Equity Release and IP Loan

Hi Brokers

Estimate figures would be appreciated for a relative

1. NSW IP - Market value between $440K-$480K (median 450K) - no debt - Rental $370pw gross
2 . Savings - $200K
3. Gross Income - $70K - Tradie

Single, no personal loan or credit card. Normal spender. He wants to buy another IP. No PPR as on shared rentals ($250pw)

Would this be reasonable?
1. Equity release - $350K on IO (rental income should be enough to cover the loan)
2. Able to borrow another $500K based on his wages
3. IP No 2 should be able to rent for about $550pw (Assume $900K purchased price)

Achievable on the current lending market?

 

1. Not reasonable for a bank to just hand out cash these days. Need an active purpose - might have to wait until the property is found before cash out is released.

2. hard to say, but would be tight perhaps.

 

Thanks Terry but that's the problem isnt it?

Sydney properties are mostly on auctioned (esp the ones he's after) so instead of equity release should I say a loan from the IP no 1 for the purpose of IP?

So what's the correct step in getting the loan?

One loan or two loans?

 

a release of equity is a loan. You would need to get credit advice and choose a lender that will allow cash out without restrictions or one that allows based on contracts that are unexchanged as of yet.

 

I agreed with ttn.

If we go to auction then we have to pay 10% deposit. WHAT IF we come back and the bank doesn't release the fund then we don't have enough money to pay deposit?

anyone experienced that ?

Is there anyway that we can get the fund before the auction?

thanks
regards

 

Yes you can, as Terry eluded to you need to make sure you pick a lender that'll allow you to facilitate the transaction in the way you're looking to do it.

 

You would need to arrange release of funds before the auction - otherwise too dangerous I would say.

 

i think all the banks are now under the same rule? like Royal commission or something like that?

is there any lenders which release the fund before hand?

 

There are money available for the deposit but that's not the point. He needs to use borrowed money to pay for deposits and expenses and his savings as offsets for rainy days

I should have been clear in asking that how easy nowadays to get the loan no 1 and no 2 from different lenders

 

Each lender has a different policy in regard to cash out. Some want to control the funds, some are happy for whatever the nominated purpose is. Each have different levels at which different policies are effective, some it is up to $250K, some more some less. Some will want to charge rates for purpose, others based on security. There are lots of variables.

In the case of @ttn if there was an application for preapproval for the new purchase alongside the cash out then many lenders are going to be OK with this. The serviceability may be a challenge.

 

There is no specific rule. Each lender has different policies.

 

No they're not all under the same rule and YES there are lenders that would allow the $350K to be released beforehand.
The person looking to do this needs to speak to a broker to see what options there are and if it's even achievable, serviceability wise.

 

Harder than before but still certainly possible.

Why not contact Morgs, he seems to know the go and is a mortgage broker

 

thanks guys. I'll let him know