using equity
- Thread starter arms
- Start date
Hi Arms
How much of your equity you can use will depend on the loan to value ratio that the lender is prepared to loan you and the value of the properties that you now hold. eg
Say your three properties are worth 1,000,000 and your current loans are $700,000 (leaving you $300,000 equity) If the bank is willing to loan you 80% you would have an extra $100,000 ($1,000,000 x 80% = $800,000 less current loans $700,000 leaves $100,000) you could use for a deposit and costs on another house. Obviously if the bank or other lending institute wanted a different loan to value (LVR) ratio this would change the amount you have to invest.
I would recommend talking to a good mortgage broker who understands investment property to advise you on how to structure your current loans to be able to use the most equity.
Silas
How much of your equity you can use will depend on the loan to value ratio that the lender is prepared to loan you and the value of the properties that you now hold. eg
Say your three properties are worth 1,000,000 and your current loans are $700,000 (leaving you $300,000 equity) If the bank is willing to loan you 80% you would have an extra $100,000 ($1,000,000 x 80% = $800,000 less current loans $700,000 leaves $100,000) you could use for a deposit and costs on another house. Obviously if the bank or other lending institute wanted a different loan to value (LVR) ratio this would change the amount you have to invest.
I would recommend talking to a good mortgage broker who understands investment property to advise you on how to structure your current loans to be able to use the most equity.
Silas
What is Equity?
.
I am yet to expereince this "Equity" however I know one day I will
.
Never the less
.
However Silas has probably summed it up. Depending on the LVR that your bank will allow you depends on how much equity you can access. This equity will then be used as deposits for your next purchase, therefore increasing the repayments on your current investments.
.
I am yet to expereince this "Equity" however I know one day I will
.
Never the less
.
However Silas has probably summed it up. Depending on the LVR that your bank will allow you depends on how much equity you can access. This equity will then be used as deposits for your next purchase, therefore increasing the repayments on your current investments.
Hi Arms
Silas has provided half an answer but the main consideration is to ensure that the loans are not cross collaralised as other wise it will be the lender calling the tune and not you when you want to go again.
I have just this second received an email from a new client who has 8 properties all with CBA and wants to access some equity and CBA have told them to sell some of the properties first and then come back. What a great answer to client looking at moving forward in welath creation.
Unfortunately many of the lenders do not understand investment loan structuring and merely believe it is a tool to grab as much security as possible for the beenfit and let you the client pay for it.
Well i must confess that is not the case and you the client is the most important person in a brokers eyes.
Loans structured correctly will enable you to carry on accessing equity and subject serviceability will mean you can keep on adding IP to your portfolio.
Rome was built in a day but if the correct foundations had not been laid then it would have not lasted so long.
By the way SE Qld is god great garden isnt it but dont let the Southerners know.
Silas has provided half an answer but the main consideration is to ensure that the loans are not cross collaralised as other wise it will be the lender calling the tune and not you when you want to go again.
I have just this second received an email from a new client who has 8 properties all with CBA and wants to access some equity and CBA have told them to sell some of the properties first and then come back. What a great answer to client looking at moving forward in welath creation.
Unfortunately many of the lenders do not understand investment loan structuring and merely believe it is a tool to grab as much security as possible for the beenfit and let you the client pay for it.
Well i must confess that is not the case and you the client is the most important person in a brokers eyes.
Loans structured correctly will enable you to carry on accessing equity and subject serviceability will mean you can keep on adding IP to your portfolio.
Rome was built in a day but if the correct foundations had not been laid then it would have not lasted so long.
By the way SE Qld is god great garden isnt it but dont let the Southerners know.
G'day arms,
These MB's have the knowledge to make things work for you. Go have a meaningful chat with one or two of them....
Regards,
In short, talk to a good Mortgage Broker. There are several around here (check the sigs). If I were you, I'd start by PMing QLDS007 who has already answered your post.
These MB's have the knowledge to make things work for you. Go have a meaningful chat with one or two of them....
Regards,
I have 2 simple questions...
- How does the bank decide on LVR ratio? Is it based on your specific situation/the type of loan/market conditions etc?
- If previously you only had power to borrow $700-$800k (in your example it would therefore mean you have borrowed the max amount) what happens when you use the equity for a deposit? Ie. does the bank lend you more? How does this work?
Thanks!
Hi lenojd
LVR is based on the banks available product suite as well as other factors such as the value of the prpoerty and the loan amount.
Many lenders do not offer a line of credit over 80% so you would only be able to access 80% of the valuation of the property if you required an LOC. Others will go to 90 - 95% LVR.
If you want to borrow over a given amount some lenders will want to reduce their borrowing such as > $1 Million might want to limit you to 70% for example.
Usually when you are accessing the equity in an existing property for deposit for another property a further loan will be taken on the new security itself. Unless the limit on your borrowing was because of a serviceability problem then accessing your equity and going again will have no bearing on the matter.
LVR is based on the banks available product suite as well as other factors such as the value of the prpoerty and the loan amount.
Many lenders do not offer a line of credit over 80% so you would only be able to access 80% of the valuation of the property if you required an LOC. Others will go to 90 - 95% LVR.
If you want to borrow over a given amount some lenders will want to reduce their borrowing such as > $1 Million might want to limit you to 70% for example.
Usually when you are accessing the equity in an existing property for deposit for another property a further loan will be taken on the new security itself. Unless the limit on your borrowing was because of a serviceability problem then accessing your equity and going again will have no bearing on the matter.
Hi Lenojd
In the example the assumption is that the properties have increased in value or you have paid down some of the loan which means you now have some equity that you can use for another deposit.
Every product varies with different requirements. Usually if you able to borrow more than 80% you will need mortgage insurance. There are many products out there each with specific requirements a good mortgage broker who understands investment property should be able to help you determine the best product for your circumstances,
Silas
In the example the assumption is that the properties have increased in value or you have paid down some of the loan which means you now have some equity that you can use for another deposit.
Every product varies with different requirements. Usually if you able to borrow more than 80% you will need mortgage insurance. There are many products out there each with specific requirements a good mortgage broker who understands investment property should be able to help you determine the best product for your circumstances,
Silas
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