Loan structure

[fbc10]

Hi There,

I have just put pen to paper on my 3rd IP. I plan on funding my initial deposit through equity from my first two homes.

Is there a simple answer to how should I structure my loans now. I will need to use equity from both properties and therefore 'top up' each loan. Is it worth categorising both these 2 additional loans as separate or should I keep it attached to the original loan.

I definitely do not want to cross collateralise my loans and add these two top ups to my new loan on IP 3.

Appreciate the support.

Cheers,
Cam

 

[Peter_Tersteeg]

If all properties are under the same ownership structure and all loans are tax deductible, then you can do a top up of the existing loans rather than set up separate split accounts.

Some people do like to set up splits because they know which money is for which IP. Personally I think it creates a headache of too many accounts though.

 

[Marty McDonald]

Hi fbc10,

If you really don't want to x coll the first 2 (and I would say mots people on here would agree with you that that is a good idea) then yes you would have to do 2 small separate loans.

It is a bit fiddly but no other way.

Care to share the numbers per property? There might be some more to add into the conversation.

 

[Marty McDonald]

sorry just understood your post better! What Pete said.

 

[fbc10]

Hi fbc10,

If you really don't want to x coll the first 2 (and I would say mots people on here would agree with you that that is a good idea) then yes you would have to do 2 small separate loans.

It is a bit fiddly but no other way.

Care to share the numbers per property? There might be some more to add into the conversation.

Hi Marty and Pete.

PP $395k
LVR: targeting about 86% as that's where the LMI drops to a reasonable level ~$4k
Current equity: ~$50k LMI free. Additional LMI required for anything above $50k
Cash investment: Balance necessary ~$20k

Are these the figures you are referring too Marty?

Cheers

 

[fbc10]

If all properties are under the same ownership structure and all loans are tax deductible, then you can do a top up of the existing loans rather than set up separate split accounts.

Some people do like to set up splits because they know which money is for which IP. Personally I think it creates a headache of too many accounts though.

Great thanks, thought the options were limited.

 

[Jamie M]

I'd just do what Pete said.

You can either set up a separate loan on each - or if they're currently IPs and you never intend to move into one and they're owned under the same structure, then increasing the loans should work fine too.

Cross coll is where you go into the bank and they give you a loan for 105% of the purchase price but take the other two properties as collateral.

What you're aiming to do (release equity in two properties to purchase a third) doesn't sound like cross coll.

Cheers

Jamie

 

[Marty McDonald]

Hi Marty and Pete.

PP $395k
LVR: targeting about 86% as that's where the LMI drops to a reasonable level ~$4k
Current equity: ~$50k LMI free. Additional LMI required for anything above $50k
Cash investment: Balance necessary ~$20k

Are these the figures you are referring too Marty?

Cheers

I was more thinking about an individual breakdown per property

IP 1: $current loan(s) / $value ....and LMI paid previously Y/N?
IP 2: $current loan(s) / $value....and LMI paid previously Y/N?
Just purchased IP3: $?? / $395,000

 

[fbc10]

I was more thinking about an individual breakdown per property

IP 1: $current loan(s) / $value ....and LMI paid previously Y/N?
IP 2: $current loan(s) / $value....and LMI paid previously Y/N?
Just purchased IP3: $?? / $395,000

295k/400k LMI paid at 88% - Can draw out $40-45k with a fee of $1400. Anymore shoots up to ~$2k+
365k/410k LMI paid at 88% - Can draw out $7k with a fee of $585. $8k shoots up to $1.5k

All the premiums have supposedly gone up for LMI so I'm having to pay big fees if I'm looking to draw out equity and go to my original LVR.

hopefully this makes sense

 

[Marty McDonald]

Ok makes sense and looks good.

The only things I would look at is keeping the powdered dry on the $7K one. May not be worth the effort.

And perhaps if you haven't already doing the numbers on cashing out to 88% or even 90% LVR on the first one. I can see why the LMI would jump as you go over the $300K threshold but may be worth it as you never know when you WONT be able to access this in the future. Realise I kind of contradict myself on the $7k one though.

 

[fbc10]

Ok makes sense and looks good.

The only things I would look at is keeping the powdered dry on the $7K one. May not be worth the effort.

And perhaps if you haven't already doing the numbers on cashing out to 88% or even 90% LVR on the first one. I can see why the LMI would jump as you go over the $300K threshold but may be worth it as you never know when you WONT be able to access this in the future. Realise I kind of contradict myself on the $7k one though.

Good tip. Thanks Marty