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Borrow against PPOR for a business

Discussion in 'Property Finance' started by Jamie, 2nd Oct, 2016.

  1. Jamie

    Jamie New Member

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    Hi all,

    I have 9 months to come up with a plan to buy into a business I currently manage and I'd like to know whether I can realistically borrow against my PPOR to fund the purchase

    The situation as it stands:

    I owe 400k on a 450k mortgage
    I have a salary of 123k/year
    My partner earns 30k/year
    Next July (when I'd be looking to buy) we anticipate savings of approx 30k (which could be paid off the mortgage)

    I have a car loan with approx 20k and 3 years of payments left and no other debt.

    I'd be looking for 200k to partner in the business.

    Appreciate any help/advice/feedback.

    Thanks,

    Jamie
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You could potentially borrow up to 80% or even 90% of the property value, less existing loans.

    But you still have to demonstrate serviceability.

    You also have to consider the cash out restrictions. This will vary depending on the bank and the LVR. But you may be able to get more cash out by borrowing in stages.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    What sort of business is it ?

    Ta
    Rolf
     
  4. Joynz

    Joynz Well-Known Member

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    If you go ahead, see if you can get income protection insurance ( may be cheaper through your superannuation).

    Have you just purchased your house recently?
     
  5. Jamie

    Jamie New Member

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    Thanks for the replies. So that would be 90% of 50k terry?

    It's a Pharmacy business.

    We built our house 7 months ago.

    Happy to consider other options rather than securing a loan against the house but not really sure of what is realistic given the circumstances.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not sure where you get the $50k from. You may have $50k in redraw but your property may be qorth more than when you took out that loan so you may be abke to borrow more than that
     
  7. Perthguy

    Perthguy Well-Known Member

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    You may be able to but it is potentially risky. The house I just bought with my investment partner was sold to us as part of a business wind up where the loan for the business was secured by the house. The business went into receivership and the business and house were sold to cover debts. The owners walked away with a debt to the bank still owing.

    Not saying that will happen in your case. Just highlighting a potential risk.
     
  8. Jamie

    Jamie New Member

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    Yeah the redraw. I guess it could be worth more. The market in our suburb has been slow...when we built the valuation came in a few k less than the build cost. Was then I learned the valuation used local properties of similar value sold in the last 6 months. might be best waiting for the market to pick up before valuing (I have googled sales this past year and seems like homes have started selling around our range so it would follow that with comparable sales picking up our valuation would pick up too...happy to be corrected)

    Thanks for your experience, I would much prefer (as was the knowledge I picked up with my last employer of them bringing in new junior partners) that my partnership be via a loan guaranteed by my current employers but that is not possible.
     
    Perthguy likes this.
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Make sure you split the loan before using redraw as the interest may be deductible.