May 11, 2016
When you have an existing property:
This relates to another blog “How can i buy my first investment property – Part 1.” Check out the first blog here - https://www.mortgagechoice.com.au/broker-pages/vic69/blog/how-can-i-buy-my-first-investment-property-part-1.aspx
Buying your first investment property can be done in two ways, linking the loan with your existing property or having separate loans against separate properties.
Let’s assume you own your existing home worth $600,000 and still have a loan against it of $250,000. Using the example of buying a $500,000 investment property from the first blog; the loan you require (assuming you have no savings to contribute) is $528,979 (also assuming you do not have to pay lenders mortgage insurance (LMI) as you are not borrowing over 80% of the property value) your two options are:
Loans against multiple properties
- You have an existing home loan of $250,000 + the new loan of $528,979 = total loans of $778,979
- You have your existing home worth $600,000 + the new property worth $500,000 which equals a total of 1,100,000 in property value
- The loan to value ratio (LVR) is hence $778,979 / $1,100,000 equally 70.8% which would be acceptable to most lenders (most lenders will allow you to borrow up to 80% of the property value)
- You would now have a loan of $250,000 secured against your home and the investment loan of $528,979 secured against both properties. Both of these loans would need to be with the one lender.
Separate loans against separate properties
- The investment property being worth $500,000 you would need the loan of $528,979. If you get the max loan against the investment property at 80% LVR (so you avoid the extra costs of LMI), that gives you a total loan of $400,000 secured just against the investment property but this makes you short on the total funds required by $128,979.
- Go back to your home where you have the $250,000 loan against your home worth $600,000. You can get an additional loan of $128,979 secured against this property and that becomes your contribution towards the purchase of your first investment property.
- Against your home worth $600,000 you now have total of loans of $378,979 – LVR is 63.2%
- The loans against your home can be at one lender and the loan against your investment property can be with another lender
Your investment loans total the same amount in each scenario but in the first example, the investment loan is secured against one property whereas in the second example, you have separated your loans across two lenders and properties.
If you would like to talk investment loans or need some help with an existing loan contact us on (03) 9877 6471 or firstname.lastname@example.org