Automated Valuation Report

[ddan]

Hi...

I asked my mortgage broker to organise a valuation on my property

He asked me what I feel its worth and I said about $580K. The broker just came back to me with a 'CBA Automated Valuation Report', which states $580K as the estimated value. Im very happy with that!!

In the report it says 'loan purpose: top up'. My question regarding this, is 'top up' the same as drawing on equity from your property? or is that different? Can someone pls explain this tom me?

Also the broker said if I take this top-up and use it for a loan which has an LVR of <=80% then the bank will proceed without a further inspection(proper valuation). Is this normal practice? Should I go with it? Im scared that if a valuer comes out it will come in at around $530K and I will lose out.

Ideally I want LVR of 90% or 95%, but if I request that, they may then do a proper valuation and I fear it will come in less.

thanks

 

[Peter_Tersteeg]

A top up is an increase on your existing loan, in this case as a means to accessing equity.

The CBA tends to use RP Data reports (which is what they've given you in a CBA format) for valuations where the loan would be up to 80% of the property value. If you want to increase the loan to more than 80%, then there is a high probability that the CBA will order a full valuation of the property (a valuer will visit and write a more detailed report).

It's not uncommon for a full valuation to come back lower than the quickie version. The CBA will give a full valuation priority over the automated report.

 

[ddan]

The CBA will give a full valuation priority over the automated report.

what do you mean by priority?

Say my existing owing is 450K and the cba valuation is 580K, does this mean I can 'top up' to 580K (borrow a further 130K) or is it 90% of 580K? so top up to 522K (borrow a further 72K)?

 

[Shahin_Afarin]

What is the purpose of the top up? There is a huge difference between topping up your existing loan and drawing upon the equity as a separate loan account. This may have significant tax implications. Tread very careful.

Also the broker should have noted $600,000 for the valuation amount in case in could come back higher.

Bank can accept AVR for loans over 80%.

 

[Aaron_C]

what do you mean by priority?

If there are two valuations - one AVR and one full - the bank will lend on the full valuation.

Say my existing owing is 450K and the cba valuation is 580K, does this mean I can 'top up' to 580K (borrow a further 130K) or is it 90% of 580K? so top up to 522K (borrow a further 72K)?

If the CBA valuation is $580,000 (AVR), then you can borrow 80% of that in total ($464,000). Minus existing loan of $450,000 means net increase of $14,000.

 

[Peter_Tersteeg]

what do you mean by priority?

Say my existing owing is 450K and the cba valuation is 580K, does this mean I can 'top up' to 580K (borrow a further 130K) or is it 90% of 580K? so top up to 522K (borrow a further 72K)?

I mean that if the automated valueation report is $580k, then you submit an application and they do a full valuation, they'll ignore the automated valuation report regardless if which is higher or lower.

If the full valuation result is $530k, then that's what they'll lend against. You can't get a do-over and ask them to lend against the automated valuation.

 

[ddan]

What is the purpose of the top up? There is a huge difference between topping up your existing loan and drawing upon the equity as a separate loan account. This may have significant tax implications. Tread very careful.

Also the broker should have noted $600,000 for the valuation amount in case in could come back higher.

Bank can accept AVR for loans over 80%.

I want to use the equity in my ppor to buy my first IP. Can you pls highlight some differences between the two? and what sort of tax implications?
To be fair I gave him a price range of 560-580 and he must have submitted the higher one.

 

[Shahin_Afarin]

By simply increasing the current loan amount which is/has been used for the PPOR you are contaminating the tax deductibility. It is best to keep the loan accounts separate.

Loan A/C 1 = PPOR Loan
Loan A/C 2 = IP Deposit Loan

Both loans are against the PPOR but the purposes of the loans vary and are clearly distinguishable.

 

[ddan]

ok got it, understand now...thanks!

 

[ddan]

ok yep so best to keep them separate, thanks!

 

[Shahin_Afarin]

Definitely - always keep them separate and remember not to cross securitise the new IP with the current PPOR.

 

[Shahin_Afarin]

Also set up an offset against the PPOR and not the IP. Ensure that the all your income (even the rent from the IP) goes straight into this offset.

 

[Aaron_C]

Looks like your broker is doing a good job so far, keep it up!