Borrowing 100% + costs
Clients with reasonable equity in their own home, may be able to borrow 100% plus costs on an investment property.
What exactly does this mean?
If you have managed to put a little extra into your home loan, or your property value has increased substantially, you will have “equity” which can be accessed for investment.
Instead of trying to save up a deposit for another home, you can simply borrow the 20% deposit and purchase costs against your home, and then borrow the remaining funds required against the new property. This means you are borrowing a total of 100% of the purchase price and costs.
You keep making their original mortgage repayments as if nothing had happened and then a tenant will make a large part of the repayments against the new property so that you only have to “top up” the repayments as necessary.
For example …
A client has a home worth $345,000 and an outstanding mortgage of $250,000. They have $95,000 of equity in their home. They purchase an investment property for $220,000 & have costs of ~$11,000 to pay on top of this. They borrow 20% + costs against their own home ($55,000) and then borrow the remaining $176,000 against the new property.
They have total new borrowings of $231,000 & will now have new loan repayments of ~$340 per week. Tenants will contribute, say, $200 per week and the client will need to top-up the remainder.
That’s a second property for just $140 per week.