Property Growth and Equity

Viewing 7 posts - 1 through 7 (of 7 total)

twinkle87
Member
@twinkle87
Join Date: 2011
Post Count: 4
January 31, 2011 - 4:10 am
Hi
I new to property investing and I would like if I could get few things explained.
I have a property which is worth 350K the loan amount is 270K ( the property was built new) and there is no equity on it. I dont understand how can that be, because if I decide to sell it I would make 80K or about in proft??
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
January 31, 2011 - 5:00 am
Hi Twinkle
Welcome to the forum.
How much was the property worth when you purchased it?
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
twinkle87
Member
@twinkle87
Join Date: 2011
Post Count: 4
January 31, 2011 - 5:12 am
Hi Jamie
It was a new built house and new land – so im guessing it was worth as much as I borrowed….
Thanks for you help
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
January 31, 2011 - 5:24 am
Hi again twinkle
Equity is simply the properties value minus the loan amount – therefore you have $80k in equity. Who said you didn’t have any equity?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
eyekew
Member
@eyekew
Join Date: 2011
Post Count: 5
January 31, 2011 - 5:39 am
Hi Twinkle
this Quick formula may help to work out your Equity –
If you want to Hold onto the Property as security – you can access the ' Equity ' in the properety ( if there is any )
if you sell your property then the diferance is " profit"   or ' capital gain "
in your case to work out your Equity – ( As a Guide only )
Purchase price / Build price $300,00.00
Your deposit (10%)                $30,000.00
Bank Loan      (90%)                  $270,000
Market Value of your Property today is $350,00.00   – less 20% of Market value (Banks Intrest in the property )
= $280,000 less what you Owe / loan amount $270,000.00    = $10,000 Equity in the property
and effectivly " Nil Equity " from a banks prespective
But if you Sell at today's market value – you will make a Capital Gain / Profit of $80,000.00 .
Hope this explains it a bit better for you .
Cheers
Ken
twinkle87
Member
@twinkle87
Join Date: 2011
Post Count: 4
February 1, 2011 - 12:29 am
Thank you all so much for helping me.
Jamie I was told by my bank that it had no equity but looking at what Ken has explianed thats probably why.
Thank you again
Cheers
mia
luke86
Participant
@luke86
Join Date: 2010
Post Count: 470
February 1, 2011 - 1:47 am
Yes, I think the bank meant no available equity for you to access with a Line of Credt.
Some banks do allow a Line of Credit with total borrowings up to 90% of the value- but you will be up for LMI (probably about $3000-$4000 in your case).
Cheers,
Luke