Buy now finance later ?

Hi

I would appreciate any comment/ advice in relation to the following:

An opportunity has presented itself to purchase a property. I deliberately made an offer "not subject to obtaining finance". I have the finance readily available.

The owners have accepted, subject to settlement in 14 days from signing the contract.

My query is - can I obtain a mortgage on the property after purchase (in order to replenish my cash balance).

Its a "cart before the horse" but I was anxious not to lose the offer hence my cash offer.

Many thanks for any advice/ comments (even negative ones).

best wishes

Tony

 

It's harder. Less choice of lender due to cash out restrictions.

I'ts not impossible to get a mortgage arranged in 14 days.

 

Also, if it's an investment purchase the interest will not be deductible due to cash being used to purchase. You can't reimburse yourself as such.

 

There is not tax deductible after the settlement unless u use that cash out to buy other income producing assets. I learned it he hard way

 

Dl

Keep in mind a mortgage is not the same as a loan.


Where is the cash coming from to pay for it?

 

Many thanks for all the excellent comments. I should have made clear that the purchase will be an investment property. The cash itself comes from savings previously held in managed funds.

Would I be right in thinking if I could obtain a LOC (instead of a mortgage) over the property, and use the funds to reinvest in managed funds (at the appropriate time), then the interest on the loan would be tax deductible.

Thanks in advance for any comments

Tony

 

Yep that would work fine. You could also use a variable rate loan rather than a loc with the right bank, it'll work out cheaper

 

It you borrow to buy it the interest will be deductible against its rent. The LOC could be secured by anything.

If you pay cash and later set up a LOC on this property then the interest on this may be deductible if you borrow to invest in income producing asses such as a managed fund that pays dividends.

An alternative now is to borrow from a relative, even if you have the cash, and to refinance this loan with a bank later on after settlement.

 

Possible and the tax implications are already noted above.

Be careful in assuming that you can cashout the funds/apply for a LOC after settlement - this is becoming more of an issue across lenders. Ensure you speak with your broker regarding the scenario so you can have a solution lined up before settling.

 

How much is the equity release? If its $1mill+ you may have a very limited lender selection. I've just been through the process here for a client who bought a $2mill + with cash. Not many lenders were fighting for a $1.5mill+ uncontrolled equity release. You may also run into AML issues with some, looking to confirm the source used to originally purchase the property.

Nonetheless, options exist, but not as many as buying it with a mortgage first go.