All Topics / Help Needed! / Debt and equity – Wrap specific

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  • Profile photo of tomdickersontomdickerson
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    @tomdickerson
    Join Date: 2004
    Post Count: 3
    November 14, 2004 - 11:01 am

    Hi There,

    I am looking into wraps and having completed “The Wrap Kit” i’m respectful of the need to use “20% down”.

    In the event that you brought a property first (say 10% down), and created a 80/20 dept to equity through renovations, and then wrapped it, would lenders consider this the same as using 20% down, when looking at your capital structure for your next mortgage?

    Tom D

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    November 16, 2004 - 3:03 am

    Hi Tom

    I’m not really sure what you mean, but you cannot use a wrapped property as additional security. ie you cannot cross securitise a wrapped property. So you will need a 20% cash deposit for the next one. (Or you could use another unwrapped property as additional security).

    Terryw
    Discover Home Loans
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    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of tomdickersontomdickerson
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    @tomdickerson
    Join Date: 2004
    Post Count: 3
    November 28, 2004 - 2:28 am

    Thanks Terry,

    What Here is a working example of what I mean.

    I purchase a property at 80k (market rate) with a 10% deposit.
    I renovate the property so that it’s worth 100k. I now have 30% equity in the deal.
    At this point if I was to wrap the property, would lenders (for future mortgages) consider this the same as if I had used a 30% deposit in the first place, based on it’s new value?

    Tom D

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    November 29, 2004 - 3:18 am

    Hi Tom

    You cannot cross securistise a wrapped property, so your equity level would not really matter to lenders unless you were refinancing htis property. If you were refinancing, then they would give you a loan based on current value, $100,000 in your example.

    Terryw
    Discover Home Loans
    Mortgage Broker
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of tomdickersontomdickerson
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    @tomdickerson
    Join Date: 2004
    Post Count: 3
    January 16, 2005 - 8:11 am

    Thanks for that Terry – Much appreciated :)

    Tom D

    Profile photo of Robbie BRobbie B
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    @robbie-b
    Join Date: 2004
    Post Count: 2,493
    January 16, 2005 - 11:11 am

    You CAN use a wrap property to get funds for a new purchase. That is a big problem with shonky wrappers. Also, I don’t know why you would cross-COLLATERALISE in any situation.

    _____________________________________________
    [withstupid]
    The forumite formally known as Big Rob

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