A situation was going through my head the other day. A purely hypothetical one.....
What happens if the following -
1) Significant rising in CG value of an IP (ie like the recent boom - doubling in 5 years)
2) Draw equity out of IP back up to 90% LVR - for whatever reason
3) Situation goes pear shaped and bank forecloses on the IP
Now in this situation the bank will try to recover its loan. But at the same time a sale event would create a CG tax event which could be a significant liability over the property....
So (assuming the person involved is bankrupt) who gets paid first - the Govt or the bank???
It may not be that relevant - but when there is significant lending against equity as happens these days, I'm sure it is realistic situation....
Cheers,
TJ
What happens if the following -
1) Significant rising in CG value of an IP (ie like the recent boom - doubling in 5 years)
2) Draw equity out of IP back up to 90% LVR - for whatever reason
3) Situation goes pear shaped and bank forecloses on the IP
Now in this situation the bank will try to recover its loan. But at the same time a sale event would create a CG tax event which could be a significant liability over the property....
So (assuming the person involved is bankrupt) who gets paid first - the Govt or the bank???
It may not be that relevant - but when there is significant lending against equity as happens these days, I'm sure it is realistic situation....
Cheers,
TJ
