Accessing Equity at High LVR's

Most lenders max without LMI is 80% so I'd assume U-Bank would be the same. As Tobe mentioned, U-bank don't use brokers at all so you'll have to approach them directly.

 

Thanks Jess & Tobe, might leave this loan alone till I can refi without nasty break costs. Was mainly asking as Terry W has mentioned a few times that you shouldn't use cash & should try and finance 104% by way of equity release for deposit plus 80-90% loan for the IP. All going well, I should have enough cash for a deposit next month, but started thinking I shouldn't use that.

 

It's definitely better to use borrowed funds if you can - it would be worth getting a payout figure and seeing how big the cost is compared to the tax benefit over 30 yrs.
It may or may not be worth considering.

 

break costs for an investment debt are tax deductible.

 

As an adviser I would always say seek advice before you do anything and you make your money when you buy.

 

Heya Big Red, sorry but I have to disagree with this statement. You make your money with what happens in between the time you buy and the time you sell.

 

I'm just starting to think more seriously and research here and by reading books. The plan is to buy a 2nd IP soonish, but I don't want to rush. I want to make sure I know what I'm doing, and more importantly that I have the right structure and lenders in place. I currently have a PPOR loan and an IP loan with Commbank.

Does it do any harm getting a valuation done through Commbank to see if I can release some equity? Will it have an impact to me in the future? My mortgage broker said it wouldn't, but I'm not sure how experienced he is with investment properties.

What happens if the valuation comes in at less than the original purchase price (was purchased at 97% LVR)? The Commbank desktop estimate (provided in net banking) indicates it is now at around 75% LVR, but my own research indicates it's more likely to be around 90%.

Any advice would be appreciated.

 

Hi Smokyjoe - if the LVR is higher than 80-90, they won't ask you to chip in.

With CBA you can do valuations well before putting in an application.

How i'd do it:
1. Order TWO desktop vals that can be used at 80 (assuming value <$1m each).
2. See if you have equity at 80. MUCH easier to release equity this way.
3. Release equity at 80 assuming its worthwhile (i.e. more than 10-20k, tipping point for going through with it).
4. If not, ask your broker how strong your file is and see if its worthwhile doing full vals. Realistically its not simple getting 90 cash outs anymore (CBA have tightened here IMO from my deals). So its not a certain deal. Hence going for 80 first is much more suited as they wouldn't see/need the full vals and the chance of approval is higher.

Cheers,
Redom

 

Thanks Redom. So will CBA honour desktop valuations for releasing equity? If so I'd love to use their own desktop val, because I believe it's very inflated.

What is the process? I order and pay for 1 or more desktop valuations, provide them to my mortgage broker who provides them to CBA, and they decide whether to release equity based on this? Or are you just suggesting that's cheaper and easier to get a desktop val done, which will give me an idea of what I may be able to release via a full val?

From discussing this with my mortgage broker yesterday I was under the impression that an in-person valuation was necessary. That's probably because I'm assuming the LVR would still be up around 90%.

I may not have been clear in my original post, but what I'm trying to do is:

1. Get valuation done to determine equity available
2. If there is enough equity to make it worthwhile, release it.
3. Park it in an offset for now (I'm assuming against PPOR, but not sure of any tax implications)
4. Use it to purchase next property (potentially in a trust or partnership. Not sure yet, just trying to get my head around everything).

Any obvious issues with this? I'm not wanting to rush into anything in regards to purchasing the next property, but the 80%LVR changes have me concerned, so if I can release equity now, then work out the details of the next property, structure etc, later, I think it will be worthwhile

 

There are potential tax issues with it, for sure but it's easy to get it right from the start if you use a good broker.

Your broker should do a desktop first. That will be the first step and will let you know if a full val is required. Your broker will organise all vals for you.

I would do this ASAP as you've mentioned, b/c if you do need to use lmi the window of opportunity is closing.

 

Sounds like I might need to find a new broker. We used this one for our first IP then PPOR, but I'm not sure he's experienced with property investors. He didn't mention a desktop val at all, wanted to go straight to a full val (free of charge).

 

Are your 2 properties cross collateralised?

 

I think the issue is with cba, you can use a desk top val to 80% and you need a full val to 90%. That's why you start with a desktop and if it works at 80% then there's no need to get a full val done.

 

Cba s desktops are fantastic - I had one this week that we thought we'd have to do at 90 go through on a desktop at 80. No lmi to pay then either.

 

No, they're not. Luckily that never came up. Being naive I might have gone for it before.

 

Just so I'm clear (I really appreciate all this advice!), is it the mortgage broker that organises the desktop val? And if the desktop val shows an LVR of <80%, I can release equity up to 80%, but anything over that would require a full val?

I hope they use the same system for their desktop vals as they do for their 'MyWealth' and Netbank portfolio estimates.

 

That's correct. Not sure if it's the same system.

 

I'm not sure either, but it would be odd if there was a major discrepancy.

 

Great. Thanks for the advice. I'm glad I asked!

 

Westpac's just gone to 85% for PPOR without LMI.
My PPOR is with CBA and I'm hoping they'll do the same soon.
Even better if they do the same, AND allow desktop vals for releasing equity .