Arrange finance pre or post settlement

I've just bought an investment property and in the fortunate position of having the full purchase price available to draw against my PPOR as a loan so that I can get full deductibility and also have the lower PPOR interest rate.

I'd like to set up a loan against the investment property though so that I have funding / liquidity for the future.

I was thinking I'd get this new loan arranged once I've settled and have a bit more time and full access to the property. My question for anyone else that may have thought about this is whether I'm missing anything important that would make it advisable to arrange the new loan at the time of settlement? Would the lender want to delve more deeply into the purpose/use of the loan or restrict LVRs given the loan isn't directly financing the purchase of the encumbered property?

Cheers

 

Really wouldn't recommend doing it that way at all

 

It's much harder to get decent leverage on an unencumbered property so highly recommend getting finance for the purchase.

They're much more willing to fund a purchase than do a huge cash out.

 

Uncontrolled cash out is only going to get harder. I would definitely go with a loan pre-settlement.

 

Get the finance for the settlement, don't try to get it after the property has settled.

Lenders aren't really keen on releasing large amounts of cash. It might be possible, but you're giving yourself an unnecessary headache.

There's also plenty of scenarios where getting the money after settlement might have a very adverse tax outcome for you.

 

Agree with others. Its easier to do upfront as you don't need to demonstrate the purpose of the funds (they will assume its for the property, even if you have cash for it).

If you plan on going down the cash route, best to prepare a good reason for the equity pull. E.g. a financial planners letter to invest in other asset classes, etc.

 

Thanks all - the advice is much appreciated and seems like I have some work to do!

 

As the gurus above have said - apply now rather than waiting for later.

I had a similar one recently that was approved/settled without issue. It was a land purchase - client funded it with cash and then we borrowed up to 80% against it post settlement. We explained to the assessor that client didn't have enough time to apply for finance before settlement (long story) - they were ok with our rationale....BUT it's not something I'd recommend doing if you can avoid it.

Cheers

Jamie

 

If time permits then get your finance in order but if not then what Jamie suggested could be a plan b as well as some "cash out" friendly lenders as plan c that are still kicking around would probably work as well.

 

I have a similar set up and I'm having difficulty obtaining a new 80% loan for a new IP because the lenders are assessing the large undrawn portion of the PPR equity as if its fully drawn. Similar to the way they see your credit cards.

 

Which lender as they view this very differently depending?

 

budget guys loans.com & Homestar

 

There in lies your problem.

 

That's normal. They'll take the limit of your liabilities over the balance. Which makes sense - you could spend that money tomorrow.

Cheers

Jamie

 

^^^^^^^
That's right.

Ultimately it doesn't change how much you can borrow overall though. Its just easier to get funds for a purchase.