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How to structure loan

Discussion in 'Property Finance' started by gkp, 5th Feb, 2016.

  1. gkp

    gkp Member

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    Hi to all.

    My current situation is as follows

    Loan A = PPOR Loan 292k P+I.
    Latest bank valuation for the home - 390k
    Potential available equity = (Valuation × 80%) less existing loan.
    (390000×80%)-292000 = $20,000.

    I am looking at buying IP for $350,000 paying 20% deposit.So I would require $70,000 to fund the purchase.I would like to use $50,000 from offset plus $20,000 from potential available equity to fund the $70,000 required for IP purchase.

    After reading Terry's post I came up with the following

    Loan A = 292,000
    Split Loan A to Loan A1 = 242000 (balance owing)
    Loan B = 50000(balance owing)

    Transfer 50,000 from Loan A offset account to pay off Loan B.
    Now the loans look like this
    Loan A1= 242,000(balance owing)
    Loan B = 50,000(available to fund IP purchase).

    Find IP 350,000 and apply for IP loan at 80%.
    Loan C= 350000×80% = 280,000
    Required funds = 70,000 of which 50,000 will come from Loan B but how to access 20,000 available equity.

    Should I apply for a separate Loan to get access to this 20,000.?

    Interested to hear your thoughts.
    Thanks for reading..

    Cheers
     
    Last edited: 5th Feb, 2016
  2. albanga

    albanga Well-Known Member

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    How will you be paying for closing costs as well? You will need roughly 15k for these.
     
  3. gkp

    gkp Member

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    May go with IP costing 330,000 so I have enough funds to cover closing costs.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You might have to go into LMI territory for the extra $45k. Go 90% on the IP maybe.
     
  5. gkp

    gkp Member

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    Hi Terry

    Thanks for replying. Could you please also provide your valuable suggestion on how to use $20,000 equity. Should I set up a separate account for this say Loan D?
    For my situation ideally how the Loan structure should be?

    Thanks
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Don't assume your lender will do redraw on the new io split as you pay it down. More than one lender has some silly traps around this

    Ta

    Rolf
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Could you increase loan B from $50k to $70k?
     
  8. gkp

    gkp Member

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    I can increase from 50,000 to 70,000 but this way I will be using majoriity of the Loan A offset account funds and that's the reason why I want to tap in the 20,000 equity.

    If I can't use 20,000 equity and just have to use 50,000,I should either lower the amount I want to spend on IP or go into the LMI territory of 90%.Is tht right?
     
  9. gkp

    gkp Member

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    Sorry Rolf could you please explain what you mean with this.

    What I understand is the lender won't allow me to redraw 50,000 because I paid it down.?
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    eg some lenders like cba close a loan after it gets to zero

    some lenders like STG still force a full repayment each month while there is nothing nett owing on the loan and thus the principal reduces.

    Some lenders like stg wont allow you to draw on the new split until the next repayment cycle..............

    Further, some lenders wont allow a simple limit split without a full app...........

    ta
    rolf
     
  11. gkp

    gkp Member

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    Thanks Rolf will call my lender Suncorp.If they doesn't suit my needs for the new loan structure, I better start looking at refinancing with a different lender and structure the loans.

    Ta