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Does fixing limit refinancing/accessing equity?

Discussion in 'Property Finance' started by Bran, 23rd Jun, 2015.

  1. Bran

    Bran Well-Known Member

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    I think the title says it all.

    If I fix rates, can I still draw down on equity (split loan) in the fixed-period time?

    Cheers

    B
     
  2. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Fixing does stop you from accessing equity from the property but if you get a poor valuation or you can service the additional debt anymore before the lender has changed their policies and servicing calculations and then you want to refinance you can't without paying break fees for the fixed component.
     
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi Bran

    Agree with Shahin - fixing doesn't automatically preclude you from releasing equity. It just means that you're restricted to using the current lender for the equity release as refinancing to another bank could be costly.

    On another note - if you're considering fixing a loan, and if it's a PPOR debt, look at keeping some of it variable so you can still link up an offset and take advantage of flexible features that aren't often associated with fixed rate loans.

    Cheers

    Jamie
     
  4. Redom

    Redom Mortgage Broker Business Member

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    Yes - but you lose flexibility. Flexibility increases chances of releasing funds (opens other banks to the equation) and can get you more $$$ (better vals).
     
  5. bonanzawealth

    bonanzawealth Well-Known Member

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    Whilst we're on these, I'd like to ask slightly relevant topic.I like the certainty of fixed but I do want to access few bit of my equity when property price does go up.

    if I do split... 80% 3 year fixed and 20% 1 year fixed
    when the 1 year fixed period is up, it should revert to variable, right?
    can I then do top up on the 20% bit when the property price hypothetically goes up?
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Fixing doesn't stop you from doing an equity release.

    Its only if you need to move for whatever reason where you get snookered:

    1. Poor valuation w/ current lender vs excellent val with another lender
    2. Inability to service/borrow the additional debt
    3. Specific policy restriction - e.g. you have decided to build 4 units at 80% LVR and your current lender is ANZ
     
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It will revert to variable after one year.

    Technically you could release equity on that split later - or set up a new split

    Cheers

    Jamie
     
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  8. bonanzawealth

    bonanzawealth Well-Known Member

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    Correct me if I'm wrong, but I'm under the impression that during fixed term you can't really access equity release when property price hypothetically goes up. Shahin, could you please clarify?

    btw... what's the difference Top Up; Equity Release and Cash Out? I'm confused
     
  9. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    You can access the equity against a property even if its fixed.

    Top up = increasing existing loan from say $100k to $150k. There is one loan account. This potentially has significant tax implications.

    Equity Release/Cashout = same thing and it may or may not be done as a top up. The way it should be done is as a separate loan. Unlike a top up you will have a new loan account created.
     
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