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Anil | 15 Jan 2014, 05:05 PM Agree 0
Hi , I have mortgage for my first home with the bank around 400,000 and my house valuation will be around 480k . How much equity can I borrow if i would like to buy an investment property avoiding LMI .. Can u provide the details . How much is the minimum amount I can get from the bank as investment property ??
  • magpie | 30 Jan 2014, 06:46 PM Agree 0
    your current loan of 400,000 divided by your current value of 480,000 gives a ratio of 83.33% debt. Most banks will not lend to you at over 80% debt, without mortgage insurance. This means you do not have any available equity.
    If you multiply the 480,000 by 80%, the answer you get is 384,000. This is the balance of your loan that you have to be below to start having any equity. If you do not have any cash to pay for legal fees, stamp duty and inspections, you would be sensible to also have this amount saved up as well before you look to buy an investment property.
    If you can find one of those hens teeth, a property that is 25% below market valuation, and positive cash flow so that all the expenses are paid by the rental income, then you recalculate the figures by adding both the loans, divide that by the total current value, and then see what the debt ratio is.
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