Help understanding property finance options

Hi all

I've been getting some conflicting advice from various sources so am hoping for some thoughts/insights to help me navigate my way through.

I own my PPOR in Queensland, valued at approx. $475k. Loan outstanding is $290k. There is approx. $60k in an offset account.

I'm considering buying a new property for $520k as my PPOR. Once I move into this house, I will sell the current PPOR. A complicating factor is that the vendor needs to rent the property back for 6-9 months after settlement before I can move in due to their own circumstances. I'm happy to accommodate this in order to seal the deal (as $520k is below market price). The rent during this period will be around $475pw.

I spoke to my lender and was told an IP loan in addition to the current loan won't be approved due to serviceability (but I'm confident the repayments would be workable). But they will do an equity release on my current loan and offer a bridging loan of $450k for up to two years to enable the transactions to take place, but this would involve having both properties as security against both loans.

I've had some advice that a cross-collateral situation is a great and simple option to get the deal done. I've had other advice that the risk associated with the bridging loan is far too high and to walk away from the deal.

Can anyone shed some light or provide some thoughts? Are there any other options that could be considered? Is it all too complicated to be buying a place essentially as an IP in the short term and then quickly converting it to a PPOR?

Thanks in advance

 

Advice from who? Lawyers, accountants, mortgage brokers, experienced property investors?

 

Cross collateralising (or not) isn't going to improve your serviceability. In this case it might make things easier but it may also be counter productive as well.

If the only advice you've had on this is from your existing lender, you might want to consider alternatives. Lenders have different policies and models, they're not all the same. The lender you're with might not the be best suited to the circumstances.

Consider speaking with a mortgage broker to get a better cross section of what different lenders can do for you.

 

Hi @ps0104

Cross coll may cause more headaches down the track.

There may be options available outside of your current lender, including restructuring existing loan.

Again, as you are aware, it will come down to your borrowing capacity as well.

Worth getting specific advice on how you can work through it, and a broker help you navigate through this.

In terms of whether this deal should be let go - just comes down to how much are you saving, and what will you be spending on a similar deal where you could move in straight away?

 

I think if a bridging loan then crossing may be necessary.

I can't really see an issue with this if it is short term.