Why can't I do this?

[Stella]

I'm told this isn't feasible?
MB seems to be fixated on the fact we will owe over $1m - (on around $110k income excluding rent) I was concerned too till I got my head around it. I figure if we can support this with no other debts & a reasonable buffer behind us we will do ok at this level of debt.

What I want to do is this;
Turn current PPOR into IP - increase current LOC to 80% of val. This will leave around $56000 in available funds in LOC. Use this to capitalise interest, make repairs etc on this property.

Existing IP - (only had for 9 mths so not sure how to do this) need to set up buffer for this property but not certain if x-coll with above is the only way? Currently have around 14% equity in this one.

Borrow for new PPOR - 105% (purchase + costs). This time set up as LOC with offset (not having offset has put me in my current situation)

Can this be done or do I just have to bite the bullet & sell PPOR to access equity now or wait a few months to a year & save more or ??????

This is driving me mad - dont want to live in this house anymore, can still see future growth in it & will be suitable for a rental but just can't seem to come up with the right way of making it happen & dont want to throw $ away with selling costs etc if I can avoid it.

Cheers
Stella

 

[dantheman]

Hi Stella,

What's the anticipated annual rents?

And loan amounts?

Cheers

Dan

 

[Mr. Fabulous]

Hi Stella,

The simplest answer is get another mortgage broker. Why use a broker who doesn't invest (sounds like it from your post that your current one doesn't) when there are a handful of great ones on here to choose from.

Mark

 

[Spectre]

Owing $1m isnt that hard to do it.... 2 to 3 properties and you're there (generally speaking).

Have you also looked at selling the property to your partner/trust to get cash out and still retain it?

Wouldnt think you'd want to x-coll it

And if you skip the LOC you could get a variable rate up to 95% with an offset (noting mortgage insurance) which might give you more cash out towards the purchase.

 

[Insan3]

Is LMI potentially the issue?
From what I can make, PPOR/NewIP @80%, ExistingIP @86%, New PPOR@ 105%.
This would mean an LVR around about 90% for $1mil+. If that is the issue, maybe the risk needs to be spread. Hard to say without knowing specifics.

Also, although the IP's will be covered by the 'buffer', most brokers won't understand, or accept this as serviceability. Especially if your broker isn't overly confident in the deal, and is sticking to tight lending criteria - it might be tough to gain finance without visiting someone else.

Not sure what rent income you receive, but I know some lenders will be looking at your case as .... $1mil+ debt @ 9.5% + 2% buffer = $115,000 holding costs.
+ General Living, Other Loans/Cards, etc, etc, etc and it may look on paper like it's no good. Esp. if they only accept 70% of rental income...

Anyway, enough generalisations and speculation....
Find a new broker who understands PI and get the loan sorted!
When you find the broker, let me know - I'm in a similar position (less property and debt though) and I'm struggling to convince them to give me the cash to purchase again!

 

[Rolf Latham]

Hiya

Often your MB knows something you dont.

More often we have found your MB knows less than the client ............

It looks to me like your MB is making a risk judgement call on your enquiry, rather than advising what you can or cant have.

We dont know your detail situation, so its hard to provide any advice of value except whats been said already AND look for alternative advice ( which may be simialr to what you are getting now)

ta
rolf

 

[Stella]

Thanks everyone for your thoughts - looks like a new MB is the way to go. Funny but I feel a sort of loyalty as the current one was referred by friends who have purchased a nice portfolio of IP's through him & he got us our first IP but I guess anyone could have done that too.

I'll start looking around for another MB (watch out fellas on here lol) but if I get the same answer again I'll hang off for awhile & pay off more of PPOR until we can make it happen.

Cheers
Stella

 

[Stella]

Just thought I'd update those of you who have made suggestions & tried to help us get our future sorted - looks like we have given up the hunt for a new PPOR and will start the hunt for IP #2 instead.

After much much discussion and many k's driven looking at houses, we have decided to keep out non deductible debt as low as possible and put up with our pig of a neighbour (the main reason I wanted to move) in order to buy another IP in the next couple of months. The costs of selling outweighed the benefits of moving and it all just got too hard (and we realised how nice our PPOR is compared to what we were looking at a couple of suburbs away).

Thanks to all of you for your thoughts & time - stay tuned for the next IP


Cheers
Stella