Accessing Equity at High LVR's

Broker orders vals, they should advise what to do and how to set it up to. Takes 2 mins to order those desktop vals and they're usually good results.

ANZ is pretty awesome in desktop val space too - although its more hit and miss when you get them. But they can be used at 90% LVR for sub 500k securities.

Regarding the 'do it now or it may be too late' - i'm finding CBA 90% equity releases aren't as simple as they once were. Unless the deals very strong i'd advise of a high degree of uncertainty (depending on the purpose). I've seen and heard many that went smoothly in Jan not going through in July. So it may be a case of do it at 80. At 90, get your broker to advise of the risks of rejection (they are considerably higher).

I think @Jamie Moore mentioned it on another thread, i find ANZ to be market leading in this space and don't appear to have changed their appetite to it (but that could change any day now). If you need an equity release at 90 i would think they'd be most likely destination for a yes outcome, at least for a PAYG.

Cheers,
Redom

 

Yep - I do love me an ANZ 90% cashout.

Just got one done with Nab B today as well - surprised at the relative ease in getting it done. Thought I'd have to jump through a few more hoops.

Cheers

Jamie

 

Haha right with you Jamie - I like ANZ's credit assessment in general, they generally ask fewer qns. Asked today if its changed at all post APRA and it looks like its still the same on this front (well as long as 90 lends are still around!).

Nab B cash outs are pretty decent, but requires verification usually. I don't think the beauty 'future investment use' flys with them at 90.

It also partly depends on the outcome of their credit scoring classification. I believe they have them basketed into risk categories. I've had 90 deals recently that go through OK much sweeter than an 80 deal that came up with a higher risk classification (even though it was auto cond approved).

Cheers,
Redom

 

Howdy Redom, virtual greetings from one of your clients

 

OK, so after reading this, i have a question:

Currently waiting for IP2 to complete building, but won't be done till September. Build 360k, loan of 340k. Having a look at houses that are similar to ours (Land, beds, bath etc) they're at 390-400k.

If i've worked out the LVR's correctly, there could be 10-20k equity to release before it gets to 90% LVR. As the loan is with CBA, and we have IP1 with CBA as well, it be hard to release this equity, correct? IP1 is at 90% LVR currently.

Thanks!

 

Different system/ calumniation and different value.

It's coming

Do it sooner rather than later.

 

You

will have trouble getting a valuer to see the increase in value on a newly built home. If it's in a new estate especially.

 

Hi everyone! My first post,

I've read this and other threads on equity releases but it's still not crystal clear to me. Just wondering if anyone can kindly shed some more light for me.

I'm new to the forums but am a long time reader of Somersoft. I have 5 properties, each I bought 90% LVR with Westpac, and I was lucky not having to pay LMI as a medico.

If I get my properties revalued, and there is some equity to extract, what shall I tell Westpac to do? It seems people here have suggested to have a separate interest only loan to the value of the equity available with the equity put into that loan's offset account (so you're not paying any interest, but have funds available when the next property acquisition occurs). However, I have also read that this contaminates the funds as it makes it less clear the money is intended for investment purposes.

What structure would make it clear that the equity pulled is purely for investment purposes? Or is it ok if you can show the money in the offset account is going towards investment properties?

Cheers!

 

LOC or a seperate split loan account. IO and just redraw when/as needed.

 

Thanks HD_ACE

Was my understanding correct? Separate IO loan account to value of available equity, with it's own offset account and all the money parked in the offset till the time came for next investment purchase?

Cheers

 

As a tax lawyer I would advise against this.
You need to borrow funds to invest to be able to claim the interest. Borrowing now and parking in an offset weakens the connection with borrowing and investing. It also allows for easy contamination.

Use the Westpac LOC product, or use the IO and borrow to park in an offset briefly and then pay off the loan (make sure it won't automatically close) and then later reborrow when you invest.

 

Hi Terry
Could you elaborate on the process please. What do you mean by paying off the loan and reborrowing?

 

Ah thanks Terry,

Read into LOC. It looks like a pretty straightforward way of doing things. Is there a disadvantage in doing it this way?

 

Simple really. Just depositing money into a loan is a repayment. Taking it out again is new borrowings with the interest deductible depending on what the borrowed funds were used for. If you can do this without mixing invested/non invested money then there will be no mixing.

 

2 major disadvantages with a LOC
1. Higher interest rates = approx 0.10% or 0.15% higher than a standard loan
2. Often repayable at demand. i.e. no fixed term

Better to use a IO term loan if possible as long as you can pay directly from the loan.

But you could also just use a LOC and later convert it to a term loan once the funds are used.

 

Thanks Terry, that clears it up.

With the IO loan, is there such a thing as pulling equity from multiple houses into one loan? Would that IO loan be collateralised/securitised against the multiple properties equity was pulled from?

Cheers

 

Yes but each property would be used as security and this would mean crossing.

 

New interest-only loan split for the value of the top up with the new funds initially placed in offset account against the new split.

Keeps things very clean come tax time.

Just don't use any of the funds for anything that isn't for investment purposes.

Have a chat to your broker for input that is more suited to your circumstances though.

 

Thank Terry and Steven, sounds like a plan!