Help: Purchasing First to Second Property Mortgage

Discussion in 'Investment Strategy' started by Binh, 15th Sep, 2017.

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  1. Binh

    Binh New Member

    Joined:
    20th Aug, 2017
    Posts:
    2
    Location:
    Brisbane
    Hi everyone,

    I am an avid reader of this forum and would love some insight/help. I wish to purchase my first property but after a talk with a Mortgage Broker, I am unsure on how to proceed.

    Background:
    Income = $80,000 p/a (In job for 3 months)
    Savings = $35,000 (Currently saving $750 p/w with no upcoming variations)
    Expenses = $327 p/w (All living expenses i.e. Rent, bills and food)
    HECS Debts = $38,000 (No other debt)

    Situation: I want to purchase a PPOR within $350-$400K, live in it for a year then rent it out. I want to continually accumulate properties yearly of which my cashflow/savings allow. I have chosen to go PPOR first due to QLD's Stamp Duty Concession and a lower deposit/fees required. My main concern currently is getting the right loan so I can achieve my second IP in a year.

    My talk with the Mortgage Broker:
    Loan situation 1: @5% deposit. Only 3 lenders appeared of which 2 required 6 months employment. 2 required P&I and the one that could do I/O did not have an offset account.
    Loan situation 2: @10% deposit. Option to go P&I then switch to I/O after a year when I rent it out.

    Problem:
    Loan situation 1: I don't know if it is good to go for P&I loan because although you're building equity into the property, down the track the Principal payments would be a lot more?
    Loan situation 2: I wanted to avoid 10% deposit because I wish to use that for my next property. In saying that, the Mortgage Broker was unsure if the switch to I/O was still going to be possible in a years time. If so, would have gone the 5% deposit in the first place.

    Question: Should I see another Mortgage Broker to find another possible loan or go with the 10% deposit and hope I can turn it into a I/O loan after a year.

    I appreciate your help/input, let me know if you require anymore information. Thanks heaps.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,670
    Location:
    Perth WA + Buderim Qld
    I would count on the fact you wouldn't be able to change to IO after a year.

    The lending environment is not what it was sadly, so the old methods are not working as easily anymore. IO over 80% is becoming a thing of the past with most lenders.

    Paying P&I now will not cost you more in principle payments - but it will save you interest. What it will do is slow down your ability to save a deposit for your next IP.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,571
    Location:
    Gold Coast (Australia Wide)
    Its a tough one because most of us have no idea what the future holds

    IO is great from a cashflow, and future tax management, but sucks badly at the moment due to higher rates, and lack of effective availability even above 80 % lvr let alone 90.

    Your issue isnt so much the broker per se, more around what you are trying to achieve is pretty close to OUTLAWED by the regulators

    ta

    rolf
     
  4. Binh

    Binh New Member

    Joined:
    20th Aug, 2017
    Posts:
    2
    Location:
    Brisbane
    Thank you for your replies Jess and Rolf. I will have to re evaluate my strategy and savings projection.