Hi,
If I own 4 Units on 1 single title and convert them to 4 separate titles, how is my loan affected?
Does the bank then take posession of the 4 titles instead of the 1?
If the valuation comes back very favourable after strata-titling can I take back perhaps 1 title if my LVR was low enough and they only required 3 as security?
Strata-titling a encumbered block
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
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Re: Strata-titling a encumbered block
Hi Robert,
When the block of units is subdivided your bank will need to be notified of and consent to the subdivision. When they do this you can request that they revalue the units and release one or more of them as security, if they are no longer required. As a general rule as long as the loan amount remains below 80% of the value of the remaining security then they will accept your request to release the other units from their mortgage.
This rule may vary depending on if you have a low doc loan or normal loan and also depending on the lender you are with. We have been through this process with many similar situations such as subdivision of large blocks of land, duplexes and small blocks of units. Generally the valuation comes in approximately 20% higher for 4 units on separate titles when compared to 4 units together on one title. Again this varies depending on the location & nature of the units.
When the block of units is subdivided your bank will need to be notified of and consent to the subdivision. When they do this you can request that they revalue the units and release one or more of them as security, if they are no longer required. As a general rule as long as the loan amount remains below 80% of the value of the remaining security then they will accept your request to release the other units from their mortgage.
This rule may vary depending on if you have a low doc loan or normal loan and also depending on the lender you are with. We have been through this process with many similar situations such as subdivision of large blocks of land, duplexes and small blocks of units. Generally the valuation comes in approximately 20% higher for 4 units on separate titles when compared to 4 units together on one title. Again this varies depending on the location & nature of the units.