Mortgage after cash purchase

Discussion in 'Loans & Mortgage Brokers' started by blueziplock, 31st Oct, 2020.

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  1. blueziplock

    blueziplock Member

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    Anyone knows if it’s possible to get a normal mortgage after fully purchasing a property with cash? Was told that we can only get an equity loan (higher interest) after paying off a property, and will need to give the lender a good reason. Is that true? Thanks!
     
    blueziplock, 31st Oct, 2020
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  2. jaybean

    jaybean Well-Known Member

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    Good question as I plan on doing the same.
     
    jaybean, 31st Oct, 2020
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    An 'equity loan' and an home or investment loan are the same product. They shouldn't have any difference in price.

    It is possible to do this, but lenders are reluctant to give people large amounts of cash, which can make it tricky. You will need to give lenders a good reason for the funds and there are restrictions that you wouldn't otherwise have if you go the loan at purchase. For investment loans there may also be tax deductibility issues if you get the loan after the purchase.

    If you can, it's better to set up the loan at purchase and keep your cash.
     
    Peter_Tersteeg, 31st Oct, 2020
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  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It’s possible to do. I’ve done it in the past.

    Having said that - borrowing from the start (before purchasing with cash) is soooo much easier and provides you with more options.

    Cheers

    Jamie
     
    Jamie Moore, 31st Oct, 2020
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes possible but need to over come cash out restrictions and you may end up at a tax and interest disadvantage
     
    Terry_w, 31st Oct, 2020
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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    depends on a few things as already mentioned.

    If one is self employed with a business that has high turnover of product

    Our largest cash out to date was a no MI 2500 k at 90 %

    Cash out above 80 LVR can be problematic.

    Increasing FTRA compliance will typically class larger cash outs as relatively high risk, and given the recent fines for CBA and WBC, I can see why they are getting a little tougher with it.



    ta
    rolf
     
    Rolf Latham, 31st Oct, 2020
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  7. htopg

    htopg Well-Known Member

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    If the cash was "borrowed" from parents and there was a written loan terms in place, after getting a new loan to "repay parents", would this be an issue with tax deductibility?
     
    htopg, 2nd Nov, 2020
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This would potentially be just a refinance - if an arms length agreement was in place. Deductibility could be maintained.
     
    Terry_w, 2nd Nov, 2020
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  9. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    It depends on the situation - a common scenario is the client has a very limited time to settle on a purchase so they pay cash. Its quite easy to get the loan post settlement of the loan - you would need to provide the solicitor's settlement notice or some form of legal confirmation that you have recently purchased the property.

    This isn't an equity release as such.
     
    Shahin_Afarin, 2nd Nov, 2020
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  10. jaybean

    jaybean Well-Known Member

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    How do you define "recent"?
     
    jaybean, 2nd Nov, 2020
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  11. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    There isn't a specific period per se but it needs to be palatable so something more than say 6 months wouldn't be recent but even that may be explainable. It just needs to make sense and be true otherwise it turns into an equity release which is still fine but policy and document requirements change.
     
    Shahin_Afarin, 2nd Nov, 2020
    #11