How Often Do You Get Bank Valuations?

[brisbane 04]

Hi,
I've been told by the bank that I've limited equity and at this point in time I'm unable to purchase any more properties. What's a reasonable amount of time to wait to get revaluations done by the bank. We have 8 properties. Cheers Martin

 

[baby blue eyes]

Looks like you need a broker. Plenty on the forum. Rolf is my broker, quite often he is the one telling me vale have increased. We also use more than one bank.

 

[Jamie M]

You could always obtain another valuation with a different bank - it might provide a different result. They're usually free to arrange via a broker.

Cheers

Jamie

 

[Rolf Latham]

Hi Martin

Limited equity is a variable concept.

I guess it depends on who is telling you, and what the other factors are such as that lenders serviceability and their policies.

With 8 Ips with the one lender (assumption) Id suggest that you are an unknowing victim of "concentration risk", meaning you have that much lending with the one bank they will give you really hot pricing, but every time you want a 10 k top up they need to value most of the portfolio and send your file off to a higher delegation decision maker.

While that sounds great, and the lenders/brokers make it sound like "phew, we have done you a real favour by working hard to get this done", most of the time they have you a major dis service. Remember in most cases, the lender wont tell you that you are "on the nose" until you are well entrenched and beyond their help moving fwd. Some more sensible ones will give you a warning, or certainly the banks credit will.


Wit 8 properties you also have the capacity to valuer shop , UNLESS you are at an LVR > 80 %, have lots of fixed loans, or are cross collaterised with all or most of your properties

Id start with getting the view of someone outside your current lender and see what the opinions are.

My gut feel says your lack of forward momentum on behalf of your lender is probably due more than just "equity"

ta
rolf

 

[brisbane 04]

Hi Rolf,
You must be psychic. All properties are with the one lender we have been able to negotiate with the bank on three properties for 4.59% fixed interest only for only 1 year. We are cross collatarised as we borrow all fees in regards to buying property eg stamp duty etc. Correct again in that every time we want to borrow more it gets sent upstairs for review. We know all the bank valuations due to recently visiting them to check out our borrowing capacity. Last valuations were done a year ago. Current LVR is right on 80%. Id like to think our momentum forward is purely equity we own our own house. We do have a LOC. We did do some bad investments which we are still paying back. We certainly have made mistakes that have cost us money but in the midst of that we have also made some good decisions. Again Rolf you must be psychic we have threatened to leave (NAB) a number of times but they have sweetened the pot to keep us. Including back paying us monies when they haven't performed their duties in a timely manner

 

[DaveM]

More likely the lender has reached thier exposure limit and wont lend more.

Go through your IP list and note which prob has the most equity based on current sales vals, then speak to a good broker (Corey Batt is mine) and refi it away to a new lender and carry on your merry way.

 

[brisbane 04]

Hi Dave,
Thanks for your reply. I didn't realize there was an exposure limit. I thought as long as I remained in the 80% LVR (my rule) and was able to demonstrate that I could repay the loans I would be right.
Cheers Martin

 

[Redom]

Hi Dave,
Thanks for your reply. I didn't realize there was an exposure limit. I thought as long as I remained in the 80% LVR (my rule) and was able to demonstrate that I could repay the loans I would be right.
Cheers Martin

Hmm you're likely to benefit largely by moving some of your loans to another bank - I suspect you'll be able to have equity to pull out. You'd need to keep your existing crossed loans with NAB at 80% (else you'll be up for some LMI.) Your servicing will also get a major boost by moving.

Also a 1 year fixed at 4.59% isn't extraordinary in today's lending market - its great for a major, but others are doing it too.

 

[ashao]

Hi Rolf,
We are cross collatarised as we borrow all fees in regards to buying property eg stamp duty etc.

why can't you topup the existing loan to get the 80%value increase out to pay down payment and fees for the new purchase?

what's the difference of "top up and split" loan and cross collatarisation loan? pros and cons?

i.e. IP A purchase price 400k, LVR80%(loan 320k), current market value 600k.
If you want to buy a new IP B say also 600k, how shall we structure your loan?

scenario 1cross collatarisation) 600k+600k=1.2mil, finance 80& of total value, that's a loan of 960k, pay down the owing of IP A 320k, 960k-320k=640k. so you have 640k to buy the IP B and pay its fees, which are tax deductable.

scenario 2: (without cross collatarisation) you go to the existing lender to topup the value increase part of IP A. 600kx80%=480K. pay down the existing owing of IP A 320k,which gives you 160k left to reinvest (as 20% downpayment of IP B and fees). Then separately, finance 80% of IP B on its own as the security. Is the 160k from IP A also tax deductable?

What's the pros and cons if scenario 2?

 

[DaveM]

why can't you topup the existing loan to get the 80%value increase out to pay down payment and fees for the new purchase?

If you have hit a servicing wall with the lender then they wont let you top up regardless of availability of equity.

I had this with RAMS who were my first lender (good for self employed like me). Tonnes of equity thanks to my western sydney exposure, but max topup 32k due to servicing.

Only have 2 RAMS loans left now, did some refi and pulled out enough to buy 5 more IP's + PPOR with lenders who had a more generous servicing model.

Planning lender order is a very important thing, a good broker can map out your plans and advise what to put with different lenders when.

 

[Rolf Latham]

Hi Rolf,
You must be psychic.

not so much

the odds work very much in my favour with stuff like this.

I would even have had a stab at NAB as well........................

Certain "vital signs" are usually symptoms of predictable underlying causes.

ta

rolf

 

[Allgood]

An interesting read, Rolf.
Thanks.
Allgood

 

[Redom]

why can't you topup the existing loan to get the 80%value increase out to pay down payment and fees for the new purchase?

what's the difference of "top up and split" loan and cross collatarisation loan? pros and cons?

i.e. IP A purchase price 400k, LVR80%(loan 320k), current market value 600k.
If you want to buy a new IP B say also 600k, how shall we structure your loan?

scenario 1cross collatarisation) 600k+600k=1.2mil, finance 80& of total value, that's a loan of 960k, pay down the owing of IP A 320k, 960k-320k=640k. so you have 640k to buy the IP B and pay its fees, which are tax deductable.

scenario 2: (without cross collatarisation) you go to the existing lender to topup the value increase part of IP A. 600kx80%=480K. pay down the existing owing of IP A 320k,which gives you 160k left to reinvest (as 20% downpayment of IP B and fees). Then separately, finance 80% of IP B on its own as the security. Is the 160k from IP A also tax deductable?

What's the pros and cons if scenario 2?

Heya,

Best to 'top up' your existing 320k loan to 480k. Release the 160k extra into a second 'split' loan. This is important to not contaminate deductible and non deductible debt.

Then use the 160k as a deposit for your next IP. It should cover 20% deposit + transaction costs for a 600k IP.

Essentially you're borrowing 105% for the new IP purchase. Doing it the above way avoids 'cross securitising' your loans. This will allow you to better release equity in future, because the banks wont need to value BOTH your assets to release equity.

A top up split loan process means the banks will be able to value each of your two properties individually, if theres equity in one of them, you'll be able to release it independently of whats happened to your other asset (assuming servicing is OK).

Other situations where it benefits too.

Cheers,
Redom