Borrowing as a PPOR then convert to an IL

Hi all, Ive seen a Mortgage Broker about borrowing to do a dual occupancy.

Due to my financial situation it will be a 95%+2%MI product.

Now the confusing bit, the Broker recommends a PPOR loan to get me into the property, but this confuses me. Using leverage gained from subdividing the land, will the bank lend to borrow further? Does my loan convert to an IL and what are the costs of this situation?

Any advise appreciated.

 

I'm guessing it is due to the 95%+2%LMI. Most lost lenders will only do 90-95% inc LMI for investment

 

Dual occs are usually limited to 80% and need to have a firewall in place.

It may be due to your high LVR as this will limit your options.

Why dont you ask your broker why?

You can potentially increase borrowings once the land is sibdivided AND titled.

 

Ok, im slowly getting the picture.

In Vic to subdivide a planning permit is required, so after i get that i get an appraisal on both properties, and using the new leverage (if any) i can apply for another loan to build. So that would mean i have 2 PPOR loans? Broker says i have no issue servicing the loans

Am i on right track?

 

Are you building dual occ or 2 separate properties? Assuming 2 separate, If you can subdivide the land first, the equity you create can be used to fund build 2.
BUT. You'll need cash to subdivide so you may need to keep saving?

The second loan could also be a PPOR loan if you intend to move into the new house - the main difference is LVR is higher for PPOR and rate is higher for investment loans.

 

Yes on the right track.

But don't forget the tax implications. You will want to split the loan and if one will be an investment you want to maximise the loan on this while minimising the loan on the one you will live in.

Tax Tip 93: Subdividing Property and Deductibility of Interest https://propertychat.com.au/communi...-property-and-deductibility-of-interest.6927/

 

Dual occ, there will be an established property at the front.

I'm thinking ill keep saving for a couple months to pay for draftsman to handle planning permit and the actual cost of subdividing will be covered by the build loan.

How can i have a PPOR for second loan, if i plan on selling it during or after construction?

 

You'll find the banks won't fund the subdivision.

If you're planning to sell you'll need an investment loan.

 

I think the subdivision and build are one and the same, not sure about other states.

Ill have to get back to Broker and see how funding for the build is done. Seems odd to get me into a place, then take a couple years to save up to borrow for build, when doing it all before would be quicker.

 

You might be able to get funding for the construction from the start but it will be on one title. If you want to subdivide you'll have to fund that separately.

 

The Broker did mention something about an off-set account and building that up while waiting on planning approval.

Will give Broker a call, at least ill be more coherent when i talk to her.