I’m new to investing, I have my first property valued at 368k and a mortgage of 297k, rented out at 310 pw, I want to get serious about property investment and have been reading all the magazines and books, but one thing none of them are actually all that clear about is how exactly I can use my equity as a deposit. If someone could explain this is simple english I would be very greatfull. Would it also make any difference if my house is in New Zealand and I want to purchase my next in Australia?
Kyron Gosse
http://www.kyrongosse.comBuild Wealth, Create Freedom, Do Awesome
Hi Roadhog
Yes it is fairly simple all you would do is refinance the current property to 90% of the valuation (In your case $368,000 x 90% = $331,200 ) and then use the difference between the new loan and your existing loan of $297,000 as the deposit and sufficient to cover acqusition costs.
Split the loans so you know whiich loan relates to which property and this also helps if one loan is not tax deductible.
Hope this helps.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Most people only draw the equity out to 80%. If you go higher than 80% (say 90%) then you often have to pay lenders mortgage insurance. Most investors try to avoid this.
Currently your LVR (loan to value ratio) is only 80.7%.
Basically how it works is you increase the loan with the bank. Because the value of the property is higher the bank lets you borrow more money. You take out an equity loan on your current property and you receive this in cash.
You can then take that cash and use it as a deposit for anther property.
Does that make sense?
Ryan McLean
CashFlow Investor
Read my blog post – 10 Killer Ways To Buy More PropertyRyan McLean | On Property
http://onproperty.com.au
Email MeI was talking to my brother yesterday, and he has about 7 properties which most of, if not all are cross securitzed, all with the same lender, he wanted to get another loan (a bigger sized one than his other ones) and the banks are starting to say no. he says he has a good deposit and not sure what the problem is, i told him its bad that he has them all with the same bank and that they are all cross securitsed, he doesnt believe me. for my 3rd and 4th property, i’m cross securitizing them, but then the 5th and 6th, i’m making them stand alone. what are your guys thoughts?
Hi,
roadhog260 – The previous 2 posters have answered your quetion about equity release; regarding the NZ property; you will nee to speak to your bank about that…as not all bank will allow a equity release for o/s purchase- I know a lot of Australian bank will; not 100% sure about NZ banks…
shoooshoo- Cross is not the end of the world, i personally crossed my 2nd IP purchase…but later down the track i un-crossed it 3 years later . Rule of thumb DO NOT CROSS if you “dont need too”, 90% of deals don’t require a cross at all, no matter what the banks tell you….the another 10 % a cross may be required for the finance/deal to go through….so the question you must ask yourself or your broker “How can i place this deal without crossing” .
Typical situations where a cross may be required:
1. Commercial property
2. Your current bank will not allow a equity release ( to many release in the last 12 month , LVR conditions, security address)
3. Valuation – Value could not be determined ( X-crossing not alwasy required here)Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hi Shooshoo
I hate to say i think you are right and your brother maybe wrong.
Lenders often have a maximum loan exposure amount of around $1.5M per client so he may have met the threshold.
I own 40 properties and at one stage had around 25 separate loans all standalone.
Personally i am not a great lover of X ing your loans because there always tends to be issues maybe not initially but eventually down the track.
I think if i was him i would get a good Broker on the job and get an assessment of his overall position.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks guys that really helped me out. Basically I am reborrowing any money I have already paid off the principal
Do I need to get it revalued in order to gain the equity or does it go off what the original loan was.
In the case of them not releasing it over seas, if I can’t, I figure if i can just restructure the loan into an overdraft type mortgage account and then just remove the equity from there. Would that be possible?Kyron Gosse
http://www.kyrongosse.comBuild Wealth, Create Freedom, Do Awesome
Yes funds you have paid off the principal if it was a P & I loan or alternatively the equity created by the increase in capital growth.
Most lenders are going to want the property revalued.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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