Equity release with conditions normal?

[zxtc]

Hi All

Currently refinancing to release some equity and a better rate to purchase our next property with a new lender.

We have asked for a high 80% equity release from our current two properties.
They have come back with to be an ethical lender they need evidence of where the extra funds will be used in my case a pre approval for our next loan which only gives us 3 months to find our next property.

Is this the norm? I thought with an equity release into an offset it was your money to do as you wanted with and when?

Thanks Mick

 

[Aaron_C]

Depends on bank policy Mick. Some lenders (particularly conservative ones) will need to verify where ALL the funds are going - regardless of LVR. Most lenders just give you the cash no questions asked except a stated purpose. Who is the lender?

 

[zxtc]

It's with teachers mutual bank.
Apparently its more that the LMI provider needs this to satisfy their criteria.

Not really a huge issue just we thought we could take our time for our next purchase.
The money I thought would just sit in the offset.

Thanks Mick

 

[tobe]

try 'we wish to have borrowed funds available to be able to purchase an investment, either property or shares'. For most lenders and LMI providers this is enough when the LVR is under 80%.

 

[zxtc]

Hi Tobe

I guess we are going for around 88% LVR so I guess they are looking at it more closely.
They said if we do 80% no issues.

 

[tobe]

have a chat to a broker. credit unions are usually more coservative. They may make you wait until you have a contract for the new purchase before they give you this money.

Alternatively ask the lending officer for an example of what sort of evidence they need. If they are on planet earth they should be able to give you a clue.

 

[Jamie M]

Hi Tobe

I guess we are going for around 88% LVR so I guess they are looking at it more closely.
They said if we do 80% no issues.

Yep, that's the issue.

It's in LMI territory so their cashout policy is going to be stricter.

If it were below 80% most lenders won't have restrictions (I can speak for teachers mutal though - I don't deal with them).

Even at 90% some lenders don't have restrictions.

Cheers

Jamie

 

[Rolf Latham]

Hi Tobe

I guess we are going for around 88% LVR so I guess they are looking at it more closely.
They said if we do 80% no issues.

TCU have great rates, but the product isnt fot for purpose for many investors becaue of issues such as this which only come up "when they come up"

Many other lenders have similar issues

ta
rolf

 

[Banvard]

I have two loans with TMB but only re-valued to 80%, so no issues.

 

[Aaron_C]

Well yes with the majority of lenders an unsubstantiated cash out at 90% is going to be hard as the guys have already said.

 

[Rolf Latham]

I have two loans with TMB but only re-valued to 80%, so no issues.

Only a few lenders that I know of do have issues with Cash out at 80 % so I would expect that

ta
rolf

 

[Colin Rice]

Is this the norm? I thought with an equity release into an offset it was your money to do as you wanted with and when?

Make sure it is a dedicated offset as lenders will disburse into your personal offset thus causing the loan to be contaminated due to mixing personal and investment funds.

There are a few lenders that will do 90% lends as cash out if you do a prepproval application for the future purchase along side the actual application. That way their backsides are covered if you put it all on black and cry poor.

Some lenders or should state assessors require a pre approval for future purchase even if an 80% lend. Very painful!

 

[zxtc]

Thanks guys for all your help

We have gone ahead with the pre approval so just waiting for them to ok it or not.

Cheers Mick