Discussion around Maximum number of loan splits for debtr recycling

Curious what the common bank lenders allow in terms of number of loan splits on a new refinance application, is there a maximum?
What about the non-banks and others?

The reason I ask is because it's a useful way to be able to re-use a non-deductible PPOR loan for various investments without having to go back to the bank and re-apply each time you want to make an investment. The reason why we don't want to reapply: Not having a job, using business/investment/crypto income that is not accepted by the banks after retiring from work.

Ideally we'd like to buy a PPOR with a mortgage, but structure it so we can pay it off slowly instead of selling our investments up front. To do this I'm thinking some splits which would ideally be something like this:
-Loan1: $500k
-Loan2 & 3: $250k each
-Loan 4-N: $100k each eg 10x$100k loans.

As we pay off each $100k loan on our PPOR, we can then draw that out again to invest and it then becomes a tax deductible loan.

What are my chances of getting a lender to do a PPOR loan with over 10 splits (assuming we satisfy all application requirements at the time of applying)?

Another question - those who have "retired", semi-retired or switched to investing/business - how did you finalise all your mortgage situations before stepping out of the banks guidelines into the world of being non-credit worthy?

ps yes I know I need to talk to a broker, but we're not implementing this until maybe next year or later, at the moment it's theoretical so I'm just here for a fun discussion.

 

Extremely high with the right lenders, impossible with the wrong ones

assume every loan is your last one, carefully consider ability to split, to swap security and perhaps do various strategies every 2 or 3 years while you can such as extending loan terms back to 30 years, changing lenders, extending IO periods etc

 

Thanks Terry
Regarding extending IO periods - has the strictness of assessment bought in after the "responsible lending" changes started to relax yet? From what I've seen the lenders I'm with still do a full serviceability assessment even collecting evidence documents for income. I miss the tick and flick days

 

still a reassessment so probably best done in conjunction with extending the loan term back to 30 years.

 

4 loan splits is easily achievable with most lenders.

 

I'm with CBA. I have 11 splits ranging from about 220k to 25k secured against the one property. All P&I, some fixed some variable, some offset - but important for upcoming future investment plans.

I think the lender was was a bit exasperated by my request and despite my explanation for debt recycling, I'm not sure they understood....

 

The people you deal with at the bank are very unlikely to understand debt recycling. Most people don't even understand how negative gearing works.

 

[QUOTE="DanW, post: 1148019, member:

Another question - those who have "retired", semi-retired or switched to investing/business - how did you finalise all your mortgage situations before stepping out of the banks guidelines into the world of being non-credit worthy?

ps yes I know I need to talk to a broker, but we're not implementing this until maybe next year or later, at the moment it's theoretical so I'm just here for a fun discussion.[/QUOTE]
Not sure what you mean by "finalise" and being "noncredit worthy". This structure would probably be good for what I do. Use security substition to get HIGH RETURNS on EQUITY. I buy properties for perhaps 40% value of a current property, that give a similiar rent, so double the yield, then invest the other half of the funds in companies which also net much more in yeild/and or growth than the disposed of property. A letter from my accountant is used to verify income . Some of my properties are X colateralized so if I have 5 cossesd properties with 25% CG as I have plenty of equity I just sell a property nothing changes with the loan have to pay none or very little from proceeds as LVR is still lower than at origin. I buy a higher yeilding one which increases income take a loan out on it and buy shares to further increases income or help purchase next property.

 

Rolf we have had push back on that lately with AMP

 

AMP's probably your best bet, go for 10 year Master Limit from the get go if you can.
Curious to know why you're waiting and not doing it now?

You have very different definition of the word 'fun' compared to me

 

what is a "master limit" ?

 

It is a facility which allows you to constantly change loans around, splitting, combining etc as long as it is all under the size limit there would be no reassessment

Strategy: Using AMP’s Master Facility to Debt Recycle Strategy: Using AMP’s Master Facility to Debt Recycle

 

Thanks that's an interesting method with security substitution. I've already sold down half my properties though and not planning on any more. Though I could maybe do it for a PPOR by swapping one of my IPs, the timing issue makes it more difficult.

By non credit worthy I mean not working a "job". I have income from a crypto business that the banks accept zero of, as well as property trust distributions and dividends that the banks only accept a small percentage of. On top of that I have trading income that supplements it but technically it's capital gains. I have more than enough to service my debt, but it doesn't pass their calculators because it's not accepted as being real the same way a salary is.

To finalise is to set myself up with the ideal/maximum mortgages and maximum interest only periods before retiring from the safety of a salary.

Agree with what others have said that the bank won't understand debt recycling. They would understand even less the importance of maximising debt and hard assets during periods of money printing and inflation so I probably will keep quiet about the true reasons for doing this.

 

Thanks, Master limit could be a good option.

I would be constantly converting OO splits to Investment splits so I'd hope they don't need to re-assess.. Or if they don't know/care what the purpose of each split is.

Not sure about servicing yet, it would depend on my final salary and how much interest rate buffer they add after the RBA makes their hikes.