All Topics / Commercial Property / Can I purchase a commercial property using equity that in my current home?

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  • Profile photo of Maple9Maple9
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    @maple9
    Join Date: 2007
    Post Count: 10

    Hi All,

    Apologies for posting in the wrong section or asking a silly question.

    If i have $400,000 of equity in my home and would like to purchase a commercial property worth $350,000, will i be able to refinance my current home loan to release $350,000 to fund the commercial property purchase?

    Looking at the banks websites, it talks about releasing equity but do they limit what the funds are used for?

    regards,

    Maple9

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
    Post Count: 1,099

    ^ yes this is possible, but not all banks.

    Mick C | Shape Home Loans
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    Profile photo of TerrywTerryw
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    @terryw
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    Possibly. Depends on the LVR of your home.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Maple9Maple9
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    @maple9
    Join Date: 2007
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    Thanks Terryw,

    What would it be for both situations:

    My LVR is above 80%, can i also use guarantors?

    Or my LVR is below 80% after releasing the equity?

    Thanks

    maple9

    Profile photo of TerrywTerryw
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    @terryw
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    I don't understand, so will use an example

    $600,000house

    $200,000 loan

    = $400,000 equity

    80% of house value is $480,000. Less $200,000 existing loan = $280,000 useable equity. You could possibly set this up as a LOC.

    If you are purchasing a $600,000 commercial property this LOC would be used as the 20 or 30% deposit and then you borrow the rest secured on the new property.

    $600,000 x 70% = $420,000

    $280,000 from the LOC.


    $600k

    You will have to factor in costs too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
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    Maple9 wrote:

    My LVR is above 80%, can i also use guarantors?

    ^ guarantors – No, not for cash out/equity release.

    However it's possible to go to 90% LVR on your current loan and still achieve what your after, but would def be a lot harder and expensive.

    Maple9 wrote:

    Or my LVR is below 80% after releasing the equity?

    Perfect. As long as your income to can service the loan- easy done. 

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of Maple9Maple9
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    @maple9
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    Post Count: 10

    Thanks Terryw,  that example helped

    Profile photo of Maple9Maple9
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    @maple9
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    Profile photo of thecrestthecrest
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    @thecrest
    Join Date: 2004
    Post Count: 992

    Several banks have told me over the last 2-3 years that a residential property or equity  in one can be used as security for a commercial loan, in particular a loan to buy a motel freehold or leasehold, and in doing so would only attract residential % rate.

    Is that still the case in the current experience of the Forum's finance brokers ?

    Would the same apply for buying other types of commercial property like shops, factories or office space etc ?

    Cheers

    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
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    selling motels in NSW

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
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    thecrest wrote:
    Several banks have told me over the last 2-3 years that a residential property or equity  in one can be used as security for a commercial loan, in particular a loan to buy a motel freehold or leasehold, and in doing so would only attract residential % rate.

    Is that still the case in the current experience of the Forum's finance brokers ?

    Would the same apply for buying other types of commercial property like shops, factories or office space etc ?

    Cheers

    thecrest

    ^ Yep, residential security for commercial purposes- resi rate. 

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Although did a nice size Commercial deal for a forum member during the week where the interest rate was actually cheaper on a Com rate that the client had on their residential loan.

    On the figures you have outlined certainly should be doable.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

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