The love-hate relationship with finance
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A property buyer recently shared his unique property journey which saw him secure a home without a deposit and with a lot of help from one of Australia’s big four banks.
In a recent episode of The Smart Property Investment Show, owner-occupier James Mitchell revealed the importance of a good mortgage broker.
Mr Mitchell explained that despite not having secured enough funds for a deposit, he bought his first property with the help of his mortgage broker and a very generous bank.
“I was about a year out from my savings,” Mr Mitchell said.
But his mortgage broker convinced him to strike.
“We settled on the place at the end of January – we started the mortgage process probably around September – so January 2021,” Mr Mitchell said.
But in the space of five months, a lot took place.
The initial idea was to put down a deposit of 5 per cent.
“The bank came back and said, ‘There’s no way that we’re going to lend to this property on Scotland Island for anything less than 80 per cent LVR.’ The purchase price was $550,000, and we didn’t have a hundred grand laying around as a deposit,” Mr Mitchell said.
“So, I said, ‘Well, I guess that’s that then, better luck next time’. And he said, ‘No, no, leave it with me’,” he recalled.
From there, his mortgage broker advised him to invite his bank, Commonwealth Bank, to carry out a valuation.
“The valuation come in, $850,000.
“Piece by piece very slowly it came together, but we even managed to get the stamp duty paid by CBA by increasing the purchase price,” Mr Mitchell said.
“The vendor was luckily my wife’s parents so they increased the purchase price to $580,000 from $550,000 and therefore, no deposit down, no stamp duty and it was all financed by the lender.”
While quite uncommon, given the purchase price must be well below the property’s real value, Mr Mitchell explained how stamp duty can become part of the loan.
“You just need a really good mortgage broker who knows how to work the system. Most brokers wouldn’t know how to do this,” Mr Mitchell told Smart Property Investment.
Lesson learnt for property investors
While highlighting how fortunate he was, host Phil Tarrant noted Mr Mitchell’s experience is a lesson for other property investors who are looking to help their own family members get ahead in a booming property market.
“For those of you out there who are thinking about how you can help transition your kids into investing in property or getting a foothold, rather than gifting them cash to go and buy something, if you already own a house, you can sell your house to them for whatever you want to sell it to them for,” Mr Tarrant said.
Listen to the full interview with James Mitchell by clicking here