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Financing Structure for First Timer

Discussion in 'Property Finance' started by gnokybbob, 8th Sep, 2016.

  1. gnokybbob

    gnokybbob New Member

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    Hi property wizards out there, I am considering of purchasing my first property (for my private own living) this year.

    Just wondering what's the best financing structure If I can get a mortgage from the big 4 banks for $300k (including offset account) - and with my own savings of $500k.

    Total property cost I'm looking for in Melbourne is around 850-900k.

    Cheers
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hiya

    10 mins and not a response from a broker????

    What are your longer term plans with this property? Think you'll rent it out in the future and purchase another PPOR?

    The popular response (assuming you're good with money) is to borrow up to 80% (if borrowing capacity allows) and dump surplus cash into an offset with a loan that's been set up as variable IO...... but everyone's different, it all depends on your future plans.

    Cheers

    Jamie
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Sorry Jamie. Telstra broadband problems, I'm on dial up speeds until the tech gets here tomorrow. What's everyone else's excuse?

    @gnokybbob you've got a large deposit and the loan you need isn't particularly large. Chances are you'll be able to make your purchase assuming your income is sufficient to service the loan.

    There's no real context behind your question though. Simple enough if you just want to buy a house and live in it - you just borrow what you need and get to work paying off the debt.

    If however you're looking at a longer term strategy involving borrowing, then there's probably better ways to structure it. There's a lot ways you can structure the purchase of your own home to give you a few tax advantages later, or to maximise your flexibility down the track should you need it. It can also be done in a manner that won't cost you anything extra until you want to purchase more property.

    So many options, so many ways to structure loans. It just depends on what your plans are as there's no 'best structure' for everyone. Have a think about what your plans are, then get in touch with one of the forums friendly brokers to discuss how to structure with those outcomes in mind.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Outrageous - we're losing our touch ;)
    I must be missing something - with savings of $500k and a loan of $300k, how are you planning to buy @$850-$900k? You might have to up the loan amount a bit. :)

    How this is structured will depend a lot on your servicing too - while borrowing 80% is ideal, it will depend how much you can afford according to the lender. In short, as long as you're disciplined with money borrow as much as you can up to 80%, and put the rest of your cash in offset.
     
  5. York

    York Finance Broker Business Member

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    It largely depends on your longer term goals. Is your objective to buy this home, pay it off whilst living there for many years to come? Or is the plan to live there for 5 years and then move on to another property and rent this one out? Different objectives will have different structures depending on your longer term aspirations. Of course either way you will need to be able to service according to the lenders requirements. Get one of these brokers to look over your situation. They can check your servicability and also advise on the best structure to suit your requirements and goals.
     
    Leo2413 likes this.
  6. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Short, medium and longer term goals will need to be considered in the equation as this will dictate the finance structuring, which bank when etc.

    I will have a stab and say got to 80% LVR and link an offset to it and drop the remaining funds in there as a cash buffer as well as to reduce interest payments on the loan amount.

    900k
    x 20%
    180,000 deposit

    - 45,000 for costs

    - 75,000 remaining funds from 300k to be placed in offset so interest payable on 825k.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Consider ownership structure - 1 name so you can have the potential to sell to the spouse if you ever move out. If you have no spouse that is even better as you can acquire one later.

    Consider 105% borrows if you think it could turn into a rental property - but don't pay LMI as this would not be deductible.

    Consider whether IO is appropriate.

    Get a 100% offset account too
     
    Colin Rice likes this.
  8. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Why is that?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Sounds like he intends to live in the property. If it is a rental then it would be deductible though.
     
    Colin Rice likes this.
  10. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    All clear. Read twice and no need to ask once :)