I am wanting to apply for a loan(low doc), and need 20% deposit ($62K)to do a development. I only have around 7%($21K) deposit, and so am $43K short. I own 2 properties(i.e have a mortgage on 2 properties), and If I had my 2 properties revalued, I think I should have around $162K in equity above what I am still owing on them. I am not clear on if I can access the equity in these to use as a part deposit, or of its even possible? Could anyone clarify how this might be possible and explain in simple terms? Many thanks if you can help.
Low Doc loans are only available, usually, up to a max of 80% LVR. So the available equity to use will be:
Value x 80% – existing loan.However, these days of tightening credit policies, most low doc lenders have restricted cash out on low doc loans to a max of around $20k. But they still may be able to make the funds available for the new purchase if they can control where the funds go. ie they may insist of paying the funds directly into the new purchase some how.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry is correct and i think this provides some of the answers to the question i raised in the finance section.
PMI QBE are not even providing cover for lodoc refinance so that will count out all those lenders who use them as their mortgage insurer. Gemworth as Terry has pointed out limit the amount of cash out and also require BAS so again you would be limited here.
Also if it is construction loan or you are purchasing in anything but your own personal name several lenders will not do these anymore under lodoc
Might have to look at cross collateralising the securities and biting the bullet on time.
Richard Taylor | Australia's leading private lender
l_b29265 wrote:I am wanting to apply for a loan(low doc), and need 20% deposit ($62K)to do a development. I only have around 7%($21K) deposit, and so am $43K short. I own 2 properties(i.e have a mortgage on 2 properties), and If I had my 2 properties revalued, I think I should have around $162K in equity above what I am still owing on them. I am not clear on if I can access the equity in these to use as a part deposit, or of its even possible? Could anyone clarify how this might be possible and explain in simple terms? Many thanks if you can help.When you say equity what you need to do is look at how much you owe and the actual value so as an example
2 properties values at say 340,000 (perfuma method (guess)
loan owing 178,000
What you need to look at is 80% LVR
80% * 340,000 = 272,000
this is most likely what the bank will lend up to as an equity loan.
So 272,000 – 178,000 = $94,000 that you could borrow as an equity loan.
You can get a line of credit loan for $94,000 in this example if you meet servicing requirements.
(also you need to be able to service the development loan requirements as well)So releasing equity via a line of credit loan gives you asset separation from the development loan (different bank)
( this is not manna from heaven – you have borrowed this money) in this example
You can use the two properties as security for the development loan but the risk of losing all your assets if the development falls over are higher. High risk (advantage you do not borrow from equity)
In this dangerous case all your assets are valued and LVR is worked out on total assets value / total loan
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