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Advice on restructuring home loan and turning it into an investment property

Discussion in 'Property Finance' started by andy73, 7th Sep, 2015.

  1. andy73

    andy73 New Member

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    Australia
    Our current principle place of residence has $240,000 owing on it. We went to the bank and told them that we wanted to use the equity in there to put towards a new home and then turn that into an investment property.

    The bank did an evaluation on our current principle place of residence and it came back valued at $370,000.

    The bank then said that we can only use up to 80% of the equity in there because that was their lending criteria when turning our principle place of residence into an investment property. We wanted to use either 90-95% of the equity in our current home to put towards a deposit+cost of our new home and can not afford a new home if this is the bank's lending criteria.

    Is this a new thing by the banks (or it it just this bank) where they will only allow you to use up to 80% of the equity in your existing home towards the purchase of a new home? Where can we take our business to if we want to use 90-95% of the equity in our existing home for the purchase of a new home and then turn the existing home into an investment property?

    Thanks in advance.

    Andy
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    The odds of you getting cash out to 95% are next to nothing unfortuntely. I think your best bet is going to be seeing how much you can get via a great valuation rather than trying to leverage up so high in this environment.

    Which lender are you with? Some may let you go up to 90% if it's a really strong application but it's not a given anymore.
     
  3. andy73

    andy73 New Member

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    Thanks Jess. We are currently with the Bank Of Melbourne.

    How do we get a "great valuation"? Not sure what you mean there sorry. The bank already did their valuation on the property and it came back at $370,000.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Valuations can vary significant between lenders, for eg one of my clients was going to go for a 90% lend with Bankwest and ended up at 80% at cba using a desk top valuation. This saved him thousands in LMI alone, plus better pricing due to lower lvr.
    So even though BOM gave you $370k valuation, other lenders may price it much higher, saving you lmi and giving you more accessible equity to use for your next purchase.
     
    albanga likes this.
  5. Watson1

    Watson1 Well-Known Member

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    Melbourne
    I think you have been incorrectly advised. If you are living in the property at the time of application they should be applying owner occupied policies ie. cash out at 90% plus cap.

    I.e $333,000 plus cap lmi ~$7k. (cash out of $93k)