Ok, equity in an existing property (as in a house on land) can be used for deposits and so on for further purchases. Can equity in a block of land (with no house) be used also? Is there the same kind of criteria that banks use with house and land (ie. the amount of equity they will lend against)?
Also, to what extent can the equity/borrowing be tiered too? For example: I own one block of land outright worth $100000. I would like to use $80000 of the equity to purchase a block of land worth $80000. Once I have the second block of land valued at $80000, can I use the equity in the second block of land to secure a third block of land valued at say $60000? I don't expect this to be the case, but just thought I'd ask. If not, what variation/similar method to this is possible?
Depends on how you want to use the equity.
Check with the bank if you can organise a $80,000 line of credit loan against the first block of land.to fund the deposits you most likely need $20,000 as a deposit.
So $80,000 line of credit loan
$60,000 land loan 2 $20,000 deposit
$60,000 land loan 3 $20,000 deposit
Need to cover stamp duty so you have $40,000 left of line of credit to use to cover this after paying deposits.
So total loan amount would be $200,000 can you service this loan amount is the question the bank will ask.
Line of credit usually 80% LVR
80,000/ 100,000 = 80%The other method is cross co laterisation
Bank adds all properties as security into one loan
$100,000 + $80,000 + $60,000 = $240,000 Value
Loans = 0 + 80,000 + $60,000 = $140,000
So loan / Value = $140,000 / 240,000 = 58.3% LVR
Need to add stamp duty to loans and you will still be within 80% LVR
Draw back is bank can sell all three properties to pay back a default by you.
As time passes values could increase in land
I am not sure if bank will lend against land
You may be able to achieve a higher LVR than 80% with mortgage insurance.Ask a mortgage broker what is achievable
As long as the land is standard residential and all else being equal then cant see an issue with your idea.
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
