Equity formula

[molly1a]

Can I ask if you purchase investment and you do it as a standalone loan we use 30k equity that is sitting in an account for deposit
house cost say 250k the 30k may help go towards deposit and LMI costs etc we use our cash to do cosmetic Reno we then get it revalued for profit
Say the house gets revalued for 300k
How do you work out the equity gain or can I ask what formula do you use to work this out
Thanks

 

[Tinkler]

The equity gain will be your original 30k plus the 50k increase on the Val.
So gross equity goes from 30k to 80k. Keep in mind the Bank will only use 80% of the gross value as security for more finance

 

[Peter_Tersteeg]

Actual equity = Property value - Money owed

To work out how much equity you've got that you can use:
Usable equity = (Property value x 80%) - Money owed

In most cases you can actually borrow 90% if you're willing to pay some mortgage insurance which increases your usable equity:
Usable equity = (Property value x 90%) - Money owed

 

[Singo]

Usable equity = (Property value x LVR) - Money Owed

The quick rough calculation is (Value added x LVR). So if you add 50k value and your LVR is at 80%, the usable equity is 50k X 80% = 40K. Above 80% LVR, LMI costs have to be considered as well.

 

[molly1a]

Please check my figures

Ok I can't believe how long it has taken me to finally get this equation of equity eg below
This next purchase will be stand alone loan not xcoll
Buy 260k we pay 5% deposit our cash pay stamp duty legals our cash
Then have a loan of 247k plus LMI approx total say 256k
We do cosmetic Reno our cash
Revalue house eg 310k
310k - 256k = 54k
Equity gain 54k* 80% = 43,200
So we can then use 43,200 to buy again
Have I got this correct
Thanks to all that have made this clearer

 

[HD_ACE]

Ok I can't believe how long it has taken me to finally get this equation of equity eg below
This next purchase will be stand alone loan not xcoll
Buy 260k we pay 5% deposit our cash pay stamp duty legals our cash
Then have a loan of 247k plus LMI approx total say 256k
We do cosmetic Reno our cash
Revalue house eg 310k
310k - 256k = 54k
Equity gain 54k* 80% = 43,200
So we can then use 43,200 to buy again
Have I got this correct
Thanks to all that have made this clearer

No has to be 80% of value minus loan amout equalls equity available for a 80%lvr.

310 x .8 =248 so at your current loan your over 82% lvr so at a 90% lvr it would be 23k to use for next purchase and lmi maybe able to be credited and used again.

Cheers