Own money down, possible to refinance?

Hey Brains trust.

Im a unique position whereas I can obtain a house and land site in a high yield regional area for 80k (normal valuation at least 150-200k).

Rents at around 290pw

If I purchase this using my own money now without a bank, can I then approach a bank once a rental agreement is in place and refinance putting a 30 year P/I loan together to get some money back out of the purchase?

How does it work?
How much could I hope to get back if the bank valuation was 180k?
If you do get to borrow back against the property is it money that goes back into my Acc for living and investment purposes?

Please excuse my probably obvious questions, I've only ever bought and sold traditionally

Any help here would be appreciated.

Thanks

 

That is fine with most lenders - they will require a copy of the settlement notice for proof of equity release funds.

You also need to check that the lenders will accept the postcode depending on how regional it is.

Any reason why you don't finance it from the get go? Is it a serviceability thing as lenders will accept the proposed rental income from the property.

 

Refinance means paying one loan out with another.
Will you have a loan in place?

If not you cannot refinance.

But there may be the ability to borrow against the property. But this will be harder than borrowing to purchase it due to cash out restrictions. Although it is a small amount.

Consider the tax issues too

 

Thanks guys,

No loan in place- ill purchase outright with my own money.

So I guess ill be asking to replace a portion of the property value with a loan? So as money used for the purchase is then returned to myself once renters are in.

Banks will not lend me, even though I have the amount in cash at the present moment, just don't meed the serviceability with other prorates etc.

 

Say the property was valued at 180k would they offer 50% or 80% or is it also down to income, even if the property rent covers the loan repayments?

 

You need to demonstrate that you can service the loan - lenders to lend on the rent purely covering the mortgage repayments. There is a lot more to it than that. How short are you on servicing?

 

Consider related party lending.

If you buy with cash and later get a loan the interest will not be deductible.
If you borrow from a related entity and later refinance this loan the interest could be deductible.

 

No. This is not possible. Speak to a broker or banker and detail your income and the proposed rental income. If that’s more than your expenses, it possible to get a loan.

 

If this were the case I could purchase in a joint structure to produce the cash flow required, then I guess the lenders would only offer a percentage based on the serviceability at the time?

Saying this, if we picked the property up for 80k and the bank value comes in around 180k- with those numbers, if we were able to get finance against the property, say 60% that's a 108k loan against the property.

Would the 108k be allocated to myself as a line of credit? How does that work?

 

You need some specific advice.

 

Oh for sure, and I will..

Just don't want to waste anyones time more than I do already ahah!

Thanks for the help