LVR question

Discussion in 'Loans & Mortgage Brokers' started by housechopper2, 13th Dec, 2019.

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  1. housechopper2

    housechopper2 Well-Known Member

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    Having a major blank here!

    Can you help with a hypothetical situation where someone purchases a property for $400,000 but the bank values it at $500,000 and is happy to lend to 80% LVR?

    At settlement, what money changes hands?

    Does the purchaser pay the seller $80,000 (20% of $400,000); then the lender pays the balance of the $400k ($320k) and the purchaser get the additional money above purchase price in their bank account ?

    I.e. $500k x 80% = $400k minus the $320k paid = $80k to purchasers bank account after settlement
     
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  2. ShireBoy

    ShireBoy Well-Known Member

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    Do you want the $500k loan? What does your conveyancer say?
    Just because you were pre-approved for $500k, doesn't mean you need to take the full $500k.
    The bank might just give you a loan $320k.
    Seek proper advice if this an IP and you're facing the prospect of cash floating around after settlement.
    @Terry_w might have a Tax Tip on this.
     
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  3. JasonC

    JasonC Well-Known Member

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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If a bank is going to lend you $500k for. $500k purchase then all you will need to pay is the stamp duty and a few minor fees. Actually if you have paid 10% deposit you will have some money left over.

    But it is generally the case that they will only lend based in the lower of value or purchase price
     
  5. VanillaSlice

    VanillaSlice Well-Known Member

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    Hello, was this an established residential home ? How did you get such a great deal ? :)
    I thought banks would usually use the borrower's purchase price even if it is less than what comparable products have been sold for. Good situation to be in if you like leverage :)
     
  6. VanillaSlice

    VanillaSlice Well-Known Member

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    oops ... just re-read the post and realised it's a hypothetical situation and not a real one ...
     
  7. tobe

    tobe Well-Known Member

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    The bank lends up to 80% of $500k. At settlement this $400k changed hands. Like terry said you got to find the stamp duty but if you have already paid 10% then you’ll get some money back after settlement.
     
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  8. JetstreamVic

    JetstreamVic Well-Known Member

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    I think in reality it would never happen.

    The val might come back at 500k, but then they would see the 400k contract and override the valuation to reduce their exposure.

    If you were to get a cracker of a deal tho, you could always re finance and draw on that money
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    Best bet is to get a revaluation after 3 months, then pull out the equity.
     

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