Relese Equity or Wait??

Discussion in 'Investment Strategy' started by Brett1709, 29th Jun, 2018.

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  1. Brett1709

    Brett1709 Well-Known Member

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    Hi guys I purchased a corner sub divided block property with development potential last year in Broadmeadows for 270k, and it's recently been valued at 420k. I have 2 other properties and not ready to buy another just yet. My question is how long do you think we have to release equity ? with the banks tightening up their lending requirements (and should I even be doing that). What are the implications of waiting until next year. Also can we see Melbourne property prices falling dramatically in the future. Cheers
     
  2. Big Will

    Big Will Well-Known Member

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    Take the money when you don't need it, rather than wait until you do need it and the banks wont lend it to you.

    Keep money in offsets and it really isn't costing you anything but you have access to the funds.

    Also your value will likely be more than the bank value on a refinance.
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Always release equity when you can - I've had clients who waited, only to find they could no longer do so due to dropping valuations and tightening policy. As Big Will said, if you do it interest only with an offset account, it can sit there for 5 years before you'll have to start slowly giving it back in the form of principle payments - and that only assuming you can't extend the IO for whatever reason.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    ASIC doesnt like us doing it............

    ta
    rolf
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Providing you're disciplined with money and will let it sit for future investment - I'd be inclined to get it now rather than later. It's only going to get harder to release equity in the future IMO.

    Cheers

    Jamie
     
  6. Blueskies

    Blueskies Well-Known Member

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    Question, what is the benefit of setting up an offset account, rather than just leaving the funds undrawn in the loan? Is it about ensuring the bank doesn’t close the loan facility? Thanks
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You can do this with some loans, but others will automatically close if they're fully undrawn.
     
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  8. Sackie

    Sackie Well-Known Member Premium Member

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    Take the money and run straight to your offsets.
     
  9. Brett1709

    Brett1709 Well-Known Member

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    Thanks for the advice, thats what I was leaning towards. Hopefully the banks haven't tightened things up too dramatically and I will be unable to access it.
     
  10. Brett1709

    Brett1709 Well-Known Member

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    Cheers mate, do I need to give the banks any direct reasons as to why I need the money. Obviously it will be for investment puposes.
     
  11. Brett1709

    Brett1709 Well-Known Member

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    Thanks Jamie, I will be calling the bank on Monday. Also is it a good idea to pay off a small ammount of personal debt with the equity release?
     
  12. Brett1709

    Brett1709 Well-Known Member

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    Thanks buddy, any idea's how the Melbourne market is going? in Broadmeadows. I'm in Sydney and the markets here have slowed down a fair bit
     
  13. Eric Wu

    Eric Wu Mortgage Broker Business Member

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    hi @Brett1709, usually releasing equity depends on 2 major factors: valuation + serviceability.

    if you have a stable job, the income tends to stay stable = stable serviceability.

    the valuation can vary quite a lot, banks use their own valuation to determine the value, when it is in a booming market, no problem, banks are ok with it. but when market dives or stabilises, banks (valuers) tend to give conservative valuation, thus less equity to release.

    so when the market is good/booming, get the equity as much as you can, and park in offset account for future use.

    it is getting inreasingly difficult to release equity. so do it now when you can.
     
  14. Tonibell

    Tonibell Well-Known Member

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    So 55% increase in one year - what's your secret ?
     
  15. hieund85

    hieund85 Well-Known Member

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    A corner block with subdivision potential in Broadie last year for $270k. Sounds incredible. Broadie median price last year is around mid 4.