Valuations And Borrowing For Deposit

Hi all,

I'm looking to get pre-approval for both borrowing against an existing IP for a deposit, and using that to purchase a new IP.

I've read some of the advice such as Tax Tip 53: Paid Deposit with cash - how to fix big mistake before settlement, and want to pursue using equity in my existing IP to fund the downpayment on a new one.

Ideally I'd like to borrow from a different financial institution than the one that holds the mortgage to the current IP.

I'm not 100% sure where to start the process. Roughly I can see I will need to:

- Know the amount of equity available in my existing IP
- Get approval from a lending insititution for loans on (deposit amount + prepurchase costs) + (loan amount)
- Locate and buy the right IP, then go through the usual purchase process for that.

I don't want to cart before the horse the process, but I also don't want to burn lots of time only to figure out there isn't sufficient equity available, or I can't borrow enough to purchase the new IP.

So, should I start by talking to: a bank? A broker? A real-estate agent to get a valuation done on the property?

 

Speak to a banker or broker and order some upfront valuations and determine exactly how much equity you can access and have this available ready to go. Ensure that the facility is seperate you so you can track the purpose of the loans.

Concurrently, ascertain a pre approval for the purchase - you don't want to access quite and not have the servicing to purchase a new property and vice versa.

You need to ensure both the equity release and the purchase app are ready and in place.

There isn't a specific requirement to have loans at different lenders - if the situation suits you can have both loans with the same lender. You just need to ensure that the properties are not cross securitised.

 

Thanks @Shahin_Afarin - that is exactly what I was trying to confirm. Can you elaborate on "You just need to ensure that the properties are not cross securitised."?

 

@Rolf Latham I went through an online mortgage broker for the last couple of purchases (MortgageHouse). Whilst it was ok, I didn't fee like I got a lot of benefit out of the arrangement. In particular I ended up with a fixed rate loan which is currently stuck at ~4% for the next 3 years - my own poor choice at the time, I should have fixed if and when rates rose, not in anticipation of it which never eventuated.

So "I'd like to borrow from another institution" should more be "I'd like to go with a broker I can meet face to face and discuss sets of options with and recieve advice from", which would likely lead me to another bank (unless fortune held that one of the current institutions I'm with was the best option anyway).

 

This is your best option

 

Cross securitisation occurs when the lender takes both properties as security and gives you one big loan - often they will say "we can lend you 100% of the purchase price". This isn't the correct/effective way of structuring the loans.

Access the equity against one property (have it as a seperate loan to the existing loan) and then borrow say 80% against the purchase property. Ensure that the broker or banker is submitting 2 seperate applications.

If you are signing one application form then you are most likely getting cross securitised.

 

Cross securitisation could also happen if you have 2 loans. it is more than one security being used for a loan.

 

@Shahin_Afarin thanks for the clarification!

 

Can anyone recommend a broker they use regularly in SA? I have a recommendation from a friend, but I'd like a few options to weigh up.

 

I'm going to have a chat to Daniel from Lendium soon, initial impressions are good. I'll post back once I know more.

Another friend recommended Eadon Home Loans - About Us, so I may talk to them as well.