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  • seals139
    Participant
    @seals139
    Join Date: 2006
    Post Count: 16

    I know what it is but just have a question is someone can help clear up with me.

    Say i buy a 100k house and after 2 years i have paid 20,000 off it and it has gone up 20,000.
    I have a debt of 80,000 and property worth 120,000. Now have 40,000 of equity.
    OK now if i pull that 40,000 of equity and use it what happens to my loan do the repayments go up and i now have to pay off a 120,000 loan?
    Or does the bank wait till i sell it and just take there money out if it then?
    How does it work.

    Thanks seals.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Pulling equity out = increasing your loan. So repayments will go up.

    But bear in mind that you cannot generally pull out all the equity, but only up to around 80% of the new value (or 90-95% if you wish to pay LMI). So in your example, new value is $120,000. 80% of this is $96,000, less your current loan of $80,000 = 16,000 in extra equity that is accessible.

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

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