Moving from 1st property to 2nd property advice?

Discussion in 'Investment Strategy' started by PlatinumProperty, 26th Apr, 2020.

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  1. PlatinumProperty

    PlatinumProperty Active Member

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    Hi, I am 28 years old from Melbourne. I recently purchased a property in Gippsland and have undertaken cosmetic renovations and added a second bathroom to a property. This property will be positive cashflow. I am nearing the stages where I am about to rent it out. I would like advice moving forward to my second property I currently live in the south eastern suburbs of Melbourne and would like to purchase another property to eventually turn into a rental. I believe I have about 50k worth of equity in my first property.
    Any advice would be much appreciated.
     
  2. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Hi!
    What is the value of the Property and what is the current loan amount?
     
  3. PlatinumProperty

    PlatinumProperty Active Member

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    Thanks for the reply.
    I believe after renovations the property will be worth $260k - $285k.
    My current mortgage is $187k
     
  4. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Did you pay LMI originally?

    If not you may be able to access about $40k toward your next one - if you did, you might be able to get closer to $70k.

    What did you need advice on specifically - how to access and use the equity?
     
  5. PlatinumProperty

    PlatinumProperty Active Member

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    yes I paid LMI in this property.
    I’m looking for advice as to what the best way to use the equity as a deposit for the next property. If you could provide any advice going forward onto potiential future purchases aswell
    Thanks
     
  6. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    If you paid LMI, that’s awesome - who’s the lender?

    The equity release is basically a new loan application with the same lender, back up to the original LVR. They then give you the cash to use toward the next purchase.

    It’s going to depend a lot on your lender though - some are better than others, and policy is changing pretty rapidly right now. It may turn out that a refinance is a better option if you’re currently with a lender that has lots of restrictions.
     
  7. PlatinumProperty

    PlatinumProperty Active Member

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    It is with bank of Melbourne.
    Ok great thank you for the information.
     
  8. Terry_w

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

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    Just borrow against the existing property for a new loan amount taking the LVR up to 80% which might give you $41k - prob stay with the same lender in case you need to go over 80% and will incur LMI. Then borrow 80% to 90% against the new property. Get your broker to work out the best LMI scenario but factor in the tax deductions too.
     
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  9. PlatinumProperty

    PlatinumProperty Active Member

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    Great news! I think I will need about 50k - 60k for the new property. Thanks for your advice!
     
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  10. Jana

    Jana Well-Known Member

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    Jess, Does LMI really increase the borrowing capacity? Is it becz bank take less risk? I never paid LMI- my thought was waste of money. Looks there are benefits on LMI.
     
  11. Niche

    Niche Well-Known Member

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    If you have already paid LMI you can go back up to the same LVR while only paying a fairly minimal LMI cost. So if your original LVR was 90% and you are still with your original lender then you can go back up to 90% rather than having to stay below 80% and only have to pay like $1,000 in LMI
     
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  12. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    It can increase the amount of equity you can access, for sure - it's a very handy strategic tool in the right situation :)

    But definitely don't DIY - it depends a LOT on lender policy how successful it can be - not all banks are keen to cash out over 80%.
     
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  13. PlatinumProperty

    PlatinumProperty Active Member

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    I had previously borrowed 95% would you recommend borrowing up to that in order to get into my second property. Presuming the first property rents quite well, about 7%