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Please help me understand an equity loan

Discussion in 'Real Estate' started by kerrie, 27th Mar, 2015.

  1. kerrie

    kerrie New Member

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    Hi after moving to western sydney a few years ago, i want to move back closer to my parents in south west sydney.

    I called the bank yesterday to get an idea of what I need to do, but he pretty much just confused me :confused:

    My house is worth approx 400k and my morgage is about 225k, Im looking to get a house worth about the same over in western sydney or maybe a little bit more. I have no other debts, credit cards etc. I have 1 dependant and am single.

    The bank yesterday said I would need to sell my current home and get a new house that way... but I remember reading something a while ago on equity loans.

    I earn enough now but its not classified as employed to get a home loan, so will be heading back into fulltime employment expecting to earn at least 50k a year, Im confident in getting employment.

    When i go to the St Georges how much can i borrow calculator I enter all the details like I have no house loan anymore and its says I can borrow 344k so with the difference from the sale of my house I can get my new house.

    But is it possible to keep my current house and rent it out I could probably get about 380pw for it and then buy another house to live in using a equity loan.

    Now here is my problem in understanding... not really sure how the bank calculates how much they can lend me vs my salary and the equity in my current home. Can anyone help me? :cool:
     
  2. Terryw

    Terryw Well-Known Member

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    your house is worth $400k
    80% = $320k
    Existing loan is $225k
    That means potential LOC of $95,000

    This $95,000 loan can be used for the deposit on the new house.

    Say the new hosue was worth $400,000
    You could borrow 80% from ANZ with a loan of $320k and the remaining 20% used from the LOC with St George with the LOC covering the stamp duty etc too.

    But you must still demonstrate to the bank you can service - ie your income and rental income needs to be high enough.
     
  3. kerrie

    kerrie New Member

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    Thanks so much Terry for replying to me.

    So does that mean my borrowing capacity needs to be $400k, or $400k minus LOC of 95k which is 305k?
     
  4. Terryw

    Terryw Well-Known Member

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    total loan -$400k in first instance.
     
  5. kerrie

    kerrie New Member

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    Is that 400k on top on my existing loan of 225k. So in total I need borrowing capacity of 625k?
     
  6. Terryw

    Terryw Well-Known Member

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    Yes yo will need a borrowing capacity of the total of all loans.
     
  7. kerrie

    kerrie New Member

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    Thanks Terry.
     
  8. Albertus Waldron

    Albertus Waldron Member

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    Income - NCCP

    Hi Kerrie,

    I think a point that was missed is in your statement " I earn enough now but its not classified as employed to get a home loan, so will be heading back into fulltime employment expecting to earn at least 50k a year, Im confident in getting employment."

    Lenders now, no matter how much equity must be able to demonstrate that the loan they gave you did not put you into hardship and you could reasonable afford the loan payments over the life of the loan, e.g. 30 years.

    So while you have equity, without a steady source of income the lender could not give you a new loan. You would at least need to complete any probationary period which can be between 3and 6 months.

    I have this problem with people who are headhunted for a better position interstate on a regular basis and often the only way to get the loan approved is to get the probationary period removed from the employment contract.

    Hope this helps