Hi All,
I own a property that is worth $280k and just got appraisal from various R.E Agent to approximately $320k
So far I have deposited approx. $ 81k in the existing loan,
and borrowed $221k previously for the above property (first home).my understanding is that my equity = $320k-($221k-$81k) = $180k
so I wonder if I should
1. increase the existing loan into let say $265k so that I can buy $465k max. of new property under the same loan facility?
2. use partially of the existing equity eg. $100k only in the second loan to buy $350k of new property ? –> I assume that this won’t need to use my existing home $320k as the security
Hi Henry
I think your bank would have to do a bank valuation and you are more than likely going to find that it will come out lower than an RE valuation. Before you assume too much and start looking I think you would be better off talking to your bank first as to what your lending critteria may be. A lot will depend upon your servicability as much as equity.
JPS25
This is how I would do it.
Value x 80% = X e.g $300,000 x 80% = $240,000
X – Existing loan = LOC limit eg. $240,0000 – $150,000 = $90,000 LOC
Set up the LOC on this property and only use that LOC for deposits and costs for the next property.
Buy $300,000 property. Get a 90% IO loan of $270,000 and take $30,000 from the LOC for this. = 100% borrowings.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Henry
There's an example on our blog – http://www.passgo.com.au/blog/25-the-project/67-how-to-use-the-equity-in-your-home-to-purchase-an-investment-property
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Terryw wrote:This is how I would do it.Value x 80% = X e.g $300,000 x 80% = $240,000
X – Existing loan = LOC limit eg. $240,0000 – $150,000 = $90,000 LOC
Set up the LOC on this property and only use that LOC for deposits and costs for the next property.
Buy $300,000 property. Get a 90% IO loan of $270,000 and take $30,000 from the LOC for this. = 100% borrowings.
Terry, thanks for the advice, so where does the figure 100% borrowing comes from ?
I thought if I got $90k LOC, by just using $30k that means I only use 30% of the total LOC value.100% of borrowings for the new property. 20% from LOC and 80% from new IO loan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
AH IC so that the interest generated from this LOC account can be tax deductible.
Yes it can and is.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
JPS25 wrote:Hi HenryI think your bank would have to do a bank valuation and you are more than likely going to find that it will come out lower than an RE valuation. Before you assume too much and start looking I think you would be better off talking to your bank first as to what your lending critteria may be. A lot will depend upon your servicability as much as equity.
JPS25
Hi JPS, yes I’ve just contacted a mortgage broker and they told me to prepare to pay $350 for bank valuation so that I can use the current equity (from the Bank valuation price – buying price). From there I will then be able to split the loan to buy another IP using LOC.
Sounds to me like you are with the wrong lender.
I cant say i have ever told a client they had to front up with cash to pay for a valuation.
I can think of a couple of lenders who I merely order a valuation for my clients and if they dont come up to scratch we merely ditch the application with no credit search undertaken.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Richard,
Thanks for the advise, from my understanding is that the broker told me to pay for the bank valuation fee if the value of my property has gone up greater than the buying price. So if it doesn’t then I do not have to pay for any fee.
Henry hate to say this is definately not the case.
Only reason you would commission your own valuation report is if the Banks figure came in less than you believed was right and you decided to have another done by a panel valuer and then have it assigned to the lender.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Henry Adams wrote:Richard, Thanks for the advise, from my understanding is that the broker told me to pay for the bank valuation fee if the value of my property has gone up greater than the buying price. So if it doesn't then I do not have to pay for any fee.Does sound a little odd. Just out of curiosity – do you mind sharing which lender this is?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Richard and Jamie,
I am with Bankwest now and just wondering if what I’m doing is right.
I have been told by the mortgage broker that i will not need to pay the fee for valuation suppose the value of my home is lesser than what I need to borrow. If it is more then the cost will be capitalize in the loan.
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