Release of Equity

[JohnMichael]

It's good to see you're thinking about this already. Definitely is a prudent move to take out the funds now and have them ready to snap up a good deal.

One of the primary means of getting a great property purchase is being able to commit and FAST - having those funds available means you can offer shorter settlement terms, larger deposits etc which can be used as a negotiating tool.

Very much a newbie question, but how does having a larger deposit increasing your bargaining power? Wouldn't the seller not care how much of the money is borrowed or not, just that they get paid? It seems to me that the borrowed funds are the buyers problem, not the sellers.

I understand how a shorter settlement is more attractive - getting paid quicker. But can't work out why a larger deposit is. Please excuse my green ness

EDIT - it occured to me that you were probably talking about the initial deposit you pay the seller, not the deposit to loan ratio with the bank. If so, please ignore my question!

 

[Peter_Tersteeg]

I think your main concern with this is you won't get a good rate on a $30k equity loan because it's too small. Easier to just use the $30k in the offset account as cash.

This does depend somewhat on the lender and the specific products being used, but in most cases lenders price on total lending, not on the individual sub-accounts. What lender and product are you using?

 

[Peter_Tersteeg]

Very much a newbie question, but how does having a larger deposit increasing your bargaining power? Wouldn't the seller not care how much of the money is borrowed or not, just that they get paid? It seems to me that the borrowed funds are the buyers problem, not the sellers.

I can put down a 10% deposit today, as opposed to $1,000 today and the balance of 10% in 3 weeks.

It's not really such a big difference in practice, but it does make the negotiation easier.

 

[Redom]

I can put down a 10% deposit today, as opposed to $1,000 today and the balance of 10% in 3 weeks.

It's not really such a big difference in practice, but it does make the negotiation easier.

Yep, signals the risk of the deal falling over are lower.

 

[Corey Batt]

Very much a newbie question, but how does having a larger deposit increasing your bargaining power? Wouldn't the seller not care how much of the money is borrowed or not, just that they get paid? It seems to me that the borrowed funds are the buyers problem, not the sellers.

I understand how a shorter settlement is more attractive - getting paid quicker. But can't work out why a larger deposit is. Please excuse my green ness

EDIT - it occured to me that you were probably talking about the initial deposit you pay the seller, not the deposit to loan ratio with the bank. If so, please ignore my question!

Correct - I was talking about in regards to placing down the initial deposit. This shows you're not just a tyre kicker with funds available to purchase. More pessimistically, an unconditional offer with a substantial deposit confirms to the agent that they're getting paid their commission no matter what.

For a lot of lower end investments $1000 deposits are absolutely fine, but you'll find when you're in a competitive market you want EVERY competitive edge you can get to work in your favour.