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Aggregate Loan

Discussion in 'Property Finance' started by Big Will, 19th Jun, 2015.

  1. Big Will

    Big Will Well-Known Member

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    Heard this term last night and didn't know what it was.

    Can someone please explain and pro/cons, it would be much appreciated.
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Often used as well as Consolidation / Consolidated loan.

    Taking two or more loans and refinancing so that the terms and rates result in more favourable cashflows for the borrower. However these cashflows do not mean cost has been reduced.

    example :

    $20,000 card debt at 21.99% (say $600pm)
    $30,000 personal loan (car) at 9.66% (say $1136pm)
    $100K PPOR loan at 4.49% (Say $700pm)
    Total monthly cashflows = $2436

    Refinance all the above to the PPOR so new loan is $150K at 4.49 IO. Repays are now $561 pm

    Annual cashflow savings around $22,500

    Just near in mind the term of repayment of the smaller loans may now be 30 years and total term interest may blowout.
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Paul has indicated one use of the term.

    In other circles 'aggregate' might refer to the total borrowing with a single lender. The term is often used to determine what rates you pay or what discounts you enjoy.

    As a very broad example, if you borrow less than $250k you'll get a 0.6% discount, but more than $250k, you might get a discount of 0.8% off the standard variable rate. If you borrow more than $500k, you'd get a 0.9% discount, and then a 1.0% discount for borrowing more than $750k.

    Sometimes you'll find that if you have 4 properties with $200k loans each, the lender will only give you the 0.5% discount. If they're pricing on the AGGREGATE amount, they'd give you a 1.0% discount given in total you've borrowed $800k across all 4 properties. Keep in mind that this is only if it's all with the same lender.
     
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  4. Big Will

    Big Will Well-Known Member

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    Thanks Peter that is what I think the guy was referring to, would the bank usually want to xcol those loans?
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Plenty of banks would want to xcol, but you definitely don't have to (nor should you).

    The annoying thing about having several small loans is you'll usually start getting a small discount, but the next loan would get larger discounts and so on. The problem is the banks don't automatically go back to the previous loans to rectify this. It's not a big deal to fix, but just remember it needs to be actively dealt with, the banks won't give you a free (or even cheap) lunch if they can help it. :)