Hi team, I want to understand equity loans better. Scenario: Home loan (house and land) = 1,850,000 Value of home and land = 2,350,000 Questions: 1. How do banks calculate equity? is it: 2,350,000 * 80% - 1,850,000 = 30,000? 2. Why is it 80%? 3. What are other things i should consider?
1. They will value your property. Its here where the power of a valuer shop may glean the best equity growth ( get a few upfront vals from different lenders). Our record between highest and lowest for the same property in the same week is 960 to 1345. Had that borrower stuck with their existing lender they would not have the 308 k additional cash out which allowed them to leverage into a combo of a couple of IPs and equities ( to kick start an active debt recycle strategy ) One you have a decent val, AND the income to service the debt, the lender will allow you to draw an equity loan of 80 % of the balance of the equity - this is called "available equity" 2. 80 % for most lenders is the safe margin for " borrower contribution" on case the loan goes bad, and the place needs to be sold and to account for some market softening at that time. LMI is used by some borrowers for the benefit of the lender, so that one can borrow more than 80 % In your case the equity is as per your calculation. 3. Other things to consider ........how long is a piece of string. Id start with your future goals and work from there ta rolf
Thanks mate did I calculate part 1 of the question correctly ? Scenario: Home loan (house and land) = 1,850,000 Value of home and land = 2,350,000 Questions: 1. How do banks calculate equity? is it: 2,350,000 * 80% - 1,850,000 = 30,000?
Equity is value less loans secured by that property. Borrowing potential is the LVR x Property value less outstanding loan 2.35mil x 80% =?? then from this figure deduct the existing loans
