5 % or 10 % cash deposit these days ? Upgrading Perth PPOR

Hi

It's been a few years (2014) since I last borrowed and I know things have changed with lending. Things are stricter. I wouldn't know where in property chat to find the info I'm searching for so I'm hoping someone can help. I'll also go see MB soon too.

I'm selling my ppor in around 6-12 months time. Its a good opportunity to upgrade my ppor whilst values in Perth are still down.

I have a 3 year old ip villa currently worth a bit less than what I bought it for in 2014 so I won't be able to use equity from it for a deposit for my new ppor. It's currently renting for $290 PW with a $350 k loan on it.

When I buy my new ppor how much of a deposit will I need? I'll be buying something worth $250-$300 k.

Is a cash deposit of 5 % enough or do I need to find 10 % cash deposit ? I will have some cash savings but I want to use as little of it as possible of it as I can.

Oh and I should probably add. I earn $68 k pa. 15 years permanent public servant.


Thanks!

 

10% deposit and assume 90% or less for a loan - but best to avoid LMI on owner occupied if you can.

 

Ok thanks Terry. Yeah I had a feeling 10 % of my own cash would be needed. That's ok, I'll have the cash

 

Yeah so hopefully with my $68 k salary and proof of my savings a bank will loan me around the $250 k mark for my new ppor.

After paying the 10 % cash deposit I'll have around $40 k still in the bank.

My ip is quite negatively geared. Rent is not covering the mortgage. I'm hoping the bank will be ok about that

From what I've just mentioned do you think I'd quality for a loan?

 

Impossible to say. As a rule of thumb total borrowings would be 6 or 7 times annual salary

 

You can do with as little as 6% with 2nd tier banks for owner occupied. Plus Stamps etc.

 

6 or 7 times gross salary ?

I think I'd be happy to go with 4 times my gross salary which works out at $272,000.

I'll get a loan that is just 30 - 35 % of my fortnightly income (in today's calculations) so that way when IR goes up I'll be able to afford to make the repayments.

Plus it also means I'll be able to invest down the track too. If I got a bigger ppor loan I wouldn't be able to afford future investments.

 

Oh ok thanks. So there is that option too

I'll look into it & weigh up the pros & cons. If I can I'd rather put the other 4% in my offset.

Im guessing there is always the opportunity later on down the track to refinance with one of the bigger better banks.

My $350 k loan on my IP is with CBA. I could even look at getting a ppor loan with CBA down the track.

I like the idea of the 6% loan. I'm guessing there's some catches though. I'll look into it. Ta.

 

Hi Alex

The LMI you pay would reflect the loan to value ratio.

Additionally - with some lenders who allow for this, the rate would be high too at their headline rate in the low 5's. For example Bank West. Unfortunately at a higher LVR they don't allow for part of the loan to be fixed at lower rates on offer.

We have had some first home buyer clients who have gone down this route, with LMI lower than the Big 4 banks (QBE). But they have gone with lenders that do allow fixing of the rates, regardless of LVR - to minimise costs. Unfortunately, on second thoughts this option was really only available to first home buyers.

 

2 tier banks = Westpac and ?

I think I read another post on PC where it shows NAB and COMM BANK as Tier 1 and likes of Liberty Tier 3 and awwstpac Tier 2.

If aomeone wants to stick with Big 4 (bit more reliability compared to small lenders) then is is best getting a 1 deal for all loans (leverage and buying power to get better IR ?) or is it beneficial to go with different banks ??

 

Gotcha , thanks @Rolf Latham. I think I am all for MB and te various options they will propose with pros and cons and auggest the best one, afterall they are the sybject matter expert.

 

Don't forget that you'll have two loans, your IP and the new PPOR loan so that is more than 4 times your gross salary.

How much profit will you make from selling your PPOR?

 

WBC isn't second tier. They just don't like Owner Occupied IO

 

PS you need to weigh up how much the LMI is for any mortgage over 80% LVR (ie less than 20% deposit). The smaller the deposit the higher the LMI is - it goes up exponentially. There is usually a sweet spot around 88LVR (12% deposit) where the LMI is a reasonable price for not using cash.

Talk to a good broker and go through your options

You should also consider selling the IP and keeping your PPOR and converting that to an IP as I recall it always rented well

 

I wish I would knew about the LMI sweet spot back in 2012 when I bought my 1st property. I was naive in property investment and didn't knew forums like this exists and a family fruend recommended a person with a reference broker and I went with him. He was actually working for Comm Bank only so no asvise/suggestion was given by him in relation to IO or P&I , strategies to minimise LMI etc.so I paid only 5% deposit with LMI , can't remember if it was $7K that time.

 

I guess so, because I was so focused to buy the property and given the CG the western sydney had and used the equity to buy another ip in melb -it all worked out well.

 

Oh ok

$50 - $100 k. some of it will be from profit.