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Question about equity

Discussion in 'Property Finance' started by Xie, 21st Oct, 2015.

  1. Xie

    Xie Well-Known Member

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    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.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    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.
     
  3. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    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.
     
  4. Travelbug

    Travelbug Well-Known Member

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

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    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
     
  6. Nathan Simon

    Nathan Simon Well-Known Member

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    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 :)
     
    Last edited by a moderator: 22nd Oct, 2015
  7. Xie

    Xie Well-Known Member

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    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?
     
  8. Xie

    Xie Well-Known Member

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    Sorry you are writing to a newbie what is CMA?
     
  9. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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

    House Well-Known Member Premium Member

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

    TaylorChang Well-Known Member

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    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.
     
  12. Nathan Simon

    Nathan Simon Well-Known Member

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    Comparative Market Analysis.
     
  13. Nathan Simon

    Nathan Simon Well-Known Member

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    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??
     
  14. TaylorChang

    TaylorChang Well-Known Member

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    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.
     
  15. Redom

    Redom Mortgage Broker Business Member

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    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
     
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  16. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    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
     
  17. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    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.
     
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  18. Xie

    Xie Well-Known Member

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    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.
     
    Nathan Simon likes this.
  19. Xie

    Xie Well-Known Member

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

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    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.