Join our investing community

Buying PPOR with minimal deposit

Discussion in 'Real Estate' started by robmillion, 20th Jan, 2010.

  1. robmillion

    robmillion Member

    Joined:
    13th Jun, 2009
    Posts:
    13
    Location:
    Melbourne, Vic
    Hey all, looking for some advice.

    Currently in the market as a FHB and looking to purchase a modest PPOR for around $280k - $290k with a 95% LVR using $9k FHOG. My problem is that I don't have enough savings to cover the shortfall for deposit (factoring in Stamp Duty, Mortgage Insurance, Loan costs and Legals). I have $75k tied up in shares that I'm not keen on selling just yet.

    What options do I have other than to wait and save?

    Rgds,
    Rob
     
  2. davo6253

    davo6253 Well-Known Member

    Joined:
    11th Jul, 2008
    Posts:
    74
    Location:
    Melbourne, Victoria
    Not sure on the technicalities of this but getting a margin loan against the shares to then use the cash to put for extra deposit? Not sure how that would work security wise with the bank/institution though.
     
  3. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    I'd sell the shares.
    You'll be saving at least 6% in interest (which is like a 9% guaranteed return before tax)

    What shares are they?
    IMO the share market will probably go sideways for a loong while
    so if I can get a guaranteed return of 10% now I'd take it.

    You will not only save interest but if you put down 20% you will not need to may mortgage insurance so you save that way as well.

    Or you can wait until you have a bigger deposit
     
  4. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Rob,
    For a $290k property in Vic, with PPR concession stamp duty and costs are just on $12k. There are not many lenders lending 95% anymore unless you are an existing customer (it could be a credit card or savings account). As it will require LMI (<80%) the insurers are wanting to see genuine savings. The $75k share should qualify you for that.

    Minimum deposit will be around $29k to $32k depending on lender and LMI costs. LMI is normally added to the loan so it is not directly funded by you upfront. FHOG of $9k assists and you could sell some of the shares to make the difference. You can see the advantage of FHB's 8 months ago taking advantage of the Boost and Bonus on offer.

    The other option is look at family support by way of a guarantee, different lenders use different methods but the main lenders do offer the family guarantee/pledge option, normally provided by parents.
    Let me know if I can help.
    Good luck
    Greg