Loan Structure/Features

[lostis]

Hi,

I am new to this game and about to apply for my first loan to purchase my first investment property and have read so many resources regarding property investment, each having ideas of what type of features a loan should have, soo many in fact that I am now lost as to what I require.

My plan is to pay it off as quickly as possible so that I can use the equity to purchase another property and eventually use the rent as an extra form of income.

I am considering borrowing 200k, which I would split between 80k and 120k, one fixed and the other being some sort of "honeymoon/introductory" rate loan respectively. The features that I think would benefit me and why i think they would benefit me are as follows:

* 100% Offset account - reduce interest on the SVR
* Low early repayment fees - so that any refinancing in the future will not be too costly.
* No extra repayments fees - speaks for it selfs
* Low administration fee - as above.

Is it possible to find a way to structure my loan as above? or am I living in a dream world?

Are there any features that I may have missed that would benefit me?

Thanks for your help.

 

[turk]

Welcome Lostis

As far loan set ups go ,talk to some MB's who are knowledgable re. investment loans.

There are some very good MB's here, perhaps read some threads they are involved in
to see who may suit you.

I use PT Bear with great results.

Regards

Peter

 

[Rolf Latham]

Hiya

lots of string there

Suppose much depends on loan to value ratio, type of property, capacity to hoe into the existing debt etc

ta
rolf

 

[Jamie_D]

Hello

You would probably want to keep the loan amount at maximum of 80% of purchase price or valuation which will save you coin on mortgage insurance.

Is the loan a full doc or low doc, that is can you provide income verification as opposed to self certifying your income?
What is your current lending capacity?
Do you have other debts?
etc
etc

An experienced mort broker can assist or you can simply (not really!) approach many banks and find the most appropriate lending package or product.
It depends on how much time you have to run around and compare features and benefits, therefore let a MB do the leg work
They don't charge fees as the banks kindly pay us

Cheers

 

[lostis]

rough estimations (quote from CBA) advise I can get a MAX loan of $350k

I will have an LVR of at most 80% as I will be using my parent's home as security (fully owned) as well and will be full doc. Am looking at getting an apartment

The reason why I am searching on this forum is that I've seen some really ineffiicient (if thats the word) loans when I used to work in CBA Home Loans which were put through by brokers, so i am some what sceptic of how much work some brokers do (NOT ALL)

Also i'd like the be precise when I meet with brokers so that nothing is ambigous and to ensure I've covered everything i can benefit from.

I will continue trawling through the threads to see what else I can dig up.

Thanks for the assistance guys,

 

[Rolf Latham]

Hiya

Probaly wont like what I have to say................


My advice in the current climate is not to use a family guarantee, since the parents home will be used. If it were an IP it would not matter that much.

Either make the 5 % deposit + costs and pay LMI or

Worst case, ask parents to take a 20 % loc on their place in their own right and lend that to you, and take a caveat on your place after settlement.

The 5 % plus lmi option may work better for you in the long term in any case if you are looking to tirn that PPOR into an IP middle term.

ta
rolf

 

[lostis]

Curiously,

why is it not a good idea to use a family guarantee at the moment? i believe there will be some minimal extra costs but other than that what other risks? Assuming that I will have no problem paying the loan.

Also, what is the purpose behind putting a caveat on the loan if the house is being used as security for my parent's loan?

Sorry if these seem like really dumb questions, all in the learning process.

 

[Rolf Latham]

Hiya

There are NO dumb questions !!

On the guarantee

1. The assumption that u or they can always pay is perhaps not solid, thus there is risk that your parents may lose the home. Small risk I know, but we wear seatbelts too. If it was an IP then no big deal.

2. Parents may want to do something with their equity with another lender for whatever reason.

3. Something happens that forces sale of the parents place


The caveat on YOUR place is only used where your parents lend you the money, that they have secured agaisnt their home. It provides for moderate protection of their interest.

 

[Mom]

Hi,

I am considering borrowing 200k, which I would split between 80k and 120k, one fixed and the other being some sort of "honeymoon/introductory" rate loan respectively. The features that I think would benefit me and why i think they would benefit me are as follows:

* 100% Offset account - reduce interest on the SVR
* Low early repayment fees - so that any refinancing in the future will not be too costly.
* No extra repayments fees - speaks for it selfs
* Low administration fee - as above.

Thanks for your help.

I'm afraid you will be charged early repayment fee if you refinancing within 3 years... or you are on fixed rate term... its quite the norm.

Try Credit Union Australia:

Make lump sum payments without penalty
No monthly account keeping fees
Receive extra free transactions on your CUA savings account

If you've borrowed more than $250,000, your home loan will automatically revert to our Discount home loan at the end of your fixed rate term. If your home loan is less than $250,000, it will automatically revert to our Standard home loan.

Key benefits:
Free redraw: Option for payments made in advance (minimum $1,000).
100% offset facility: Available to reduce the interest you pay.
Interest only : Ideal option for investors for the fixed term.

start up fee:
Establishment fee $600 (incluiding valuation) - if your servicability is impeccable, you might want to request a couple of hundreds waiver from the lender (but you will still need to pay the portion of this etabslihment that is used for paying valuation fee normally $200)
Sec admin fee $195 ( attending settlement, bank cheques fee searh etc) No more to pay.

Hope this will give you an option

 

[Les]

G'day Lostis,

why is it not a good idea to use a family guarantee at the moment? i believe there will be some minimal extra costs but other than that what other risks? Assuming that I will have no problem paying the loan.

I don't know that THIS time is any worse than any other (referring to your "at the moment" comment). Over the past several years, I recall MANY posts advocating to stay clear of involving family in your purposes.

We don't PLAN for things to go wrong, but, when they do, the cards will fall where they may. And I'm sure you wouldn't want your parents to be out of their home because of your actions.

In short, I prefer Rolf's idea (it's a bit like NOT cross-collateralising) - let your parents lend you a deposit but DON'T tie it up with your investment by having them GUARANTEE your moves.

If all turns out well, you'll square them up later. But, if it goes BAD, don't involve them (as would happen if they were guarantors),

Regards,