Equity from PPOR to fund IP - Top Up Loan

Hi all, 1st time poster in the forum, based on the reading of various posts, I feel more educated! However, i am not there yet!

Question and reason for my 1st post.

I have my PPOR valued @ 600k and have 275k owing so have built 'some' equity in the past 6-7 years.

My plan is now to buy a investment and use the equity 20% to fund for my first IP purchase. I have conditional loan approved through another lender but have been speaking to current bank CUA on how to obtain the equity.

They suggested a 'top up' loan which will be a seperate product from my OO loan, essentially a split loan for the equity release. To make sure i understand this correctly and before i proceed. i would like opinions from you all is this the way it works to release the equity?

Essentially, this will top up say 150k for example to the loan, therefore this cash will be avaliable to draw upon for my IP (1st deposit), i already have cash in offset to pay for the stamp duty fees. If i proceed and have this cash available as a separate loan, i would only have to pay the interest if used?

 

You would pay interest on money borrowed on the top up loan, but you will still have to pay back the principal, over 30 years or so.

 

thanks terry, yes i read that the interest rate is usually higher for a top up (waiting for the bank to confirm the rate and have informed me there will be a $600 app fee that can't be waived)

Would this normally be the best strategy to take the equity out, 2nd option would be a refinance to the other lender that where my conditional loan is @ however, not ideal as i only refinance early in the year.

 

That is basically the strategy i suggested in this one.

Terryw’s Ideal Loan Structure Terryw’s Ideal Loan Structure

 

Great have not across this thread! let me have a deep dive. Basically essentially what i just mentioned you have answered in this thread already!!

From my knowledge, a investor loan vs a line of credit loan to draw equity - what is the stand out point? one has a higher rate, both can draw out... what am i missing here

 

best to avoid LOCs these days I think.
Keep in mind that thread was written maybe 4 years ago

 

How many times can you get equity from your PPOR? How would you know if you can still get some equity? Would you always need to refinance to do it?

 

You can't get equtiy - equity is the value less the loan.

You can borrow against the value of the property - there is not a limit as long as you can keep qualifying.

First thing to do would be estimate the current value and debts secured against it and work out the LVR. If it is more than 90%, step back and wait, if it is under consider seeking advice.

 

Thanks Terry. So if I have already borrowed against the PPOR at 80% LVR to be used for IP deposit, can I come back again after a year or two borrow again for another IP investment?

 

Yes as long as your property increases in value and/or the loan decreases/

 

Thanks.