All Topics / Help Needed! / Property Growth and Equity

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Viewing 7 posts - 1 through 7 (of 7 total)
  • Profile photo of twinkle87twinkle87
    Member
    @twinkle87
    Join Date: 2011
    Post Count: 4
    January 31, 2011 - 4:10 am

    Hi

    I new to property investing and I would like if I could get few things explained.

    I have a property which is worth 350K the loan amount is 270K ( the property was built new) and there is no equity on it. I dont understand how can that be, because if I decide to sell it I would make 80K or about in proft??

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,068
    January 31, 2011 - 5:00 am

    Hi Twinkle

    Welcome to the forum.

    How much was the property worth when you purchased it?

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of twinkle87twinkle87
    Member
    @twinkle87
    Join Date: 2011
    Post Count: 4
    January 31, 2011 - 5:12 am

    Hi Jamie

    It was a new built house and new land – so im guessing it was worth as much as I borrowed….

    Thanks for you help

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,068
    January 31, 2011 - 5:24 am

    Hi again twinkle

    Equity is simply the properties value minus the loan amount – therefore you have $80k in equity. Who said you didn’t have any equity?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of eyekeweyekew
    Member
    @eyekew
    Join Date: 2011
    Post Count: 5
    January 31, 2011 - 5:39 am

    Hi Twinkle

    this Quick formula may help  to work out your Equity –

    If you want to Hold onto the Property as security – you can access the  ' Equity ' in the properety ( if there is any )

    if you sell your property then the diferance is " profit"   or ' capital gain "  

    in your case to work out your Equity –  ( As a Guide only )  

    Purchase price / Build price $300,00.00
    Your deposit (10%)                $30,000.00  

    Bank Loan      (90%)                  $270,000

    Market Value of your Property today is $350,00.00   – less 20% of Market value (Banks Intrest in the property )

    =  $280,000 less what you Owe / loan amount $270,000.00    = $10,000 Equity in the property

    and effectivly " Nil Equity " from a banks prespective

    But if you Sell at today's market value – you will make a Capital Gain / Profit of $80,000.00 .

    Hope this explains it a bit better for you .

    Cheers
    Ken

    Profile photo of twinkle87twinkle87
    Member
    @twinkle87
    Join Date: 2011
    Post Count: 4
    February 1, 2011 - 12:29 am

    Thank you all so much for helping me.

    Jamie I was told by my bank that it had no equity but looking at what Ken has explianed thats probably why.

    Thank you again

    Cheers

    mia

    Profile photo of luke86luke86
    Participant
    @luke86
    Join Date: 2010
    Post Count: 470
    February 1, 2011 - 1:47 am

    Yes, I think the bank meant no available equity for you to access with a Line of Credt.

    Some banks do allow a Line of Credit with total borrowings up to 90% of the value- but you will be up for LMI (probably about $3000-$4000 in your case).

    Cheers,
    Luke

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