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Withdrawing Equity.

Discussion in 'Property Finance' started by Krysta, 9th Feb, 2016.

  1. Krysta

    Krysta Member

    Joined:
    8th Feb, 2016
    Posts:
    10
    Location:
    Regional NSW
    Hi All,
    I'm new to all this, so please bear with me.

    PPOR: Value $285k
    Owe $200k

    IP1: Value $240
    Owe $160k

    I'm assuming the PPOR and IP1 are cross coll together, both with suncorp, used equity in PPOR to purchase IP1.

    We are ready for IP2. Have previously received pre approval with Suncorp, this has ran out due to not being able to find a suitable place.
    Can I draw out cash from one of the houses, say 30k (making it a separate IP loan with suncorp) and then take that 30k to another bank as a cash deposit to get an IP loan?
    Is this what should happen? I have asked the local suncorp guy this and he told me no way will a bank release the funds to get a loan for another property at another bank.

    Obviously I need to find a good mortgage broker, and I'm going to have to get onto this soon, but how does this all work?

    Thanks for any input :)
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    Hi Krysta,

    Suncorp are very conservative when it comes to investors, and as you already know you're not structured very well with the x-coll. It would be a good idea to find a broker on the forums to help you restructure what you have and set you up properly for the next purchase.
    They'll be able to walk you through the structure and process so you're fully informed.

    Most of us are happy to work long distance if there's no one in your local area, so have a read of some of the posts and find someone you feel comfortable with.
     
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,140
    Location:
    Canberra and Sydney
    Based on those values/loan amounts it should be possible.

    Tell him he's dreamin'

    He can only advise on suncorps policy - so not sure how/why he would even make such a claim.

    If your borrowing capacity is ok - and the valuations on your properties come back at what you expect they are, then uncrossing the loans and releasing some equity for another IP is certainly doable.

    Take your pick - there's a gazillion on this website that I'm sure would help you. Jess who posted above is a good start.

    Cheers

    Jamie
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,091
    Location:
    Melbourne, Nationwide
    Based on the figures your total property value is $525k, you can borrow up to 80% of the value so considering your total lending is $360k, your 'useable equity' is:
    (525 x 80%) - 360 = $60k.

    This is effectively what could be used towards deposits and costs for another IP.

    You need to get rid of the cross colalteralisation and frankly Suncorp is not a good long term match for an investor. You'll need to refinance and in the process the cross collateralisation can be repaired and the $60k equity can be released.

    Once this is done, you'll be well set up to purchase another IP.

    If you don't restructure your loans more appropriately, you'll be tied to Suncorp which are a very conservative lender for investment purposes, as it appears you've already discovered.
     
  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    641
    Location:
    Sydney
    You don't have oodles of equity so getting the right valuation is going to be imperative for your strategies moving forward.

    Therefore recommend ascertaining a few upfront valuations to determine the exact equity you have to play with. Different lenders use different valuers and what you think the property is worth may be very different to what valuer A thinks to what valuer B thinks and so.

    Based on the numbers provided - here is how the loans should be structured:

    PPOR: Value $285k
    Owe $200k
    2nd split: $28,000

    IP1: Value $240
    Owe $160k
    2nd Split: $32,000

    Ensure that:

    1. You draw upon the equity from each property ASAP. Don't leave this to the last minute
    2. Do not cross the securities even for the new purchase
    3. Run the numbers and consider whether its worth while doing 80%, 85%, 88%, 90% or 95% on the new purchase.
     
    Krysta likes this.
  6. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    853
    Location:
    Sydney (West) and Canberra
    As the other brokers have mentioned, based on the numbers provided you should be able to do what you'd like to.

    What you'll need to do to make it happen:
    1. Get someone to run your borrowing power numbers and see whether you meet banks qualifying criteria. As Shahin mentioned, best to also check how you can fund your next purchase too.
    2. Order a couple valuations from suitable banks to ascertain how much equity you have. You may be best ordering desktop valuations if you don't want delays/annoy tenants.
    3. Apply to a new lender to release funds - ensure no cross collateralising, so each loan should only be secured by one property.
    4. Get a pre-approval (if necessary, talk to your banker/broker).

    If you're happy working remotely plenty of great brokers nationally (a few have posted above!). Otherwise, armed with all this new knowledge, you should be able to find someone locally that should be able to put this together for you. You can test their advice on the forums or against some of the advice above to see if they're heading in the right direction.

    Cheers,
    Redom
     
    Krysta likes this.
  7. Taku Ekanayake

    Taku Ekanayake Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    756
    Location:
    Sydney, Australia
    How much would it cost to remove the x-coll?
    Is this a costly and lengthy exercise?


    Cheers,

    Taku
     
  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    Depends on the situation - if LMI is involved it can be expensive, if not, very cheap (relatively) and simple. Can be very quick, or very long - quick if it's just a partial discharge, long if it's multiple properties all going to different lenders.
     
    Taku Ekanayake likes this.