Hi there
I am looking for a bit of feedback on my current situation with regard to purchasing an IP.
My husband and I have a PPOR with $61k owing and available balance of $210k = total credit limit $271k
We are looking to purchase an IP between $260-300k and the bank has given us 2 options with regard to loan structure:
1. bank loan will cover IP value to 100% + stamp duty costs. No deposit required from us but they will reduce our current credit limit in our PPOR down to $185k from it's current amount of $271k. No LMI applicable as we would be reducing our PPOR mortgage limit.
OR
2. we put in 5% deposit + stamp duty. Bank covers 95% of IP + LMI is rolled into loan amount.
We don't mind covering the 5% deposit and any other costs. The main concern for us is that in option 1 the bank would be reducing our current PPOR mortgage credit limit from $271k to $185k. I feel like it is potential money being taken away from me
We aim to pay our PPOR balance of $61k off by mid 2015 so at that point we would still have a substantial amount of equity available but if we go by option 2 we would have approx $80k more equity available.
We are looking to purchase around 3 more properties over the next 10 years.
I feel maybe it's just a perception shift of not having that larger equity available but wonder if I'm missing some key financial part to making our decision?
Our bank contact said the following in summary of our options:
Scenario one may enable you not only to avoid mortgage insurance but also structure in such a way that your total loan will be tax effective . Scenario two allows you to keep the both properties separate however incur costs that can be avoided and potentially limit your full realisation of what could be tax efficient debt.
Sounds like he is encouraging option 1 which makes me suspicious
Any feedback is appreciated.
Thank you
I am looking for a bit of feedback on my current situation with regard to purchasing an IP.
My husband and I have a PPOR with $61k owing and available balance of $210k = total credit limit $271k
We are looking to purchase an IP between $260-300k and the bank has given us 2 options with regard to loan structure:
1. bank loan will cover IP value to 100% + stamp duty costs. No deposit required from us but they will reduce our current credit limit in our PPOR down to $185k from it's current amount of $271k. No LMI applicable as we would be reducing our PPOR mortgage limit.
OR
2. we put in 5% deposit + stamp duty. Bank covers 95% of IP + LMI is rolled into loan amount.
We don't mind covering the 5% deposit and any other costs. The main concern for us is that in option 1 the bank would be reducing our current PPOR mortgage credit limit from $271k to $185k. I feel like it is potential money being taken away from me
We aim to pay our PPOR balance of $61k off by mid 2015 so at that point we would still have a substantial amount of equity available but if we go by option 2 we would have approx $80k more equity available.
We are looking to purchase around 3 more properties over the next 10 years.
I feel maybe it's just a perception shift of not having that larger equity available but wonder if I'm missing some key financial part to making our decision?
Our bank contact said the following in summary of our options:
Scenario one may enable you not only to avoid mortgage insurance but also structure in such a way that your total loan will be tax effective . Scenario two allows you to keep the both properties separate however incur costs that can be avoided and potentially limit your full realisation of what could be tax efficient debt.
Sounds like he is encouraging option 1 which makes me suspicious
Any feedback is appreciated.
Thank you