Changing Loan Limits

For the brokers and likely accountants, a friend of mine was telling me about how WBC allows him to easily change loan limits.

Is this actually possible? And if so what are the considerations and do all lenders allow this?

An example may be necessary:
Say you have your PPOR, loan balance is 400k but limit is 500k.
You then have a second split of 100k used for investment purposes.

Say you now want another 50k to invest. Can you reduce your PPOR loan limit to 450k and then increase your investment split limit to 150k?

So you are basically re-borrowing the money from your PPOR and turning it into an investment loan which in my/and his likely ignorance would still mean its deductible as an investment loan.

And also given it is simply re-shuffling loan limits then it should be straight forward as he stated?

 

Some loan products allow this - it's a master limit and can be useful for debt recycling. Macq, AMP and St G have versions of a similar thing.

 

Thanks @Jess Peletier
He is with WBC and said he did this previously and it was no issue at all, as in no new applications or anything, a quick and easy process with the bank.

 

Yep, with those products there's no new application required. They're mostly used by people in a massive x-coll mess, but used correctly they can be useful.

 

Jess mentioned the relevant lenders who have similar master limit products allowing many splits.

Some financial planners are big on them....setting up a "borrow to invest in shares" function.

 

Westpac have an 'easy increase' option. Within certain limits they'll increase the limit on a loan in a quick and easy process.

Sometimes however, the process isn't so quick and easy, it's significantly harder than a regular application as they introduce a large paperwork (vs electronic) application to it.

They're a bit ambiguous on the parameters between easy and hard. There's limits around the amount and how often. Personally I prefer to simply get a few payslips and rent statements. On balance it's easier.

 

So basically what he was saying is he asked them to reduce the limit on his PPOR loan and then increase the limit on his investment loan and "sometimes" they will allow this with a simple tick and flick?

 

WBC easily allows me to change limits on a commercial loan. I have a floating interest rate that is usually between 4.34 and 4.39 % on top of this is a line fee if I want to increase the limit the line fee is increased if I want to save money I can reduce the loan limit and reduce the line fee. Which makes the commercial loan about the same as my residential loans.