and revalue? Do you pay stamp duty when refinance?
If the IO loan is lock in for 3 years with the same lender does that mean it can't be revalued or refinanced? What sort of fee involved in revaluation?

Do you need all IPs under the same lender in order to do a LOC?

Also when the PPOR is revalued, use vsdabhi's case an an example:

"PPOR $415K Deposit $83K (ANZ)
IP-1 $445K+expencies Deposit $105K (borrowed from PPOR equity) (ANZ)"

Sorry I am a bit slow... so you were paying P/I mortgage on $415k-$83k=$332k, then borrowed equity from this PPOR $105k, does that mean your mortgage on the PPOR became $332k+$105k=$437k? Did the lender check your affordability of funding the extra $105k? Or not really?

I can't understand how the bank let you borrow more and more? what do you do when you reach the max. borrowing capacity and can't buy anymore?

Thanks heaps!

Sorry for late response, First property PPOr bought in Feb 2008. Price $415K Deposit $83. Valuation done in Feb 2009 and draw down $105K as a new loan. So that I can claim for Tax deduction. Mortgage on PPOR is still same. $415K-$83K=$332K
The IP-1 purchase price $445K plus other expences $17K, Total $462K. IP-1 loan no:1 was $356K and Loan no:2 was $105K. So it was 100% loan.
Bank checked searvicability. They include rent in income.
For IP-1, Interest is $28121 plus rates and insurance $2100, Total $30221/52=$581 less rent $450 less PM fees$ 36. So I need to add approx: $167. This is just rough calculations so error is possible.
Thanks

 

[Olive]

thanks vsdabhi for the reply!