Advantages of Revaluing After Reno, But Not Using the Equity

Hi guys,

I bought a property last year and did some minor cosmetic renovations. It is now rented out...

Are there any advantages in having the property revalued, but without the intention of doing anything with the additional equity in the short-term? :confused: Or should I just not bother, until the time comes when I am ready to refinance in order to buy another IP...

For the next year or so, I need to focus on building a cash reserve, and I dont want to over-extend...
 
Yep as Rolf said...only do the revalue when you need the money...because the bank will do ANOTHER revalue anyway when the time comes.

If you got a offset account, it would be beneficial to revalue and cash out a bit of equity, say 5% and have the money sitting in your offset; so when the times comes you have some money ready and is not waiting on the bank to approve the equity release ( which can take up to 2-3weeks!!)



Regards
Michael
 
Is it worth reval after reno's? Yes, so you can borrow more.

Put this recently borrowed money in your offset account for a rainy day, cause when it rains, banks dont like giving out umbrellas.

If you dont trust yourself with such a scheme, the answer is No, there is no value in reval after reno.

The only other reason it might be worthwhile is to see if you did your sums correctly when you did the due diligence on the reno, but you could probably get this info from your managing agent (has the market rent gone up?) and a selling agents estimate.
 
If you got a offset account, it would be beneficial to revalue and cash out a bit of equity, say 5% and have the money sitting in your offset; so when the times comes you have some money ready and is not waiting on the bank to approve the equity release ( which can take up to 2-3weeks!!)

Regards
Michael

i am in a similar situation to the OP.

i wanted to do this with an IP. I called my bank today to discuss the possibility of releasing some equity in my IP and putting this released equity into my offset.. well, the bank didn´t really like this idea. they said in order to get a top-up loan or refinance, I need to have a ´purpose´ of what the funds will be used for.. i just want to have the released equity sitting in my offset, so that when I want to buy my next IP, i can use this cash for the deposit. (i,e it might be a few months before I find my new IP).

It seems they would be happy to refinance the IP if I already had a a signed contract for my next IP.. but just to refinance with the money sitting in my offset.. well, seems like this can´t be done.

anyone have similar experiences, or am I going about this the wrong way? am i asking the bank the wrong questions?

just to note, this is a recent IP (bought 12 months ago). However, I did a reno and prices have increased, however, there isn´t a lot of equity in this property at the moment. only around 40K. I know, itś nothing much at all.. but it seems this bank doesn´t want to do top-up or refinance exiting property without u already having chosen your next IP, and have a signed contract as proof. :(
 
Your just asking the wrong questions. Also not all bank allow cash out, some are very strict some are not.

Which bank is it??

Regards
Michael
 
It may be silly but I like to reval and sit post reno. The advantage of that is if values fall, you have a locked in valuation. This is where I like LOC or offset as the guys have suggested.
However - discipline is required and if that doesn't work, a fixed interest offset can help. Its about maximising capital and limiting downside. So if you cant be disciplined, don't do it.
 
Your just asking the wrong questions. Also not all bank allow cash out, some are very strict some are not.

Which bank is it??

Regards
Michael

Suncorp :(

do you know which banks allow cash out ?

what questions should I be asking :confused:
 
Put this recently borrowed money in your offset account for a rainy day, cause when it rains, banks dont like giving out umbrellas.

Thanks everyone for the advice...

If I do re-finance and place in an offset, the interest on this new loan amount isn't tax deductible is it? Shouldnt that be a concern? Would it be better then to not refinance until Im ready to purchase another IP, as it might be more tax advantageous?
 
Thanks everyone for the advice...

If I do re-finance and place in an offset, the interest on this new loan amount isn't tax deductible is it? Shouldnt that be a concern? Would it be better then to not refinance until Im ready to purchase another IP, as it might be more tax advantageous?

That's right Michael, and im glad you ask the question.
The way around this is to split the loan for the 5% and have another linked offset connecting it;

If your with ANZ and you have the break free package this would be VERY simple to do and they allow up to 5 splits per account + no questions ask as long as LVR under 80% and the cash out is less then 5% of the value.

So it depends what product your on and which lender. If your lender doesn't allow it ...all good..just wait it out till you find a place (hopefully the are quick with the cash out)

Regards
Michael
 
Suncorp :(

do you know which banks allow cash out ?

what questions should I be asking :confused:

Umm suncorp is ok with cashout, i never had a problem with them,
You just have to make sure 3 conditions that suncorp has;

- LVR under 80%
- Cash out MAX at 10% of loan amount OR max $50k, which ever is less ( proof of funds required + control)
- When you cash out less then 5% of loan amount or less then 30k, most of the time proof of funds not required ; just a acceptable reason/uses.


** feel free to correct me on the above conditons, as this is from memory; and havnt done a suncorp cash out for 3 month now :eek:

Regards
Michael
 
just a acceptable reason/uses.

Regards
Michael

Thanks Mick.

What would be an example of an acceptable reason/use? I said I just want the extra cash out to sit in my offset account, so that I have it ready to use as a deposit for my next IP (which may be in a few month). they didn´t like this idea.

The only other reason I can think of is to renovate the property. would this be a valid reason?

would a cash out/top up be considered a new loan application? is this a full refinance with credit checks, etc, or is it a much more simpler process.

sorry for the noob questions. i just found suncorp not very cooperative.
 
Your purpose is fine, - to invest into the next IP. But the amount your asking may not be right...How much were you asking for?? and what's your current loan amount?

You may find if you ask another branch staff or give the customer service center a call, and you meet the 5% limit they would still ask for a reason but wont ask for proof + no controls of funds.

In terms of paper work; it's just a simple top up form.

Suncorp arnt to bad for cash out, just have to work within their limits...another banks like ING are a nightmare- need a full application !!
The best i find are the majors - NAB, CBA, ANZ.

Regards
Michael
 
Thanks everyone for the advice...

If I do re-finance and place in an offset, the interest on this new loan amount isn't tax deductible is it? Shouldnt that be a concern? Would it be better then to not refinance until Im ready to purchase another IP, as it might be more tax advantageous?

yes, the interest on the loan isnt tax deductable until you use the borrowed funds for an income producing investment. However, while they are in your offset waiting for such an opportunity, your not paying interest in any case.

the advantages of doing it now, is that you can move quickly when an opportunity arises, you may miss further credit policy tightening, or bank processing dealys that can get in the way of purchases.
The main disadvantage is if you havent got the disipline to sit on a large amount of cash, or if having the cash sitting makes you more prone to invest in less than ideal assets. (I was a case study of this phenomena as the market crashed during the GFC. it was a great time to buy, but the folowing weeks and months proved an even better time, and I hadnt kept any powder dry).
 
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