I think i'm in a sticky situation with my loans advice please

[catcha]

Hi All

I just recently moved to Perth since August last year and looking to buy PPRO in the near future.

This issues I have is I have an IP property in Darwin 3 bedroom house in Leanyer purchased for 400k 2009, my loan interest only for this IP is at 340k and have 30k in and offset account. Getting 420pw which will soon be raised this June when renewal is up.

I have also purchased off the plan a 1 bedroom waterfront apartment for 470k and I decided to go half’s with my mother but she has now decided to op out and she is retiring soon and therefore should not have any assets advise by financial advisors.

This apartment at the time I thought was a good idea and still is as it has a projected sunset date of completion of 2013. Stamp duty for this would be about 20k so expecting on settlement to be about 500k. I also have 50k in deposit guarantee held by CBA for this IP. Technically its still a joint venture with my mum and have not done anything to this date to change. this will also be I/O

I'm currently renting at 355pw in Perth with my wife. Both of us are on about 60k each and no other loans except for the above.

I want to buy in Perth eventually and thinking how I should structure things in regards to my loans to buy my PPRO in Perth.

I think Darwin has lots to offer still and once Inpex announce officially prices should go up.

1. I don't want to sell the 3 bedroom house in Leanyer at all
2. I would like to be able to keep the waterfront investment as well, but willing to sell to fund my Perth purchase.
3. And also purchase a property in Perth with a price range of about 550-600k

 

[Peter_Tersteeg]

I'm not really clear what you're asking here, but I would start by speaking with you conveyancer to ensure that you can get your Mum of the contract for the new appartment.

 

[catcha]

I'm not really clear what you're asking here, but I would start by speaking with you conveyancer to ensure that you can get your Mum of the contract for the new appartment.

That is in the process. I’m not very good at putting thoughts into writing.

Basically I want to buy a PPOR in Perth, with all this debt of my rental in Darwin and in 2 years Time when they build the apartments. I’m unsure whether I am going beyond my means. I would like to keep all my IP and also purchase a home in Perth. If that makes sense?

Is there a strategy? eg borrow whatever equity in my rental house and just buy here. Onsell my apartment and just break even ?

 

[catcha]

Hi Sniffer thank for that, the deposit bond is a bank gurantee 50k.

I'm unsure about this 960k - TOTAL via lending and cash. 5k short of required funds for goal 1 and 2. sorry still learning.

Another scenario 1

I keep goal 1 and 2 take out mums name and go it on my own question is will bank lend me the money for it for goal 2 ?

scenario 2 I get my wife to apply for loan for goal 3( wife has no title on 1 or 2) and go joint with her ? or is there another way ?

I think in the back of my mind if I knew I was going to Perth I would not have got the apartment. As I don't want to sell the house and apartment is not even built I feel stuck.

 

[The Sniffer]

For now I will work on the assumption your IP is still worth 400k. Please update us with a current val for a better answer.

Based on how I interpret your post you have a few goals.

1. Keep current IP... 2. Buy a new PPOR... 3. Buy 2nd ip without your mum - but only if possible.

So let's look at funds required for 1 and 2

600,000 - Purchase new home
23,000 - stamps etc
2,000 - misc
340,000 - existing loan.
965,000 - TOTAL REQUIRED FOR GOAL 1+2

POTENTIAL STRUCTURE

340,000 - current loan / security = IP
20,000 - top up to 90% of 400k / security = IP
570,000 - new PPOR @ 95% / security = PPOR
30,000 - your cash in offset

960,000 - TOTAL VIA LENDING & CASH

So you are 5k short of goal 1 and 2. I assume some growth in IP will allow you to increase the top up loan.

Can you clarify; in addition to the 30k in offset. You also have another 50k cash in TD that secures a bank guarantee for the new IP - is this correct???

If correct you have enough equity to do all 3. It will depend on income (I'll leave that part to someone else).

When the time comes pay all cash and deposits in to the PPOR and reborrow it for the IPs. Better for tax.

 

[catcha]

For now I will work on the assumption your IP is still worth 400k. would be around 500k

Can you clarify; in addition to the 30k in offset. You also have another 50k cash in TD that secures a bank guarantee for the new IP - is this correct yes

Thanks again for taking the time nut out some goals its really appreciate

 

[The Sniffer]

Ok. Income might restrict you but on an equity basis here goes.

It is easier to do the math on the total amount needed. Then work out how to split the loans.

Revised and simplified. You need the following money to do all 3;

340,000 Existing loan
600,000 Buy new PPOP
25,000 stamps etc PPOR
470,000 buy next IP
25,000 stamps etc next IP
1,460,000 TOTAL

1,400,000 After tipping in some cash (noting you have total 80k cash in offset and security for the bank guarantee)

1,570,000 of real estate (500 + 600 +470)

1,400,000 / 1,570,000 = 89.2% LVR (loan to value ratio).

I think you will struggle a bit on the income and the gearing is high at 90% considering the amounts. Saying that banks do lend at 90% so it all comes down to income (and of course bank valuations).

 

[Rolf Latham]

Hi

OTP has its own finance risks, the longer the settlement period, the larger the risk that your circumstances change, the appetite of lenders generally and the appetite for the property.

A unit development property may be all hunky today and for some reason it becomes yucky and the lenders or LMI providers dont want it.

While today something may be done by an in house insurer such as CBA or WBC, at 90 % or so, you may not want to rely on this 2 + years out.

Id prep myself to have at least a 20 % deposit plus costs available for the unit when it comes due.

As has been mentioned above, u may be able to structure the 20 % in a way thats most tax effective.

ta
rolf

 

[catcha]

Thanks Rolf, yes that issue of circimstances has been looming at the back of my mind. And two years later banks don't wanna know you or lend the money is also something I have considered carefully, gets worst when my joint venture becomes a single one.

i'm getting a headache trying to figure out what to do might have to just sit and wait till the apartment gets built. then sell it for a small profit or just break even and use my 50k deposit to buy here

 

[Rolf Latham]

maybe sit back and chill a little

Often the answer will come to you.

Us science/ engeering folk think we can fix it all with logic..........sometimes you just gotta stop long enough to hear your intuition YELL at you

ta
rolf