What should I believe?

[jaspn]

When we got our PPOR revalued to extract equity, HomeSide did a comprehensive walk through inspection. That came back at a conservative $305k.

At the same time as talking to the broker, we were also in discussions with CBA. We had the Personal Lender come to our home to talk through a number of options. We were asked to provide an estimate on what our PPOR is now worth. We put down $320k. The finance preapproval then came back to us with $320k as the accepted value, meaning $15k more equity than HomeSide! I queried the Personal Lender on if this value has to be assessed to ensure its accuracy. He verbally assured me that I can buy with confidence in my target price range using this equity as he "put the numbers into the system and at present doesn't require a valuation". How solid is this? Should I take his word for it?

What I want to avoid is making an offer on an IP only to be knocked back if CBA turn around at the last minute and decide to do a full valuation, potentially lowering our equity.

 

[S.T]

Why don't you take out the split equity loan now? Then you know exactly how much you can spend, assuming you're going to use it for a deposit on the new place.

 

[Marty McDonald]

Why don't you take out the split equity loan now? Then you know exactly how much you can spend, assuming you're going to use it for a deposit on the new place.

^^^^
I think you can take his word for it but why would you when you can do this. You also make sure you are not cross collateralised this way too.

 

[Peter_Tersteeg]

HomeSide sent a valuer. CBA ran an RP Data report. Both will lend against their result. If mortgage insurance is required then CBA will likely get a full valuation done, otherwise they'll rely on the existing report.

Also if LMI is required, the cost of LMI will eat up most of your equity gain with CBA.

As to which is more accurate, in theory you'd say it was the lender who sent someone to actually look at the property over the one who ran some statistics. The reality is that we see a lot of cases where valuers are being very conservative in their estimates.

$320 is probably more accurate in good sales conditions. $305k is probably closer if you need a quick sale.


Interesting observation about online reports. ANZ can use several data houses for their modeled estimates. Last week we had a report done by RP Data via ANZ which a lousy result. I appealed it and they ran it through Residex, which came back 20% higher.

 

[Aaron_C]

What is the LVR? The CBA guy is correct - they can use desktop valuations for 80% or under whereas Homeside uses kerbsides for under 80% and full vals for over 80%.

 

[Shahin_Afarin]

You have gone about it the wrong way in hindsight.

Broker should have done a few different types of upfront vals (full, kerbside, modelled estimate, etc). From then you could have way up equity, policy, interest rate, lender and then proceeded with a lender.

To answer your question - yes you can use the CBA valuation which was an RP Data system val.

Ps. I agree with Pete's comment about the ANZ modelled estimates - they are generally very generous.

 

[Shahin_Afarin]

On a completely different point - its a shame homeside remove their no val policy on 80% LVR purchases

 

[Aaron_C]

On a completely different point - its a shame homeside remove their no val policy on 80% LVR purchases

Yes it is....must've been a reason for it though. I did take advantage of it while it was on though haha!

 

[jaspn]

Wouldn't taking out the loan now mean paying interest before holding the property? We probably couldn't afford to do that for very long if at all.

I have stated to the lender that I do not want x-coll loans, and that I need to be able to draw out equity from the IP in the future for further investments. How do I know he has set it all up correctly?

Here's some figures:
- Current Value (CBA) $320,000
- Current Value (HomeSite) $305,000
- Current Loan Amount: $216,000 (at the time it was purchased with 20% deposit to avoid LMI)
- Looking at an IP purchase price of up to $250k if possible.

The bank has got back to me just now and has said the loan will be effectively two loans - one against our PPOR and the other against the IP. That sounds right yeah?

 

[PJCollins]

if it is not crossed tied then it should be three loans. 1. against ppor (current loan), 2. deposit and cost loan (for want of a better word- against your property) and 3. new loan against inv property.

someone may be able to correct me if i have it wrong

 

[Rolf Latham]

id say simply get in in writing and then act in reliance thereof

If the CBA then goes yuck you have some come back.

Or as suggested do the loans now in such a way you dont pay for what you dont use.


ta

rolf

 

[Aaron_C]

Wouldn't taking out the loan now mean paying interest before holding the property? We probably couldn't afford to do that for very long if at all.

No. The excess loan funds you just put it in redraw so you don't pay extra.

I have stated to the lender that I do not want x-coll loans, and that I need to be able to draw out equity from the IP in the future for further investments. How do I know he has set it all up correctly?

The only way to know for sure is to check the loan documents. If you have a loan document with two loan splits and 2 securities listed then you are cross collateralised...at which point most people say 'I cbf' and sign it anyway. As a broker I always put separate applications so there is 0% chance of a x-coll.

The bank has got back to me just now and has said the loan will be effectively two loans - one against our PPOR and the other against the IP. That sounds right yeah?

With a non-x-coll situation it will be two loans yes.

 

[Brady]

As mentioned get the equity loan set up straight away

 

[jaspn]

Finally, an update.

Bank has come back to me with two new approved loans (so three loans in total as suggested above).

- $34k, secured against PPOR (They can have this ready to go for when we find the IP)
- $227k + LMI $4895 for a PP of up to $250k

The second loan is subject to valuation of the IP. They can lend us up to 90% of the valuation of the IP.

 

[Brady]

Finally, an update.

Bank has come back to me with two new approved loans (so three loans in total as suggested above).

- $34k, secured against PPOR (They can have this ready to go for when we find the IP)
- $227k + LMI $4895 for a PP of up to $250k

The second loan is subject to valuation of the IP. They can lend us up to 90% of the valuation of the IP.

If you are happy with the equity loan against the PPOR, get the funds now... Things change, banks change minds, policy changes, valuations expire.

Get the money put it into offset or redraw, make sure you don't mix this purpose.

Then that money is ready to go...

 

[Rolf Latham]

If you are happy with the equity loan against the PPOR, get the funds now... Things change, banks change minds, policy changes, valuations expire.

Very valuable advice

ta
rolf

 

[jaspn]

I might also add that the variable rate for these two new loans are 5.34% for 3 years, no establishment fee, no monthly fee, jumping to 5.69% (comparison 5.83%) after three years. At least that's how I understand it.

 

[Brady]

I might also add that the variable rate for these two new loans are 5.34% for 3 years, no establishment fee, no monthly fee, jumping to 5.69% (comparison 5.83%) after three years. At least that's how I understand it.

Sounds like economiser home loans, be aware that these don't have an offset account available, it has a redraw facility that charges you $50 per redraw.

I'm not sure if you mentioned what the LVR would be, but if its under 90% you should be able to negotiate to get the rates that are available for new customers. 0.80% discount off the SVR so as of today 5.35%... This would have a annual $375 package fee, but you can unlimited loans. This way you have the flexibly of offset and allows you to complete further purchases without fees (likely giving you further discount across your portfolio). And allows you to fix all or a portion at a lower rate without the monthly fees.

The loan option you have gone with is good, but I don't often find it the best suited for those looking to build a portfolio wanting flexibility.