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Own an IP, looking for advice on buying family home

Discussion in 'Property Finance' started by Lowie, 27th Dec, 2016.

  1. Lowie

    Lowie New Member

    Joined:
    12th May, 2016
    Posts:
    3
    Location:
    Brisbane
    Hi everyone,

    This is my first post on these forums though I've been an on and off reader for many years since the somersoft days, this is by far the best property forum I've seen!

    I'm looking for some advice on a strategy to purchasing my next property.

    My current situation:

    I own an apartment in West End, Brisbane purchased OTP which settled Q2 2014 and received first home owners grant. Purchase price was $390k and I'm thinking it's done not much since then as it's in the West End area. I'm paying interest only on a loan of $312k at 4.34%, rented at $400/week so it's covering costs. I lived in it for a year and then moved out and am now renting an apartment with my wife at $395/wk.

    I earn a reasonable wage ~110k gross p.a. and my wife is on about 70k p.a. We don't have any bad debt; my wife has a minor credit card bill monthly and aside from my apartment and credit card that's it for me. We own our own cars totalling about $35k.

    No other notable assets or liabilities though I have basically no savings in my offset account as we just got married and I'm not giving up a honeymoon :)

    The goal is to buy a family home in 2017 which will be our PPOR, servicing the loan should be easy but I'm just not sure on the best approach to us getting the loan sooner rather than later. Initial thoughts are to stay a little conservative with the family home purchase capped at about 650k as I'd like to be able to service this off my salary (planning a family next year so any earnings from my wife towards the end of next year considered a bonus in the long run).

    Some questions:
    • What are some avenues for us achieving a family home in 2017? Saving only? Creative finance solutions? Making the investment property serve me a little better?
    • Rightly or wrongly I've always been of the opinion that LMI is like throwing money away though to save a 20% deposit for a $600-650k property would take us quite a while. Is there long term financial merit in borrowing as much as we can, copping any LMI that comes with it, getting in to the market say 2-3 years earlier than we might have if we saved the 20% deposit? My simple and uneducated opinion says "only if the property appreciates enough over time to offset the LMI". Appreciate there are no certainties with market movements so there's always an element of risk.
    • Is there anything creative that can be done with my investment property involving loan structure to help us achieve this new purchase? Not sure that there's much in the way of potential available equity.
    I haven't been too creative with my property situation to date so please feel free to be a little brutal yet constructive. Thanks in advance for any guidance, I'm hoping some responses will kick off a few more discussions and point out a few obvious compass adjustments I could make.

    Cheers,

    Lowie
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,409
    Location:
    Gold Coast
    do you have access to a guarantor that can provide some equity ? family etc

    ta
    rolf
     
  3. Lowie

    Lowie New Member

    Joined:
    12th May, 2016
    Posts:
    3
    Location:
    Brisbane
    Hi Rolf,

    Yep I have a few options there from my parent's generation. I'm aware that this is an option though first preference was that I'd be able to achieve this under my own steam, not that there would be any issues if I broached the question with family.

    Thanks.
     
  4. Ethan Timor

    Ethan Timor Well-Known Member

    Joined:
    16th Nov, 2016
    Posts:
    70
    Location:
    Northern Rivers NSW
    Hey mate,

    If servicing isn't an issue but only getting a deposit is, I would look into doing a Reno or adding somehow value to the existing IP, then refinance it to access the new equity and thus have more funds for the deposit.

    The second option is LMI. You made very good comments here:

    Cheers,
    Ethan
     
    Last edited by a moderator: 30th Dec, 2016
  5. Lowie

    Lowie New Member

    Joined:
    12th May, 2016
    Posts:
    3
    Location:
    Brisbane
    Thanks Ethan. So by the sounds of it there was no overwhelming options that I'd missed. I'll have a think about what reno options I've got but will likely have to go down the LMI path if we decide to make a purchase this year.

    Thanks :)
     
  6. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,422
    Location:
    Adelaide, SA
    I can appreciate wanting to do things under your own steam, but using a guarantor can be beneficial in your own circumstances if you think about it strategically. For example:
    1. Buy PPOR under guarantor
    2. Renovate PPOR - increasing value, meanwhile pay down loan
    3. Remove guarantor
    It doesn't have to be a long term position - we've helped clients use this exact strategy who have gone from purchase to removal of guarantor in ~12 months comfortably - if you're a strong saver this should be quicker.
     
    Jess Peletier likes this.