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Looking for some help or can we do better

Discussion in 'Property Finance' started by Ardi, 2nd Aug, 2015.

  1. Ardi

    Ardi Well-Known Member

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    Hi all,

    Looking for some help or guidance with our current financial situation. I am not sure if it is the best to meet our property goals and how much the new lending rules will affect our ability to grow our portfolio.
    Trying to grow as much as possible and looking for value add properties or to try and get a taste for some small subdivisions.

    Our current situation is:

    IP1 value $500k owe $351k @ 4.4% IO. Leasing for $495 pw.

    Xcoll with

    IP2 value $570k owe $481k @ 4.4% IO. Leasing for $575 pw.

    PPOR value of $530k owe $410k @ 4.4% IO. Have elected to pay more into an offset in lieu of paying down principal.

    All are with commonwealth and have about a reasonable amount in an offset on PPOR. We are on a fairly healthy wage between the bride and myself. Does this sound like a reasonable way to be moving forward? As above looking for value add and positive property if possible.

    Any help or advice would be greatly appreciated. Cheers!
     
  2. Mick C

    Mick C Well-Known Member

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    1. Uncross - esp if your planning on growing a portfolio + taking out equity ....

    2. Overall everything else looks ok....

    3. Take out equity ASAP even when you dont need it...
     
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  3. Ardi

    Ardi Well-Known Member

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    3. Take out equity? As in get a loan on equity and sit in an offset against the loan taken?
     
  4. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    100% agree with @Mick C.

    @Ardi, yeah that'd be the plan. I have a saying "Grab what you can, when you can, whenever you can". The lending rules are subject to change without warning so it's always good to have equity in your offset account (in case you want to use it) rather than trapped in your property...as long as you don't spend it on something silly.
     
  5. Ardi

    Ardi Well-Known Member

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    Thanks for that. So far with IP'S we have been around 80% LVR. Do you think we should aim for closer to 90% on IP's? Or with the most recent changes to lending rules, do we have a choice?
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    There's not a whole lot of equity to access. Based on those numbers - taking your borrowings back up to 80% would provide you with $38k.

    Going above 80% with CBA for an equity release is getting harder these days - they'll ask to see a contract of sale or a preapproval for the property you anticipate purchasing.

    Another option is to inject some of your savings from the offset into the principal of the PPOR loan and re-borrow it as a separate loan split for investment - you can also release that $38k at the same time.

    Uncrossing is a good idea - but note that you may see your interest rates rise as a result as they could become subjected to post APRA rates. CBA may (or may not) honour whatever rate discount you currently have in place but you'd need to put a formal pricing request to see.

    Cheers

    Jamie
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    With a PPOR in the mix it should still be okay with CBA.
     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - just had a couple of pricing requests returned this morning and still all good. Hopefully it continues.

    Cheers

    Jamie
     
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  9. Ardi

    Ardi Well-Known Member

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    Being in the situation we are in as above. Would i be likely to be able to purchase another IP @ 90%lvr?
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    That depends completely on your income and deposit, both of which aren't mentioned. But a 90% lend is still possible, especially if everything else stacks up.
     
  11. Ardi

    Ardi Well-Known Member

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    Sorry would have around 40k in equity for deposit. Combined income of a little over 200k and about 55k income from existing IP's. Have some cash in an offset but hoping not to touch it if we can.
     
  12. Hodor

    Hodor Well-Known Member

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    I would be looking to make my next purchase with a different lender.

    Surprised your rates aren't a bit sharper considering you are over $1m and under 80% LVR. Although some knowledgeable brokers haven't mentioned this so maybe I'm behind the times.

    Get yourself a good broker who can organise everything suggested.
     
  13. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    We did mention the rates - I'd be uncrossing, getting a better rate and accessing the equity. You can do it all with CBA, no need to change lenders. You should be able to get a good discount on rates.

    $40k will get you a super cheap IP. Servicing will be fine but the lack of deposit is the problem.
     
  14. Be Developer

    Be Developer Property Developer Business Member

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    As others said, not much accessible equity.

    Perhaps, pick up a small development site sub $500k....

    Time line (3-6 months)
    drip feed the project (as your high income will support it) get plans and permits

    Timeline (8-12 months)
    Get construction loan or sell with plans and permits.

    One way to increase portfolio and make decent money.
     
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  15. Ardi

    Ardi Well-Known Member

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    Thanks Jess! Would it be possible to draw equity to take the current IP's to 90%? Not sure if its a good idea increasing the lvr. But really keen to keep purchasing.
    I might get vals done on current properties as i might be a little conservative on my estimated value to.
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Definitely get some desktop vals done - CBA's desktop vals usually come up very nicely :) Cash out to 90% may not be necessary - that's how good they can be!
     
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  17. Be Developer

    Be Developer Property Developer Business Member

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    Best to aviod LMI territory if possible!

    Did you pay LMI for any of property? If yes,you may be able to use credits.
     
  18. Ardi

    Ardi Well-Known Member

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    Yeah i think the 2nd ip we paid a couple of thousand lmi.
    Might have to dip into savings. But wanted to keep as much of a buffer as possible.
    Now to start the hunt for a reno or cheap development project!
     
  19. Be Developer

    Be Developer Property Developer Business Member

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    In that case,speak to Broker/banker and have equity released (regardless of $ value) keep it in offset.

    May come in handy one day!