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deposits for investment properties

Discussion in 'Property Finance' started by blackenator, 16th Jul, 2015.

  1. blackenator

    blackenator Well-Known Member

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    Just a quick question in regards to deposits. If your in a strong cashflow position and are able to save up say 10% deposits (20k deposits for 200k properties) are you able to keep borrowing with differnt lenders then say when you pull out equity. I am looking at starting to purchase some additonal properties but am equity poor but in a strong cash flow position.

    Also is their a limit and how much 10% deposits I can do before the bank(s) say no more 10% deposits.

    Thanks
     
  2. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Certainly possible to make rolling purchases of 90% LVR's at this time - it's a common strategy used by many investors, especially in the beginning of their investment 'career'.

    It's generally not lenders per say which will put the brakes on maintaining high LVR's, more the mortgage insurers who can veto finance if you go over DUA limits/borrow with lenders without DUA. This is where an investment savvy mortgage broker with a carefully structured plan can avoid these artificial constraints.

    It's important to remember that a 10% deposit includes you also having to provide sufficient funds to cover all government charges, which equates more along the lines to 15%.
     
    D.T. likes this.
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I'd be aiming for a12% deposit these days, it gives you far more options.
     
  4. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Absolutely - 88%+LMI can be a significant saving, particularly in higher prices.

    I was working on one yesterday where a $500 decrease in deposit (increasing it a tough over 88% base LVR) would increase the LMI by $3800 - talk about a no brainer.
     
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  5. miximitosis

    miximitosis Well-Known Member

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    What are some of the better lenders servicing wise still offering 90% + lmi lends? Or even 95% for that matter?
     
    Last edited: 17th Jul, 2015
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    CBA will stil do up to 95% incl LMI, but servicing gets tougher as they won't allow the use of neg gearing.
     
  7. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    hi Jess,
    Is NG limit due to recent RBA jawboning (ie banks are anticipating NG to be removed in near future?) or just a normal tightening?
     
  8. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Just another risk management measure to discourage high LVR investment lending. Other lenders capped it at 90%, CBA just made it more difficult rather than taking it away all together.
     
  10. Redom

    Redom Mortgage Broker Business Member

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    No, because APRA mentioned that it was not very prudent for banks to include this in servicing calculators.

    Wayne Byres made a speech talking about key issues with serviceability calculators a couple months ago. Since then all of the things he targetted have changed with one bank or another (to varying degrees).

    Thanks,
    Redom
     
  11. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Thanks Redom and Jess,

    For an IP, Do banks threat genuine deposit different to deposit from redraws? or is it a blanket min 90 lvr for IPs
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    NO they don't treat them different - the redraw amount is counted as a liability, and if servicing works with that added in, they're fine with it.
     
  13. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Thanks again Jess
     
  14. blackenator

    blackenator Well-Known Member

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    thanks guys for all your responses much appreciated