Join Australia's most dynamic and respected property investment community

getting 105% finance

Discussion in 'Property Finance' started by Elives, 29th Oct, 2015.

  1. Elives

    Elives Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    536
    Location:
    Queensland
    how common is it for banks to allow to you to use cash savings as collateral security? and then as the prices goes up release the cash security

    etc instead of using 25% for deposit and closing costs you put it into a term deposit.



    Cheers, Elives
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,973
    Location:
    Sydney
    It is very rare to see, but should be commonly allowed.
     
    Elives likes this.
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,766
    Location:
    Perth WA
    Some lenders do it, some don't but it's not done very often. There was another thread on this recently.
     
    Elives likes this.
  4. Elives

    Elives Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    536
    Location:
    Queensland
    as brokers would you look to do this, or is it to much of a hassle / not really worth it?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,973
    Location:
    Sydney
    Why not - same thing = borrowing money, just different security.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,766
    Location:
    Perth WA
    I would look to do it in some situations as an interim measure, for eg where a PPOR that has been used for IP deposits is sold, and we're looking to keep the investment loan open until a new security can replace it. In reality it doesn't happen often and lenders don't love it - probably due to the PITA factor.
     
  7. Elives

    Elives Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    536
    Location:
    Queensland
    PITA factor, what is this? :s
     
    Bubica42 and Jess Peletier like this.
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,161
    Location:
    Gold Coast
    security over a TD is relatively common for portability purposes

    We dont mind getting 30 % more comm for the extra 25 % borrowings where the purpose suits the borrower.

    Most peops that initially look at this have second thoughts for any longer term facility.

    This is mainly due to the cost spread. A TD provides say 3 % taxable income, the mortgage costs say 4.5 after tax for a ppor.

    As already stated y others, it can be very useful for short term scenarios where you can get the TD released to other security in a shortish time

    ta
    rolf
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,766
    Location:
    Perth WA
    Pain in the bum, only less lady like. ;)
     
    Bubica42 and Elives like this.
  10. Elives

    Elives Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    536
    Location:
    Queensland
    are you saying you need to put down 30% in TD to get 25% for borrowing? confused what you mean with the 30% bit. :s
     
  11. Elives

    Elives Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    536
    Location:
    Queensland
    oh commission? haha
     
  12. Mick C

    Mick C Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    206
    Location:
    Sydney
    ^ A common strategy we see a lot of business owners take up or ppl with a VERY high income and decent cash flow ( ie more the Doctors and CFO/CEO etc...) - normally at the request of their accountant due to future planning request.

    In fact this is a strategy i personally executed for some of my recent purchases....

    For those playing at home and a bit confused;
    Purchase: $1,000,000

    20% Term deposit ( Say $200,000) - Note the 200,000 can be money from equity or LOC.
    Borrow the normal 80% LVR loan.....but really it's a 100% loan using the term deposit as "security".

    Pro
    * Can release the CASH/term deposit when the property goes up...instead of "equity" release it's CASH ( Tax reasons)
    * Better interest rate, as you increase the loan size ( a bit hard to explain....but sometimes it's the difference between a 4.15% interest rate and a 4.10% interest rate)

    Con
    * Even though you get interest on the $200,000 as per term deposit or online savers rate, you are still paying more in interest for this $200,000 as the mortgage % is higher.

    Note:
    1. It's more common to see a 10% term deposit and 10% Cash kind of situation rather than 20% term deposit....it's just easier....

    2. Not all banks offer this...but your major big 4 ( CBA/ ANZ/ NAB/ WBC) and some medium tier banks ( St George/ Suncorp etc...) for sure does.
     
    Redom and Elives like this.