Lenders easy on cashout

Hopefully brokers can answer this one. Which lenders would you say ars easy/relaxed with their cashout/equity release policy for an existing loan? I know some lenders require a fair bit of paperwork and reason to release any equity(ie require proof of what the extra funds are going to be used for or need the next IP loan to be taken out with them as well).

Thanks in advance.

 

Is the purpose of the cashout to use as deposit on another property? Or whats your plans with it? And what LVR do you plan to go to?

Based on that someone might be able to point you in the right direction.

 

It could be for property or shares. I am trying to find lenders to whom I dont have to specifically prove what I need to use the extra funds for.

Lets us say that LVR is under 80% even after the cashout(ie no LMI involved)

 

Depends on the LVR and the purpose of funds. NAB for instance want to see a contract of sale for loans over 80% - just doing one now.

 

And the amount - the larger it is the more difficult.

 

Hi Terry, will the new loan need to be with NAB as well?

 

All loans secured by the property need to be with the same lender.

Most lenders have a reasonably flexible approach to cash out for LVRs under 80%. Above 80% LVR you'll see some serious restrictions with almost all lenders.

Less than $200k is fairly easy, above that is certainly possible, but it gets harder.

Almost all lenders now require a full application (or the equivalent) for any increase.

 

Sub 80% cashout is generally a lot easier than above 80%. Some of the best lenders in this space have no restrictions on sub 80%, others still have OK policies which will allow you to release up to x amount (250k without documentation with NAB for instance).

Depending on the security, serviceability etc will depend on what lender is appropriate for this kind of deal.

 

Sorry, I didn't explain myself properly there. What I meant by new loan, is loan for purchase of next IP. For example, can I get equity release on IP1 with Lender A that acts as deposit for IP2(LVR still under 80% and amount under 200k) and get 80% loan for IP2 with Lender B. My question was basically to see which Lenders(ie Lender A) will allow equity release for such a request. Also,using the same example, what if I need say 100k equity released by Lender A to buy shares instead.

 

Not necessarily.

 

Subject to their general borrowing criteria, most lenders would allow this type of equity release.

 

Under 80% and most lenders (the majors in particular) will be ok with large cashouts. NAB will restrict it to $250k without sufficient evidence (contract of sale for instance).

AMP are a pretty good in this space too.

Cheers

Jamie

 

Thanks all for your responses.

 

AMP offers unrestricted cash out to 85% LVR - no questions asked.

 

Just resurrecting this thread - have policies on cash out tightened significantly since late last year??

 

Overall yes. Most lenders are getting more details on their interpretation of 'responsible lending' and part of that is analysing what you'll use the money for. Last year many lenders were okay with the explanation, "Future personal investment". Today they want specifics and any cash out proposal should include that in a manner that is acceptable to the lender.

 

So what are the 'acceptable' or 'right' answers to provide a bank for the use of funds?

Obviously 'betting it all on black' would not be a wise answer.

Nor is saying it's to shore up your cash buffer I'd imagine (even though that's what a lot of prudent investors get cashouts for).

 

I'd be careful with this, you could be contaminating your deductibility if you use equity release on an IP to bolster your cash buffer, as it becomes a mixed purpose loan in that regard, on of @Terry_w tax tips highlights this.

 

I was deliberately vague on that because it depends on the lender.

Basically if you say that you'll want to invest in more property, they're going to want to have an understanding of what you're going to buy, how much you'll borrow and they'll ensure that this proposal meets their criteria. Some will even ask for a pre-approval for the proposal and possibly a proposed contract of sale before the release the funds.

If you say you'll invest in shares, they'll want to see either a track record of this, or some documentation from an appropriate professional advisor in this field.

I often mention a 'cash buffer' in loan proposals. It's only prudent, but it's got to be reasonably in line with the rest of the financial position.

I've yet to be asked to come up with a justification for putting it on black, but fortunately the request doesn't come up too often. It seems to me that everyone always puts it on black, nobody ever wants to go with red?