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Lenders easy on cashout

Discussion in 'Property Finance' started by Xsi, 30th Sep, 2016.

  1. Xsi

    Xsi Active Member

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    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.
     
  2. D.T.

    D.T. Specialist Property Manager Business Member

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    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.
     
  3. Xsi

    Xsi Active Member

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    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)
     
  4. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    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.
     
  5. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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

    Xsi Active Member

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

    Peter_Tersteeg Finance broker and strategist Business Member

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    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.
     
  8. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    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.
     
  9. Xsi

    Xsi Active Member

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    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.
     
  10. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Not necessarily.
     
  11. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    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
     
  13. Xsi

    Xsi Active Member

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    Thanks all for your responses.
     
  14. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Recently had a 90 % lvr cash out approved at WBC for near 500 k.................

    sometimes u get lucky

    ta

    rolf
     
  15. euro73

    euro73 Well-Known Member Business Member

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

    Lacrim Well-Known Member

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

    Peter_Tersteeg Finance broker and strategist Business Member

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    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.
     
  18. Lacrim

    Lacrim Well-Known Member

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    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:p.

    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).
     
  19. Archaon

    Archaon Well-Known Member

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    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.
     
    Last edited: 12th Sep, 2017
  20. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    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?