Using multiple properties' equity for single IP deposit

[tess85]

Hi all,

I am curious about how it would work if I use equity in multiple IPs to fund my next IP deposit.

For example:
IP1 - $80k equity
IP2 - $50k equity

Total equity - $130k

Let's suppose I wanted to buy an IP worth $650k, putting down 20% deposit ($130k).

How would one be able to "combine" the equity from the 2 different IPs (that are not cross-collateralised?)

Just trying to get my head around how it would work. I know I could always put down 10% deposit and pay LMI but still would like to know if it's possible to get away with not paying LMI.

Thanks!

Tess

 

[Corey Batt]

You would draw the equity from two separate equity releases. The funds can be then provided to the solicitor's trust account at the time of purchase.

There isn't any real need to have the deposit funds in one bank account/loan account.

 

[Jamie M]

Hi Tess

It's easy to do - and quite common.

Just need to carry out either a loan increase (or set up a separate loan) against each property. Those funds are then used to cover the deposit/costs on IP 3.

There's no need to cross up the properties either - all three could be with different banks and this could still be done.

Cheers

Jamie

 

[tess85]

Ah... thanks guys!

You mean, when it comes to logistics, I can present 2 cheques from 2 different loan accounts? For some reason I always thought I could only do it as 1 cheque as a lump sum!

Cool, good to know

 

[Corey Batt]

Ah... thanks guys!

You mean, when it comes to logistics, I can present 2 cheques from 2 different loan accounts? For some reason I always thought I could only do it as 1 cheque as a lump sum!

Cool, good to know

That's correct, just provide two cheques to your solicitor prior to settlement, they will draw new cheques for disbursement in any case.

Same with lenders requirements to show funds to complete, just show two statements showing each available funds balance to satisfy the lenders requirements.

 

[HLE]

Hi Tess,

As everyone has said, you would just need to do a loan increase on your existing loans.

The problem though is banks will not allow you to draw 100% of the equity from your properties. Quite often they only allow you to draw a maximum of up to 90% of the property value and in some rare cases 95% of the property value. Also if you were to draw above 80% of the property value you would incur LMI. Finally would also to need draw enough equity from your properties to also pay for stamp duty on your new investment, which would be about $26,000 for an investment property worth $650,000.

Hope this helps!