can someone explain to me an interest only loan

ok.. this is my scenario ....house ... Country NSW- Moree
Price --150k
Deposit @ 20 % 30k
Rental income $200 weekly

Borrow 120k interest only and pay stamp duty and legal costs myself.

Rates -$1800 a year ( country area / moree )

So i will be paying back 120k on interest only or should i borrow for the stamp duty too?

 

why not borrow 150k plus the stamp duty?

 

Depends on personal circumstances but generally borrow as much as you can and include these expense in the total loan.

 

I don't think you can stack on stamp duty, unless you paid for that out of a LOC from a separate property.

 

I doubt if a bank would lend me that... That would be 100% of the loan??

Can any mortgage brkers confirm they would lend 100% ?
Would you take my other fully paid off IP as security ?

What criteria would i have to meet ?
My wage is only about 55k a year .

I just want interest only loan on a Country NSW property... Would that be negative if its in the country area?

 

I am a mortgage broker and can confirm you could borrow 105% or more - but you could only borrow 80-90% against one property and the rest secured on a separate property and/or related parties.

 

Isn't that x-coll? Wouldn't it be better to get a LOC against his other property and draw the stamp money from that?

 

I see ... Probaly would be easier then just putting down 10% or so rather than putting my other IP or my home up as security.

I might ring around mortgage brokers to see if they will take 10% deposit and give me a interest free loan... Interest might be higher on 10% though.. I will see.

 

I just rang a mortgage broker here in Darlinghurst... Her advice is .. If you put 10% down only your going to pay 2% mortgage insurance.

So you'd be better off putting down that money as deposit on top of your 10% deposit and making it 20 percent .. Which i guess makes sense ... Unless im negative gearing.

 

Let us know when you find an interest free loan, Id like one of those myself.

 

When you find out, PM me their details!!!!

 

Well now i've gone off the 10 per cent deposit idea..

Its no use paying 2% mortgage insurance... But then again 2 per cent of 150 k would be only 3k i suppose ?

 

Borrow 20% plus stamp duty from your unencumbered property, and then 80% on the new property.

 

Using a LOC is exactly what Terry is trying to describe. Avoiding x-coll is simply a matter of appropriate structuring. This topic gets discussed at least 3-4 times a week on this forum and it's standard procedure for every broker here that reguarly contributes.

Can be worthwhile if you wish to preserve your funds for a future purchase. It basically stretches your funds further. You could 2 properties at 80%, or 3 properties at 90% using the same amount of cash.

You wouldn't pay LMI if you had unlimited funds for deposits, but if the funds are finite, paying LMI can get you further.

 

Yes but it was the way he wrote it that made me take pause. Could have been interpreted in both ways yeah.

 

Not necessarily;

If the purchase costs and stamp duty are borrowed from an LOC secured by another property, and the remainder of the funds needed to buy are borrowed from an entirely different Bank, and secured by the new property then it is not cross-coll.

Of course; you need to have access to enough funds in the existing LOC to cover the remainder of the purchase plus the purchase costs ans stamp duty.

 

Peter has explained it below. avoid x-coll.

See my ideal version of loan structuring here
https://propertychat.com.au/community/threads/terryws-ideal-loan-structure.6016/

 

Yeah I know how it works, I just misinterpreted your statement

 

Borrowing Scenario Example.

PPOR Value 800K
Loan amount 500K
Current LVR 62%

Take out a Separate loan (LOC)140K against PPOR so that loans look like below

PPOR Value 800K
PPOR Loan 500K
LOC Loan 140K
Total Loans 640K
Current LVR 80%

So this 140K can now be used for deposit & costs on an investment property as per below

IP
Value 450K
Deposit 12% + Costs $76,500 taken from LOC

New loan with bank X taken out for remainder of $396,000 to settle property.

LOC & new loan are both tax deductable and investment property loans are stand alone and not crossed

New Total Borrowings Below

PPOR Value 800K
PPOR Loan 500K
LOC Loan 140K($63,500 still remaining post IP1 purchase costs)

IP1
Value 450K
Loan 396K
LVR 88%

 

I have. My last purchase was a 105% lend. So I borrowed the 100% of the purchase cost + funds to cover stamp duty and other purchase costs.