Hi
Just a thought and a question…
I have a number of wrapped properties all financed at 90% LVR. Since I’ve bought these properties, all have increased significantly in value, eg 1 property I purchased in September 2002 at $80k with a $72k loan has now increased in ‘value’ to at least $100k
My question is (as per my finance applications) what is the LVR for this particular property; is it 90% ($72k/$80k) or is it 72% ($72k/$100k)?
Using traditional buy and hold strategies, the answer is obviously 72%, but seeing that these are wrapped properties, I’m not too sure about who ‘owns’ this increased growth as far as finance applications go.
Any thoughts would be appreciated
David U
Hi David,
My thoughts would be that the asset is still yours until the last payment is made on the wrapped property. So on paper the LVR calculation would be exactly the same as if it was a buy and hold property.
Obviously though, the wrappees have the rights to the benefit of the increased equity, which i am sure that they are happy about (and you cannot access the extra equity for deposit + costs on another property)
Cheers and happy investing,
Nathan.[
]Thanks Nathan
I was looking at this purely from a sense of filling out finance application forms. I guess what I am saying is although I have currently taken out all 90% loans, my ‘real’ LTV ratio is below 80%.
I was just wondering how finance institutions and in particular mortgage insurers viewed this particular scenario.?
Thanks
David U
Hey David,
If you got an independent valuation what would it be worth ??? That is the true value of the property that the bank will care about. Just remember though that if you start getting into ideas of refinancing those deals up then you are starting to skate on thin ice.
For Loan applications and therefore more money all you can use is fair market value. This may also indicate an option for your owner to potentiall cash you out and you go on to the next deal ???Enjoy
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An independent valuation would be in excess of $100k which is based on recent sales for similar properties in the same street.
True, my wrappees could cash me out at any point, but I guess ultimately that is their call.
Refinancing was/is not a consideration as it is illegal for myself to refinance a property once it has been wrapped in Victoria in any case.
I am just trying to work out what figure to put down in my assets column in future loan applications; ie purchase price or ‘current market value’?
Cheers
David U
Hi David,
The quick and easy answer is that on a finance application the current market value of your assets is the only relevant one.
Cheers, and happy investing
Nathan[
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