Hi Mum & Dad,
I have been reading for some time now about how good the property market has been going in places around the country in the last few years. And I know that at the same time, your home has increased significantly in value.
The great thing is that you have both made a ton of money from this happening. The bad part for me, is that the great growth you and the property market have seen, has made it extremely difficult for me to now buy my own home.
And I know how much you both would love for me to move out, especially as I’m now in my mid-twenties.
So, I took the initiative and spoke with this guy… he helps people make money through investing, people like me, so we might be able to later afford to buy a home.
But I need your help…
So I thought it best that I copy what he has written to show you how it could work, but he is of course happy to sit down with you both and explain everything in detail.
“This is how it works:
Your parents property is worth approximately $800,000 and you have told me that they owe approximately $250,000. So if they allow you to use the equity in their home, you will be able to buy an investment property without having a big deposit.
What we do, is arrange a loan with the same lender as they already have their mortgage with. Now, if their interest rate is not competitive, then we can also talk to them about saving some money on their home loan at the same time. Win-win, as they say.
Now, we pre-approve a loan for the entire purchase price of the property, being around $400,000. As you mentioned you have around $25,000 in savings, we would have you use this towards the stamp duty and other set up costs.
So if your parents allow you to use their equity in their home, the lender will be happy to proceed with the deal.
So in numbers, it looks like this:
Parents home value $800,000
Investment property $400,000
Total security value $1,200,000
Parents loan $250,000
Investment loan $400,000
Total debt $650,000
Debt to value ratio (LVR) 54%
As the LVR is well under 80%, the banks would be happy for this to happen.
Now many parents have a legitimate concern about losing their home. And yes, it is a legitimate concern. With that in mind, we are able to structure the loans differently, so they won’t have a problem with this ever happening. With this structure we can have each of the properties stand alone so they are not cross securitised.
By purchasing an investment property first, you are able to increase your wealth with this property as well as continuing to save whilst living at home. So when you decide to sell this property and buy your first home, you will have a much larger deposit and this in turns you will have a smaller home loan. Financially, it makes the world of sense.”
So Mum & Dad, what are your thoughts?
My end goal is to be out of your hair by age 30. Now, that sounds like a good deal to me…