Tax Tip 61: How to borrow 105% on your first purchase

It is a parental guarantee loan we are doing.

Most brokers would have no idea about the deposit thing. It would probably be something I would be wary of recommending and lenders won't like it without an exit plan.

 

Parental gaurantee isn't an option for me and since I have no other property to secure it against term deposit is a better option.

In your experience what do the lenders want to see for an exit plan ? I have shares and crypto although reluctant to liquidating it for an exit stratergy if thats what they want to see. My income would release the deposit back in 1 yrs. Will that count as an exit stratergy instead or say pay down x amount or % every month and release the deposit ?

 

they want to see something like a sale of another property or shares perhaps.
If you intend to pay down the loan why not just borrow less in the beginning?

 

I only intend to release the term deposit not pay down the loan per se. Or the cash will be used for another downpayment instead of paying down the term deposit of IP1 .It's about having that option as I intend to buy 2 IP, one each in Brisbane and Perth in the next 12 months.


Your question on why not borrow less- Well ,I am borrowing less ~$400 k but want all of it to be deductable and have the cash freed up for another purchase hence the term deposit. Basically want a 105% LVR loan but I understand its not possible now hence this route,although with the Treasurer announcing the relaxing of lending rules it might very well be possible once it passes thru the senate but that's a discussion for another thread.

Even with 105% ,I will still have to pay stamp duty and a BA fees which I understand is deductible when you sell but doesn't help the immediate cash flow while acquiring IP's now.

 

How will you release the term deposit?

 

Good question.

Borrow and refinance the borrow into the mortgage after one year.

 

borrow from where?

I don't think that will be comforting to a lender.

 

I can pay that off straight away from my credit card and refinance the credit card together with the mortgage of 2nd IP or refinancing it with the 1st IP .

 

I wouldn't take that as acceptable

 

Copy that . Thankyou.

 

Interested to see how you went with your borrowing strategy? Did you secure your two properties you were aiming for?

 

Probably the parental guarantee is the easiest solution and this can be used in conjunction with a debt recycling strategy as well if the parents are happy for a delay in the guarantee being lifted.