Question about equity

Just wondering when I can draw on equity I have in a unit? I purchased last Feb and got very lucky with fast CG. If I want to use it for my next IP can I use this any way I need i.e stamp duty, fees etc or is it limited to a deposit? What else do I need to know? I have an IO loan and 80% LVR.

 

3 conditions
1. enough equity to maintain LVRs
2. enough serviceability
3. within the lender's policy of time limits on valuations - over 6 months should generally be fine.

 

You should be able to use it for everything. There's no need to tip in any of your actual money for the next one if there's enough equity in the property that you can extract.

 

Just don't mix the loans if you are using it to buy a private item, eg a car.

 

Hi Xie

It could be possible. Just need to order an upfront valuation with your lender (if they allow it) - and providing their policy enables for an equity release up to 80% (most do without too much hassle), your borrowing capacity supports its and if the property has gone up in value - then should be possible.

Cheers

Jamie

 

Best to get an agent in the local area out to appraise the property. Get the CMA which will list the recent sales in close proximity to your place, take it to a lender and go from there. Will show exactly how much equity you have

 

Ok great so I need to start with the valuation. Obviously I will talk to my broker but I always like to have the heads up first. Terry W mentioned serviceability I assume this is my ability to service another loan. I now have one -ive and one +ive so will be looking at a neutrally geared or even better positively geared IP as I don't want to use any more of my own salary. However, the banks don't know this in advance so how does this work?

 

Sorry you are writing to a newbie what is CMA?

 

Comparative Market Analysis - the REA equivalent of a valuation (but can't call it a valuation).

 

Comparative Market Analysis. It's an analysis of an IP's worth in the current market.

 

Just a tip for calculating the servicing ability yourself.

Get onto any bank's online calculator and put your current interest rate+2% into the calculator.
Check if your income can still servicing the loan.

This is just a rough indication on how you can guesstimate your servicing ability.

 

Comparative Market Analysis.

 

Why do you have a negative geared investment property?
Why don't you sell it. I don't see any use in having an investment property that is going to cost you money??

 

This is because most of the lenders will put around 2% above their standard variable rate when it comes to servicing calculation.

As above mentioned, lending policy (6 months equity release), LVR are another things to consider.

 

Steps:
1. Check with your broker regarding your serviceability in extracting equity. Also check the policy of the bank that your looking to release equity from. Some are easier than others.
2. Order a valuation (or a couple if optimal).
3. Release equity in a separate split loan. This is a full loan application.

Regarding your borrowing power, its not just whether your properties are cash flow neutral or positive. The banks will use a higher interest rate than the one you actually pay to work out what your expense is. This will reduce your borrowing power relative to an 'actual dollar for dollar' income/expense calculation. Some banks apply lower buffers than others - so sometimes another bank is necessary for borrowing power.

Cheers,
Redom

 

Some of my best performing IP's have been negatively geared. The growth has far surpassed the holding costs over time.

I've also had cashflow properties putting a few dollars in my pocket each month but not growing in value.

Different strokes for different folks.

Cheers

Jamie

 

Lenders (more importantly, valuers) don't care a fig about a real estate agent's CMA when looking at values.

Likewise, nothing wrong with a negatively geared property if you buy well - the fundamentals just need to stack up.

 

I purchased for CG in a good area. My outlay is fairly small and I got it through a BA who was able to get a great deal. I think I will see growth even in the short term - but of course have no crystal ball. Either way it is affordable for me but would like to find one +ive next time so no more outlay.

 

Thanks Redom I don't know about split loans what are they and why are they suitable?

 

Also, because your LVR is under 80% you might benefit from other lenders desktop vals if you're lenders one comes up short.

Lots of options

That's not actually true - RE valuations/CMA's count for nothing when it comes to bank valuations.