Finance Clause - 105%

If you need to borrow equity to complete a purchase then do you put 105% as required finance in the contract?

 

Presumably the equity portion was approved and delivered before you went IP shopping?

I'd put 80 or 90 or whatever it is on the contract, since this will be the part you're actually applying for.

 

If you still need to apply and be approved for the deposit and costs, yes - 105%.

If you have the equity portion approved and ready to go, just the balance of the loan is fine.

I would recommend sorting out the deposit side of things well before signing a contract.

 

Do you need a 105% loan to complete the purchase? Hopefully at this point you'll have the 15% - 25% for the deposit and costs already taken care of via an equity loan against a different and only require another 90% or 80% loan to buy the house.

A 105% loan doesn't exist on it's own, the only way you'd qualify for one is by cross collateralising the new property with an existing property. Here's a post on the reasons why this is a terrible thing...
Cross collateralisation - 10 reasons to avoid

 

Thanks for all the replies guys. I found one that I'll putting an offer on. I do have enough deposit to go for a 88%+LMI loan but I want to first try and see if I can cash out to 90% with Westpac. They seem to want to control funds for a LOC for 90% cash out.

 

I recommend the same for land contracts when purchasing land and building a home. The finance clause is a percentage of the land plus house price.

 

I could be out of date, but are Westpac doing 90% investment loans again?

 

The LVR on my IP is 75% so I want to see if I can get a 15% LOC. Last I checked they said they want to control the funds. Could have changed recently. Have to wait for my broker to get back to me on that.

 

what about
Specialist Mortgage Brokers - Home Loan Experts
i saw there were doing a 105% home loan ?

 

Follow through to the appropriate page, they describe 5 ways to do it...

1. 105% Guarantor loan - most of us call this a parental guarantee, it's not 105% of the security value.
2. A gift - not really a 105% loan if you're getting a gift to bring the LVR down.
3. Personal loan as a deposit - they even admit it's not suitable for all people, in fact it's not suitable for almost anyone.
4. Equity in another property - again this isn't really a 105% loan, but it is potentially bad advice with cross collateralising.
5. Use your superannuation - here they even say you can borrow up to 80% of the purchase price; I think they just broke physics because now 80% = 105%.

105% makes for some nice marketing, but it's rubbish.

 

thanks rolf - not for me (actually for someone else who doesn't have sufficient deposit)