purpose of equity withdrawal

[Beijos2]

Hi

I want to consider withdrawing some equity to use as a deposit for a 2nd IP.

Will the bank look at this differently than say if I said.i.wanted to do renovations? Ie does the reason matter, should i be honest and say its to hold in my offset until whenever i want to use?is there a time limit i have to.draw down this equity?

Is it possible to.get this totally split from my current loan so as for tax reasons? Ie its like a separate loan acount?

I do use my offset for my PPOR as a transaction acct so not sure if that would muddle everything. basically i want to keep it til i need it, in offset it woildnt.be costing me anything.

Ppor
Value 365k
Loan 270k

Original loan was around 90% with lmi capitalised

Thankyou for any feedback

 

[tobe]

yes, the purpose will color the banks thinking.
should you be honest? yes.
yes, its possible with most lenders to get a 'split' or seperate loan.

How long ago did you do this 90% loan? If values havent increased, it might all be a moot point, most lenders have a max 90% lvr for refinances....

 

[Jamie M]

Hello

If you carry out an equity release at or below 80% LVR - then the purpose of a future investment property purchase is usually fine. They'll probably want to see that the deal services on their in-house lender calculator once you've included the next IP's loan and anticipated rent.

However, if you go above 80% - some lenders have funny quirks. Some may want to see a contract of sale as proof that the funds are being released for an IP purchase - others will happily go up to 90% LVR based on the brokers notes and others won't be keen on doing it at all.

Same goes for renovations. At or below 80% and some notes from your broker/banker should suffice. Above 80% and they may want to see some quotes for the renos.

And yes - it's possible to set up a separate loan split for IP purposes and that's what you should be doing if the equity you're releasing is against a PPOR.

Cheers

Jamie

 

[Beijos2]

Thanks
I bought it for 319k late 2011
My house is one of many identical ones in neighbouring estates so i can follow comparable sales quite easily
I am with bankwest for this loan which is fairly anmoying as the said i have to do a full app before they will value.

Is this heading in the direction that i need to wait until i have more equity?

Thankyou

 

[Jamie M]

Given that you've already paid LMI with BWA it makes sense to stick with them for any equity release above 80% - otherwise you'll be paying a new LMI premium with a new lender.

The problem is that you may go to the effort of submitting an application and receiving a hit to your credit file to find out that the valuation didn't stack up and you can't proceed with the equity release.

Ordering an upfront valuation via another lender will give you an idea of what the property is worth - but that valuation won't be considered by BWA.

Cheers

Jamie

 

[Edmond Dantes]

Ordering an upfront valuation via another lender will give you an idea of what the property is worth - but that valuation won't be considered by BWA.

Isn't it possible to do the upfront val with the same lender?

 

[Bigtone]

Thanks
I bought it for 319k late 2011
My house is one of many identical ones in neighbouring estates so i can follow comparable sales quite easily
I am with bankwest for this loan which is fairly anmoying as the said i have to do a full app before they will value.

Is this heading in the direction that i need to wait until i have more equity?

Thankyou

Plenty of brokers on Somersoft could order you a free upfront val with Bankwest, ask one of them to do it for you and you might as well give them the deal so you are set-up properly on the loan structure

 

[datto]

The problem is that you may go to the effort of submitting an application and receiving a hit to your credit file to find out that the valuation didn't stack up and you can't proceed with the equity release.

Is this really a problem? So credit providers don't like applicants having too many "hits" on their file?

 

[Beijos2]

Thanks i was not aware a broker could org a val through BW on my behalf

I did use a broker for this loan but did not use his services for my IP and dont want to go back to him

Would this mean a new broker would not want to do this application because they would get no commission? i dont mind doing it myself just prefer to avoid that hassle

 

[Jamie M]

Isn't it possible to do the upfront val with the same lender?

Some brokers might have access to upfront vals with them - I personally avoid them (BWA) as much as possible.

They have certain niches which are ok - but I don't send them a lot of business. I've got a BWA in the pipeline at the moment because they were a last resort...it's a painful process.

Cheers

Jamie

 

[Jamie M]

Is this really a problem? So credit providers don't like applicants having too many "hits" on their file?

Correct.

Cheers

Jamie

 

[Beijos2]

Is this really a problem? So credit providers don't like applicants having too many "hits" on their file?

I heard this as well, like if someone has a lot of hits it can show desperation or risk etc

 

[Terry_w]

Hi

I want to consider withdrawing some equity to use as a deposit for a 2nd IP.

Will the bank look at this differently than say if I said.i.wanted to do renovations? Ie does the reason matter, should i be honest and say its to hold in my offset until whenever i want to use?is there a time limit i have to.draw down this equity?

Is it possible to.get this totally split from my current loan so as for tax reasons? Ie its like a separate loan acount?

I do use my offset for my PPOR as a transaction acct so not sure if that would muddle everything. basically i want to keep it til i need it, in offset it woildnt.be costing me anything.

Ppor
Value 365k
Loan 270k

Original loan was around 90% with lmi capitalised

Thankyou for any feedback

Interest deductibility won't be maintained

 

[Beijos2]

Interest deductibility won't be maintained

But the purpose of the loan is investment

Do you mean i cant keep it in an offset against my PPOR and should instead keep it in a new account and just pay interest on it even when i havent paid for a deposit woth it yet?

 

[Terry_w]

But the purpose of the loan is investment

Do you mean i cant keep it in an offset against my PPOR and should instead keep it in a new account and just pay interest on it even when i havent paid for a deposit woth it yet?

You will be borrowing to invest in a savings account, mixing with non borrowed funds and then later investing in an investment.

Why not just use a LOC?

 

[Beijos2]

Because i thought this would be a much simpler application process

I guess i could just keep it in a separate account

Or else cant i keep it in.the offset and not tax deduct it initially and then only start tax deducting it once ive actually spent it?

 

[Terry_w]

I guess i could just keep it in a separate account

Or else cant i keep it in.the offset and not tax deduct it initially and then only start tax deducting it once ive actually spent it?

I guess you could, but this wouldn't maintain deductibility. There is no connection between the borrowing and investing.

See the Domjan case.

 

[Aaron_C]

It's quite simple. Get a loan increase, but leave the loan increase in the loan redraw. If the product requires you to fully draw out the loan, then ask the bank to put it into another bank account, then transfer all the funds directly back into the loan again which you can access via redraw. Done.

 

[Aaron_C]

Isn't it possible to do the upfront val with the same lender?

Not with Bankwest unless you are a super-duper broker who puts many loans to them.....which I (and others like Jamie et al) do not.

 

[Rolf Latham]

Is this really a problem? So credit providers don't like applicants having too many "hits" on their file?

Very much an issue with loans where the Loan to value ratio is above 80, and super critical above 90

Most lenders have a black box scoring system that can get u into a real mess

ta
rolf