Equity in company share title units

how much equity would banks let me tap into a paid off company share titled 2 bedroom apartment? The real estate agent said it’s about 80% of the value for regular properties so I’m guessing it’s going to be about 70% for a company share title?

 

Generally 70% but some go to 80% with LMI

 

I’m thinking if I buy something with cash in the next few months then borrow the equity and put it into an offset so can use it to buy another if the market gets really bad in 2020 and prices come off 20% (and I’m unable to get finance at that time).

 

It would be easier if you borrowed as much as you can and put the cash in the offset account and then wait.

This overcomes the potential tax issues as well as the potential cash out restrictions.

 

I left a message with a local mortgage broker. Will probably get a call back on Monday.

At the moment my borrowing power isn’t very much so there wouldn’t be anything decent to put in an offset. The 300k cash in my hisa account isn’t having a big impact on borrow power. I was assuming if that was a 2 bed unit instead I could borrow 70% against it just based on the asset alone?

 

Depends on the lender - some lenders like Westpac and CBA will go to max 80% (no LMI).

St George will go to 85% (LMI obviously payable over 80%) if its an owner occupied property - if its an investment they will go to 80%.

 

Would that be irrespective of my borrowing capacity without the unit? Say if I can only borrow 100k now with no asset would I be able to borrow 80% equity if I had a 500k property?

 

Everything is based on servicing/borrowing capacity so even if you have oodles of equity the amount of equity you can access will also be dependent on your borrowing capacity.

Most people fall into 2 buckets - they are generally either asset rich and income poor (relatively speaking) or income rich and asset poor.

 

I see. I’m going to fall into the former category of asset rich/income poor but that will likely change if the economy holds up for the rest of the year (more income). And the asset will be a PPOR.

 

I just spoke to the mortgage broker over the phone. He said only some lenders lend against company share and it’s often only 70% of the value whilst for regular apartments you can sometimes borrow 95% of the value.

Secondly, he said lenders won’t just give you the money anymore to put in the offset while you wait instead they’ll want to hold onto it until you’ve shown them what you’re using it for and only for a period of 3 months.

So it sounds like I won’t be able to do my strategy of buying now and borrowing against the equity incase there’s a credit crunch/crash in 2020.

Should I call a 2nd mortgage broker?

 

2 Brokers above have said there are lenders who will lend more than 70%.

I've also mentioned above how to overcome the cash out issues

 

If I borrowed 30% of value to purchase now would I be able to cash out the other 40% by 2020? I currently only have borrowing power of about 30% of the purchase price but I’d need to cash out 70% of the purchase price to have an amount in cash that’s worthwhile.

If I could borrow 80% of the value and put the cash in the offset instead that would be great but I can only borrow 30% currently.

 

I could perhaps change my current financial situation in order to get the borrowing power for the full amount, the only issue is that could take a few months and the property I’m after won’t still be there. So if could buy now with cash and cash out the equity in 6 months it would make things easier.

 

No one could answer that as it would depend on your income and other circumstances at that time.

 

So if I increase my income which enables full borrowing power by sept 2019. Do you see any hurdles with me borrowing 30% to purchase the unit today then once I’ve increased my income by sept I cash out the rest of the equity by borrowing another 40-50% in sept? Is that a viable strategy? Will the banks be put off by me requesting full cash out in onky 6 months from purchasing the property and increasing my income?

 

I don't know anything about you so can't comment but you will still have to satisfy the cash out requirements.

 

Having spoke to 2nd MB on the phone and lending manager at commonwealth bank it’s going to be tough cashing out the equity and leaving it in the offset. Banks don’t like not knowing what you’re doing with the money. I can’t rely on being approved for a loan at time of purchase because credit squeeze could be much worse.

Best option is to borrow full amount and put cash in offset as mentioned.