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From: John Lewen
I have a question about equity that I'd like answering. I talked to a financial advisor recently as part of the process towards the purchase of a property. I have $30000 deposit and we used $170000 as the loan amount (ie a $200000 property - disregarding costs) in our discussions. When the subject of equity came up, I assumed that the $30000 I put in to the property would be equity I could draw against (eg, possible line of credit use), as it would be secured by the $200000 value of the property. However, he explained that his financial institution did not regard that as equity that could be drawn against. He spun some figures around that basically said that if I defaulted on the loan it would cost them more than the money I had in the property to dispose of it and get their money back. Is this correct? Is it the usual practice for financial institutions or was I being spun a line of bull? It would seem to me that at least some of that $30000 of mine would be equity straight away and therefore available for me to draw against. Could someone please help me out here? Any other information that would be useful to me in this context would also be appreciated.
Cheers
John Lewen
I have a question about equity that I'd like answering. I talked to a financial advisor recently as part of the process towards the purchase of a property. I have $30000 deposit and we used $170000 as the loan amount (ie a $200000 property - disregarding costs) in our discussions. When the subject of equity came up, I assumed that the $30000 I put in to the property would be equity I could draw against (eg, possible line of credit use), as it would be secured by the $200000 value of the property. However, he explained that his financial institution did not regard that as equity that could be drawn against. He spun some figures around that basically said that if I defaulted on the loan it would cost them more than the money I had in the property to dispose of it and get their money back. Is this correct? Is it the usual practice for financial institutions or was I being spun a line of bull? It would seem to me that at least some of that $30000 of mine would be equity straight away and therefore available for me to draw against. Could someone please help me out here? Any other information that would be useful to me in this context would also be appreciated.
Cheers
John Lewen
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