Question regarding equity release

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?

 

In theory they could, but very unlikley

 

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.

 

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?

 

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,.

 

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

 

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

 

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.

 

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 ?

 

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.

 

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?