Buying second home using first home as security

[rozzer]

Hi All
Can anyone offer any advice or direct me to the right place for advice
about using my current (paid up) house as collateral for a second home.

I'm not even sure if it's possible but maybe someone here is more informed
Than me ( that's not difficult) http://www.theforumsa.co.za/forums/i...cons/icon7.png

Thanks in advance

Regards rozzer

[Houses4Rent]

What seems to be the problem? Why would you want to do that, but this does not really matter. Why dont you make an OTP subject to a bond and then specify teh address over which the bond must be taken on. Why not use the services of a decent bond originator. I was almost also asking why the selling agent for the 2nd home can not answer that, but I guess its a matter of the unsual agent incompetence then.

In future never make an access bond paid up, just leave a small amount in there. That way you can tap into it later again without having to start the entire process and cost again.

[wynn]

Hi All
using my current (paid up) house as collateral for a second home.
Regards rozzer

It's called 'gearing up' but I would take H4R advice and not link the second house to the first, if you need to have some cash for deposit, sure, but make it a personal loan against the first property so that if it happens that the new (second) property causes financial problems your primary property is not affected.

Also take out the bond for the new house with a different bank to the one you usually use and possibly borrow the money from a third bank, that way no bank can link your primary property to your personal account and there are firewalls between your loan and personal accounts.

[rozzer]

Hi All
Thanks for the response, it's obvious i still have a lot to learn in finance.
My intention is/was to purchase a second home (somehow) and rent it and use the rent/income
to pay for the second bond, however i do not want to get myself into too much debt
personally as i do not have sufficient loose or liquid funds available.
I think i have a lot of research to do before taking the plunge.

Regards
rozzer

[HR Solutions]

I would keep them separate.

Normally when applying for a bond, having a tenant in that house does not count for much, but you say you owe nothing on your current bond, therefore you should not have a problem.

But if you buy a commercial property - having a signed lease with a tenant goes a long way.

[Houses4Rent]

Hi Rozzer

If you qualify for a bond then I cannot see why you should not be able to buy a second property. Feel free to contact me. I am not financial advisor but multiple buy to let property investor which some experience. No financial advisor would encourage you into property anyway as they sell only paper assets for comission gain.

[rozzer]

Thanks once again.
I think i should give you more info about me as I'm sure it will effect your comments.
I am retired and only have a reasonable pension as income, my wife does not work
either.
My son is currently employed as a Supervisor for a mediocre company and lives in a
rented accommodation and the rent is pretty steep which makes it impossible for him
to save enough to get a deposit and purchase a property and he is actually lucky to be
employed anyway in the current S.A. market regardless of his qualifications.
So back to the second home scenario.......It was my intention to try and make some
provision for him and his family where if anything happens to me he would be catered
for and to own a home (my current one ) and have another option with the second home.
Just my way of trying to provide enough financial support and back-up for them.
So with that in mind I am looking forward to your much appreciated comments

Thanks And regards

Rozzer

[Houses4Rent]

Ok, that will probably make it difficult to get a high bond. However, I think you should target to get a decent deposit together (save over time and/or look at a bond with the help of a decent bond originator). Once you know for what amount you qualify for you can plan around that to see what kind of property you can afford. Since your deposit will be bigger than normal the bond installment will be smaller so it should well be possible to have the expenses covered by the rent. All you need to make provision for is to cover 1-2m expenses in case of vacancy. I hope this helps.

[wynn]

First thing then is to register the new home in a trust and leave the existing home to go to the same trust in your will, make yourself the trustee and you your wife and your son as beneficiaries with an external independent trustee not beneficiary, that way should anything happen to you or your wife they just fall out of being a beneficiary, your wife becomes trustee if you precede her and your son becomes the trustee on the demise of the last of you or your wife.

That way no matter what financial trouble or nasty relationship breakdowns between your son and his partner the property stays sacrosanct and he remains beneficiary.
If you like you or he can name any of your grandchildren as beneficiaries should he precede them.

[rozzer]

Thanks H4R & Wynn

Taken your advice on board, just need to do some looking now and see what kind of deposit
is needed i.e percentage wise.

Wynn i already have my current home registered in a will etc & pretty much as you mention.

Thanks again all and if you have anymore advice i would be pleased to hear

Regards Rozzer