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Question regarding equity release

Discussion in 'Property Finance' started by Drgonzo, 19th Dec, 2016.

  1. Drgonzo

    Drgonzo Well-Known Member

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    Just a theoretical question - If we were to ask the bank for a topup from our mortgage to pay out some renovation costs and the val came back lower than what it was at loan commencement, i understand the bank might refuse the equity release, but could they also ask us to tip in more cash to maintain the LVR?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    In theory they could, but very unlikley
     
  3. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Never seen or heard of it happening - it's not standard procedure. Seen quite a number of properties underwater/higher LVR than their previous val and no push back/adverse outcome from the lender.
     
  4. Northboy

    Northboy Well-Known Member

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    So why is it that property experts always warn that getting into a position of negative equity is deadly. So long as you can hold during the downturn, it shouldn't really make a difference should it?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Who are these experts you speak of??

    Negative equity should be avoided as your assets will be dropping in value. If you have each loan stand alone with a different bank not much will happen unless you try to sell. You could hold on if you think it will bounce back,.
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Agree with the guys above - they could ask you to reduce the LVR but in reality it's probably unlikely.

    Does the bank allow upfront valuations? If so - order one and if the result isn't high enough then don't proceed with an application.

    Cheers

    Jamie
     
  7. the world is your oyster

    the world is your oyster Well-Known Member

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    I have a deal in Gladstone
    When the land settled it was 45k below purchurse price I had to to up that from equity
    But that was/is high risk area I spose pretty shattering to be honest
     
  8. Drgonzo

    Drgonzo Well-Known Member

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    val came back disappointingly low - so no equity release for us for now, but they havent asked us to tip in any more money either.
     
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  9. aussieB

    aussieB Well-Known Member

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    Was there any LMI paid ? If so, did you have to pay some more LMI ? If the LVR has moved, wouldn't the bank want the appropriate LMI ?
     
  10. Drgonzo

    Drgonzo Well-Known Member

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    Yes it was at 90. No they haven't asked for any more LMI though the LVR is technically higher now. They would have charged 600 in LMI for equity releas.
     
  11. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    How bad was the valuation in the end - did it come back at lower than the original construction price, or just lower than the previous construction price + additional funds you've spent on the property since?