Using Equity From Investment Property

Discussion in 'Property Finance' started by Shaneo78, 12th Jan, 2019.

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  1. Shaneo78

    Shaneo78 Well-Known Member

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    Hi,

    My partner just got a job in Hobart. We have always wanted to move there. I have left my job and we are moving to Tasmania.

    We were just renting in Melbourne, but we are hoping to buy in Hobart. The rental market is quite expensive and we would be out of pocket less each week with a mortgage.

    We have some savings, however we would need to access some equity in my investment property for a deposit. However I am currently unemployed after leaving my job to move to Hobart.

    The property and loan is under my name. My partner will be on a similar salary to what I was on in Melbourne. I'll be able to get regular casual work until I find something more permanent.

    Does anyone have any advice regarding how to access equity in this situation? My concern is I will have trouble accessing the equity with my employment status. I am with CBA.

    I will talk to a broker on Monday but interested in your thoughts.

    Thanks
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Any loan, including releasing equity, requires you to demonstrate enough income to service the loan.

    Perhaps your partner's income will be sufficient to demonstrate serviceability, but if not, you're probably going to have wait until you've got a job.
     
  3. Shaneo78

    Shaneo78 Well-Known Member

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    Thanks for the reply Peter.

    My investment property is only $50 or so out of pocket each week. My partner will be on a decent wage over in Hobart. Running through the budget, we will easily be able to put 100-200 extra into the mortgage each week just relying on her income. But I know the banks are more restrictive on their serviceability criteria. I guess we will have to run through the numbers with a broker and see what is possible.
     
  4. David Shih

    David Shih Mortgage Broker Business Member

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    Unfortunately banks don't look at things the same way as your budget sheet. They have a higher assessment rate of loan repayment - usually in the realms of 7.25%.

    It'll also depend on how much equity you need to pull, and then your broker will be able to check serviceability and work backwards so you know what sort of income level you need either on a casual basis or the more permanent job you're looking at. In addition, how long before such income can be used - for example CBA currently requires 3 months casual income before it can be used for servicing.

    Also keep in mind the other equation of equity pull would be valuation - depending on where & when you bought and current market condition it'll also determine how much potential equity is available.

    Cheers,
    David
     
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  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    That's probably going to be your best bet.

    As mentioned above - banks put all sorts of added buffers in place when calculating your max borrowing. So while your property is only costing you around $50 per week to hold onto - once you factor in the banks assessment rate, etc it will appear to cost a lot more on their in-house calculator - which in turn reduces your borrowing capacity.

    Best of luck with the move to Tasmania!

    Cheers

    Jamie
     
  6. Shaneo78

    Shaneo78 Well-Known Member

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    Ran the numbers and on her wage it is not possible to go down this route.

    However we are looking into another option. Have a 5% deposit. It may be possible to put the loan in her name only. Ideally we would want a higher deposit, buy with crazy rents we are thinking this could be the way to go.
     
  7. JohnPropChat

    JohnPropChat Well-Known Member

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    Hobart has peaked. Give it a year or two for things to correct. Don't let FOMO get the best of you.
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Having the loan (and presumably the property) just in your wife's name doesn't change the fact that you're a one income household. The figures should be exactly the same if you're on the loan or not.

    As suggested, you may not need to rush into this. Things will likely change significantly once you're employed.
     
  9. Archaon

    Archaon Well-Known Member

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    rents may cost more weekly, but it would still be better to rent in the event you buy at the top of the market and are then stuck with 2 loans and only one income (if this level of borrowing will be allowed), it may be that jobs are difficult to acquire in Tas, better to secure employment before over reaching on future possibilities.
     
  10. Shaneo78

    Shaneo78 Well-Known Member

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    Not concerned with the repayments. We would be looking at renting out one or two rooms for a year or two. I can easily get casual work back on the mainland if needed as well.

    Thanks for the advice. Going through our options now.
     
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