Relese Equity or Wait??

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

 

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.

 

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.

 

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

 

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

 

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

 

Take the money and run straight to your offsets.

 

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.

 

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.

 

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?

 

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

 

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.

 

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

 

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