Borrowing Power For Investment

Discussion in 'Loans & Mortgage Brokers' started by FernTree, 27th May, 2018.

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  1. FernTree

    FernTree Member

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    4th Mar, 2018
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    Location:
    Newcastle
    Hi all,

    Newbie but loving all the information on PC.

    We recently purchased a 2 bedroom OTP apartment as an IP (Probably wasn't the best move since discovering PC) due for completion at the end of 2020. Our broker was confident we would be fine at the time of settlement but since then there have been a lot of changes in the banking sector with more changes on the way & we were just after a second opinion with regards to obtaining finance.

    Approx projected values at time of completion:
    PPOR currently valued $650k - $300k owing
    LOC against PPOR - owing $75k for 10% Deposit / Stamp Duty for IP
    Combined gross salary including potential rent from IP approx $160k per year.
    No debt / loans / dependents.

    At time of settlement we will require an additional $520k loan to exchange - (total IP cost approx 570k)

    I know that no one has a crystal ball nor can give a definite answer but I was just after opinions / educated guesses from other brokers as to whether I may need to change my name & leave the country anytime soon hahaha!!.......just kidding. We do have other savings available to us but just don't really want to have to use them in this purchase.

    Many thanks in advance & keep up the great work :).
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    FernTree likes this.
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    id suggest having a proper chat with a banker/broker to see what other options are there.

    hard to gauge that far out, so I certainly wouldnt provide a lot of comfort....... but such a long gap, while introducing risk, also provides opportunity if properly handled

    eg

    Lock nut your current equity NOW, you look to have some spare

    ta

    rolf
     
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  4. Trainee

    Trainee Well-Known Member

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    Where is the OTP? You might have to consider, what happens if the val comes in 10% low?
     
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  5. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    @FernTree

    Really good advice from Rolf above. Definitely extract any equity NOW while you can to mitigate any future risk.

    Whilst we won't know what the lending climate will be like in a few years, but it is in your control to draw down equity now. Often people don't go down the route of accessing money while they can - but this can be a bigger opportunity cost down the track.

    You also need to factor in the valuation issue - and something we won't know until later on whether the property may be in a restricted postcode - again that is very lender dependant and who you service with.
     
  6. FernTree

    FernTree Member

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    Hi Trainee,
    Thanks for getting back to me.
    Newcastle CBD.
    We are not too concerned about it coming in under value as smaller 2 bedroom apartments are selling in the area for $620k.
    There are quite a few apartments going up in Newcastle but nothing compared to the oversupply in Sydney.
     
  7. Trainee

    Trainee Well-Known Member

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    Your choice, but 2 1/2 years is a long time in otp land. Now would be time to save as much as you can, lock in as much of the loc as you can, and seriously try to avoid having kids in the next 3 years.
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Lurve newc........... Stockton beach is one of my fave haunts.

    2020 is a loooooooong way away

    and what happens today, v then may be very different, and may not come down to an oversupply issue at all.

    if demand tanks for whatever reason, even moderate supply can cause valuers to freak out, hence lock away what you can today .

    ta

    rolf
     
  9. Sackie

    Sackie Well-Known Member

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    For 620k I'd prefer an older 2bedder about 12km from the Sydney CBD. Medium to longer term I predict will perform better with less risk.
     
  10. Trainee

    Trainee Well-Known Member

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    Yeah but you lock in todays price and get two years of appreciation for free. Reduced stamp and lots of depreciation on the shiny stuff!
     
  11. FernTree

    FernTree Member

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    Really appreciate everyone getting back to me. Thanks for taking the time to reply.
    Never something I thought of until mentioned above but defo a good idea to lock in more equity now while we have access to it.
     
  12. FernTree

    FernTree Member

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    Haha. Yes, very true. I think kids are off the cards for a few years.