Do I need to change my PPOR loan?

Hi. I'm planning to get my first IP in a few months and not sure if my existing PPOR P&I loan will be an issue.

When I bought my PPOR a few years ago (first home), I told my mortgage broker that I wanted to get a few IPs in the near future. He put me on an ING P&I loan and said we'd review the loan when I was ready to buy an IP. Last year I fixed 50% of the loan to lock in low interest rate. This was after I asked him if this would have any impact on getting a future investment loan. He said no and recommended fixing it for 3 years to get the lowest fixed rate, which I did.

Just told the accountant about this, and he said that fixing the loan can make it harder to get an investment loan because you have to use the bank's valuer. He's no expert but suggested talking to another broker because apparently ING aren't good for investment loans.

Is this correct? And if I need to change the loan, what sort of costs (apart from break costs) should I watch out for? Don't want to overreact but it makes me wonder what else has the broker not told me about. Any input would be appreciated. Thanks.

 

If you need equity from the PPOR it may be an issue - getting the val is no worries but if ING will give cash out for an IP may be more problematic. Get a broker to go over it for you to see if servicing and LVR is okay.

 

Best not to take lending advice from an accountant. It is not correct. ING are great for investment loans in certain situations.

You could, as Jess suggests, just borrow further against ING and use this as deposit with the funds for the one mainly coming from another lender - or even ING.

 

@Jess Peletier and @Terry_w - thanks for your comments. I'm seeing my broker this week to go through options with him so see what he says. I'm not a finance person and I've come across some dishonest people so it's sometimes hard to tell if people actually have a valid point or talking out of their a***s

 

Run it past us here if you're unsure

 

Your accountants comments do have some merit behind them TBH.
What he means is that when you come to extract equity, the fact you have locked in ING means that you are somewhat now reliant on their valuer, meaning you get 1 shot.

If you hadn't locked it in then you would be able to value shop and then accept the higher valuation.

So if for example ING came back at 500k but you also got ANZ who came back at 550k then to get the extra equity available from the ANZ Val would mean breaking the fixed portion which would incur some costs. Could be minimal could be substantial.

What we don't know though is if you paid LMI originally? If so then refinancing would not usually be wise so locking in a low rate with ING could have been a smart move.

 

I think your accountant is doing a good job. He has identified an opportunity, gone through the pros and cons and then recommended you see a mortgage broker for detailed product advice.

 

ING one of the most conservative in serviceability terms. This can be restrictive. I also agree that locking in restricts your options of valuers, you're essentially with ING for better or worse.

This could be a restriction or it may not be a problem at all. You might have a lot more equity than your plans require and thus a conservative valuation won't be a problem. You may have a strong income and serviceability for an equity release will be easy.

There's not enough information to make any real comment about the appropriateness of the loan structures at this point. ING are quite competitive in rates. The accountant has done well to identify the valuation risk but it's not possible to say if it's valid.

 

@Peter_Tersteeg @albanga @Ross Forrester thanks for your comments. I don't have LMI because I borrowed 80%. My accountant was talking about his own situation, so it's helpful to get outside explanations of how ING approaches things. My broker will probably say something similar, but great to get different perspectives here and feel a bit more informed - or at least know what I don't know and should be asking about...

 

ING are generally fine with equity releases when the LVR is sub 80

Yes - their servicing isn't that fantastic but the same can be said for most lenders these days.

ING will treat the application as a variation so takes a bit longer than a normal application. Also request a rate discount on the equity release since you have an existing loan already- they won't just take this into account without your broker flagging it with them.

Cheers

Jamie