Finance

[WebBoard]

From: Mike .


Equity Loan
From: GC
Date: 02 Jan 2001
Time: 10:46:18

Hi All,

Being new to this game as compared to most of the experts on this forum I am currently looking at buying an investment property and many more to come. I already have a house to which I am thinking of using the equity to purchase the IP.

In this situation what will happen if I take out a loan using the equity of my current house, and after purchasing the IP decide to sell my original house? Will this effect the loan since it is based on the equity of my home?

Thanks for all your help GC

 

[WebBoard]

Anna

Reply: 1
From: Mike .


Re: Equity Loan
From: Anna
Date: 03 Jan 2001
Time: 08:33:05

Yes, it will effect the loan but there is a simple solution. When you sell your home have your investment property revalued at this time and if your loan is less than 80% of the valuation you are fine as the IP will be able to be 100% secured against itself. If the loan is greater than 80% of the valuation then just pay off the difference when you get the money fom the sale of your house.

Hope that makes sense - Anna

 

[WebBoard]

GC

Reply: 1.1
From: Mike .


Re: Equity Loan
From: GC
Date: 05 Jan 2001
Time: 12:05:01

Thanks Anna,

Just quickly what do you mean by "self secured". Please excuse my ignorance.

 

[WebBoard]

Anna

Reply: 1.1.1
From: Mike .


Re: Equity Loan
From: Anna
Date: 05 Jan 2001
Time: 14:57:15

By self secured I mean that the loan is 80% or less of the valuation and therefore in the banks eyes the property can stand alone and does not require further security or a cash injection.

For example at the time of purchase lets imagine that your new IP cost $100, 000 and you secured $26, 000 (20% depost and costs against your home). 5 years later your IP has increased in value to $135, 000 and your loan of $106, 000 is only 78% of your the new valuation - below the magical 80%. If you are a little short you could perhaps inject a little money from the sale of your house if needbe. Hope I have made myself clearer. I am presumig that will will have an interest only loan.