Good income/serviceability, stretched equity

What have you done (apart from the obvious) to get some equity to allow you to keep investing?

We've stretched out equity to the limit now (latest finance for a PPOR build was at 91% and required LMI). The way I see it our options are to;

- funnel as much income into paying down debt on the new PPOR finance.

- wait for IPs to gain some more equity. This could be tough in what valuers are seeing as slowing markets (IPs just recently renoed and re-valued)

- liquidate some other investments and pay down debt.

Any other ideas out there?

TIA

 

A radical idea - wait!

 

Hehe..well, @Terry_w , I did mention it. I kind of resigned myself to that being our probable answer.

Tough to do when you just seem like you got going though.

 

At 91% LVR...wait......patience grasshopper.....

 

Add value / Reno

 

Casino, Race Track, Sportsbet, Pokies, Club Keno, Scratchies or......wait.

 

Rent out ppor, claim interest and depreciation to reduce tax and increase equity via savings on tax bill? Get a second job or two? Rent in a cheaper place to save faster? Although with a brand new ppor you're probably not keen on renting it out

 

Win lotto, get a job with higher salary.... wait...

 

If prices move up on your current holdings, equity will present itself.
if they don't then you haven't missed much (perhaps avoided a fall in real terms) by holding back and seeing what transpires.

As you say, concentrate on paying down your PPOR is the best bet in my view.

 

Serviceability is not the issue, equity is. So dont be looking to pay down the PPOR. Put extra money till you have enough equity available for another purchase into an offset account attached to the PPOR loan. You never know if the PPOR will turn into an IP at some time. Then you can use those offset funds...

 

Realistically it's a matter of waiting, renovating or saving.

Realistically - you're not going to be able to move ahead at present with an LVR at 90% - in this new post APRA world, I'd aim to keep the portfolio under 80%

Cheers

Jamie

 

If the offset funds are to be used for an investment purchase it's still best to do a debt recycle. What isn't a serviceability problem now will certainly be one in the future, unless your last name is Reinhart.

 

Thanks Corey. I'm always happy to learn from a good broker or someone who knows more in specialised fields!

 

I am not referring to serviceability....more in terms of opening up an equity gap. Your overall LVR will decline if you were to pay down some of your PPOR. Hence, all else being equal, you would have more equity to buy IP's.

 

You could look at splitting off a 'deposit and cost' sized LOC out of your current PPOR loan, which you pay down, rather than offsetting. Once the LOC is completely paid down, you can redraw for the deposit and costs and the borrowings will be completely deductible (get tax advice.) .
Best way to move forward, I reckon, and reduce non-deductible debt at the same time.

 

If serviceability is fine but equity isn't could you get around this by getting one of the Citibank or Westpac unsecured loans to create another deposit? Citibank are only 5% or something nice and low, Westpac are around 10% but both will do up to $50k quite easily.
It will impact on your serviceability of course but if that is fine then it might still fly.
I'm not a broker, I'm just throwing ideas out there if you don't want to wait.

 

Thanks all. I suppose it was what we already knew in reality. I think we'll probably take the collective advice of the experience that has posted and wait, move our goals and focus towards getting our LVR under 80%. Unless we win lotto or find out we're related to Gina.

The move and this PPOR build were unplanned and killed our budget, but will be well worth it job security and income wise in the long term.

 

Many lenders specifically preclude using (personal loan) borrowed funds for the deposit, and with the lenders left, using a borrowed deposit is something that can impact credit score.

 

I feel your pain Jeah I put post recently where I had similar position to yourself. I decided to wait and hopefully do some purchasing once my properties get revalued middle next year. As they say good things come to those who wait or build equity in this case