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Can equity can be used as deposit to another bank ?

Discussion in 'Property Finance' started by benjma, 19th Aug, 2015.

  1. benjma

    benjma New Member

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    Hi,

    This is a newbie question. Can I draw equity from my existing home loan in one Bank ( CBA) and use it to pay the 20% deposit to another lender for a new IP ? Will I be in any trouble if I do that, say, CBA will recall equity loan if they find it out ???

    My intention is not to be attached to just one lender and cannot move away from existing lender any time soon as my loan fixed.

    Thank in advance for any comments.
     
  2. Hodor

    Hodor Well-Known Member

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    Yes you can do this. The 20% deposit is secured by the original property only and you take out a new loan which is secured by your new purchase.
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Yep, that's perfectly fine :)

    You'll need to create a new loan split and leave to fixed portion untouched to avoid break costs.
     
  4. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Yes you certainly can at 80% LVR (assuming that the servicing/borrowing capacity is demonstrated) but anything over 80% will be difficult.

    You will need to be upfront in the application submission to say that the new loan will be with another lender.

    The important thing to note (and this may be the deal breaker) is that CBA will do the servicing based on the end debt. So say you plan to purchase a property for $400,000 at an 80% LVR - CBA will factor this into the servicing even though you haven't found a property yet.

    If the loan doesn't service base on the end debt they will not lend you the equity.
     
    WattleIdo likes this.
  5. LibGS

    LibGS Well-Known Member

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    I did this. With guidance from my broker, I borrowed 80% on my PPOR with AMP. I then used this money as deposits on properties, with the loans coming from other banks.
     
  6. benjma

    benjma New Member

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    Thanks for all quick comments/ replies ... :))

    CBA asked if the equity loan is for investment purposes but didn't ask if the new home loan will be with them or another lender. They probably assume that it is with them.They probably will not be too happy with it and might affect my equity loan if I can tell them? Do I have to tell them if I may go with another lender or might end in trouble? I am hoping not. Otherwise, all loans have to stick with CBA.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    They don't really care where the next loan will be - no problem.
     
  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If it's under 80% just saying future investment purposes should be fine. If you tell them it's a deposit to buy another property they may ask to see servicing based on end debt - that's where it can get tricky.
     
  9. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Spot on - that's what I'd be doing. Keep it vague. You're being honest - it's for future investment....it's just when you start explaining the type of investment they'll want to see how it services on their own internal calculator.

    Cheers

    Jamie
     
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  10. benjma

    benjma New Member

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    Thanks for all responses ! Really appreciated as it really helps !
     
  11. Tony Xia

    Tony Xia Member

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    My advice is never be loyal to your bank...
     
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  12. Sonamic

    Sonamic Well-Known Member

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    It's fine. In fact most on here would encourage this. Don't feel guilty for doing it either, CBA doesn't when they're taking your Repayments.