Mortgage help - buy before sell

Hi Guys,

We came across an opportunity to buy our upgrade house about a year before we planned to do so (and as such we haven't planned for it). The opportunity is good (about $50-60k below market value).

Problem that I have is that our deposit is currently tied up in our existing home, how can I buy the house before selling our existing one without paying LMI?

The numbers:
Current home value: $410k
Current home loan balance: $240k (of which $40k is sitting in redraw)

New home value: $700k - $720k
New home buy price: $660k
New home purchasing costs: $40k (duty, legals, etc...)

We thought about keeping existing home and renting it out, but it's all structured wrong (no tax benefit) and the property is high maintenance (garden requires 1 day a week to keep in shape).

Any ideas of products or strategies that I can look at to make this happen? Please help... :)

Edit - when we bought the existing house we paid LMI (took a 95% loan on $321k buy price)
 
Unfortunately there isnt a way to avoid paying LMI, (or selling, as you have referred to).

LMI is going to be pretty steep, its going to eat into most of your $40k 'profit' on the purchase.

the good news is, if you rent out the new purchase, you can claim the costs and the LMI over the first 5 years....
 
Equity split loan.

Property value: 410k
at 80% ( No LMI): $328k

Loan: $240,000 ( im presuming this includes the redraw??? ie loan is $200,000 and redraw of $40,000)
Equity available/cash: $88,000

So you will have $88,000 available cash/equity that you can draw out BEFORE you sell.

Note: since you already paid LMI on your current property, it's possible to take out more than 80% LVR on your current home and pay a small pro-rated LMI price on the increase...so potentially you can get $129,000 out ( 90% LVR) and pay a bit of LMi on top.
 
All subject to affordability, etc...

You can probably top up your existing loan back to 90% of the current value. This would leave you with about $130k cash for the deposit and costs of the next purchase. You'd need an LVR of 85%-90% for the new purchase, so there's some LMI to be paid both on the existing property loan increase and the new purchase.

You may be able to increase the existing loan to 95% which may give you enough cash for the next purchase at 80% and thus no LMI on the new purchase. You'd still have to pay some LMI on the increase of course.

It's hard to say which is the more cost effective option, you'd need to know exactly how much LMI was paid at purchase of the original home and get a current valuation done (to be certain of how much equity is available).

My gut feeling says that the first scenario (top up to 90% and buy at 85%) is the safer option as you have more room to move if you don't get sale price you want.
 
Thanks Guys, you are confirming what i feared.

What about bridging loans? is that just a fancy name for 'we will hide LMI and call it something different'?

Basically, i'm pretty sure that our existing property will sell fairly quickly (very popular entry area where most houses sell within 3 weeks - i won't be asking for above market on the house), is there a way to get the bank to work with that or will they take the stance of two loans one at over 80% LVR therefore we make money off LMI...
 
Regarding the new home LMI.

Since the buy price is $660,000- you need 20% cash/equity/deposit to avoid LMI...without knowing your full numbers/details here are some possible options.

1. Apply for a 90% equity split loan on your current loan - yes LMi payable but minimal since you have credit for LMI up to 95% in the past

2. for new loan apply for an 85% No LMI loan - Looking at the preminlinary numbers ( equity/redraw) you have enough for a 15% deposit

3. for new loan apply for an >80% loan - but choose a lender that has a reduced LMI costing

4. Sell first and than buy ( obvious)

5. Apply for lender that will lend the Stamp duty funds on top...allowing you to place more funds towards your deposit.

6. other options...


Cheers
 
What about bridging loans? is that just a fancy name for 'we will hide LMI and call it something different'?

No...personally it's always my last option in fact for your case and the numbers
your giving i would not even think abt bridging loan
 
Bridging loans generally only allow you to go to a max 80% of the peak debt/value. It won't work in this case.

They also tend to charge more, and be a major pain in the bum to get approved.
 
zgnilek - My advice...give Pete a buzz- he knows exactly what his doing + he will lay out the best option available and his in your part of town.
 
Bridging loans remove your flexbility and put the lender in charge as to when to sell and how much for

id agree with Mick - have a chat with a broker - Pete T is on your turf and is very good with this stuff

ta
rolf
 
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