How to finance renos to ppor

Hi guys we have an appointment with our broker next Friday but wanted other opinions as well. We have just sold an investment property in Somerset, tas and we have a second one which is a 2x2 apartment in Darwin (previously ppor hence buying up there in 2012). Obviously the market up there has tanked so we are trying to see it through and come out the other side at some stage ! It's rented out currently so all good there. Our ppor is opposite a beach in tassie (near Burnie). Purchased 2010 $240k now worth $310k, with a mortgage against it around $200k. We are wanting to do some renovations to it (build second story). We came out of the sale of our other investment property with about $50k. My question is how best to finance the renovations...? Should we look to sell Darwin? Use the equity or wait a few years until we save more ?! We are talking $200-300k renovation to completion, (will be worth it based on location!) but we could start downstairs and do in parts also. I'm currently on maternity leave for 12 months and we have a 3 year old and 8 week old. Sorry for the long post. Any help will be greatly appreciated !

 

Hi there

Are you going to pocket $300k from the sale of Darwin?

I suspect the only option is going to be a construction loan against your PPOR. You'll need a fixed price building contract, etc - the bank will then carry out an on completion valuation to determine the end value. They'll then lend against that.

Mat leave may throw a spanner in the works. Not all banks are keen on it (they may not accept your return to work income for servicing).

All in all - mat leave coupled with a structural renovation would have me looking towards major lenders for this.

It also sounds like a lot of work during an already extremely busy time in your life! If you do go ahead with it - just ensure that you've got sufficient cash reserves to cover the shortfall in your income between now and returning to work.

Cheers

Jamie

 

We're in a very similar situation.. two young bubs, mum on maternity leave, just sold an IP and wanting to do a reno on our PPOR.

I believe the maximum you can borrow is limited to the serviceability of 1 income, against the end value of the home as Jamie has said.
The only other thing worth considering is not using any of cash from the sale of your last IP, but all new borrowings (assuming LVR is ok), and park your cash in the offset account?

 

I find NAB are good in this space.

Most reno go over budget by 20%+ so if you thing you need 50k you may find it turns into 100k.

 

Heya,
I'd be budgeting a bit more of a Darwin downturn into your sums. A friend of mine just rented a lovely CBD 2x2 for 380 per week furnished.

Yours sounds a little newer but the competition is stiff. However much rent you're receiving now may not be indicative of the future....

Worth keeping in mind if you're going to borrow more for your PPOR.

I honestly wish I was the bearer of better news...sorry....

 

Some banks will take into account both incomes if you can provide an employers letter stating return to work date, earnings, hours worked etc and you need to explain/prove how you’ll meet your liabilities during the mat leave period (savings usually).

Cheers

Jamie