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Is this refinance possible without a loan application?

Discussion in 'Property Finance' started by spludgey, 6th Aug, 2016.

  1. spludgey

    spludgey Well-Known Member

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    I currently have two fixed loans with TMBank on my PPOR:
    • Non-deductible, 4.49%, ~$580k
    • Deductible, 4.19%, ~$120k
    I've spoken to the bank and my break fees are actually zero and they're offering a 3 year fixed loan at 3.74%.

    Now, I've got around $100k sitting in my offset against loan 1. What I would like to do is to do the following:
    1. Break the fixed rate on both loans for free.
    2. Pay down $100k on loan 1, making it $480k.
    3. Redrawing $100k on loan 2, making it $220k.
    4. Ideally: (Redrawing even more on loan 2 to bring the total LVR to 80%)
    5. Fixing both loans at 3.74%
    6. Transferring the $100k to another deductible loan offset account that's at a higher interest rate.
    Basically, I need to know which of these steps I can take without triggering a full loan application? The reason for this is that we've bought more properties and had a reduction in income and I'm almost certain that we would no longer fit the lending criteria for new loans.
    I'm guessing step 4 is out of the question, but are the other ones possible?
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    TMB arent on my panel

    id be surprised that they wouldnt want a full app for increasing any loan split

    Reduction and split a loan into 2 may be ok as it with many lenders

    ta
    rolf
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I do have TMB on my panel, and I would assume splitting the first loan and paying it down would be fine. There may be fees though.

    If you want new money, that would definitely be a new application though.

    There will be tax implications with 6) - the redrawn $100k that's offsetting other debt will be incurring interest and this will not be deductible.
     
  4. spludgey

    spludgey Well-Known Member

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    Thanks, the loan is already split into two.

    By "new money" you mean point 3 as well as point 4, right? Because step four would not increase the total loan amount, it would just shift it around.
    As for deductibility, I think my understanding might be different to yours (or my explanation might be lacking). Loan 2 is currently a deductible loan as it was created for the purposes of buying an investment property. So if I redrew money and put that into an offset against it, it wouldn't change the deductibility of this loan. If I now move that money from that offset account to the offset account of another deductible account, this shouldn't change either loan's status, should it?
     
  5. dabbler

    dabbler Well-Known Member

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    if the deductible loan is 120k, there is no way to inflate it to 220k and be deductible unless you go and buy another IP, or , use it slowly on existing IP costs and saving the cash.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    yes it would, because redrawing funds equals new loan and new loan purpose. The minute the funds leave the loan, their purpose is determined by what you do with them. Putting them into an offset account is not a deductible purpose.
     
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  7. spludgey

    spludgey Well-Known Member

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    Yes, sorry, I should have added that. Down the road I'm looking at moving into developing and the money would be earmarked either for that, or for some other non-interest IP expenses.
     
  8. Brady

    Brady Well-Known Member

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    But by the sounds of what you're doing you're increasing $120k > $220k and putting the $100k somewhere else. Why?

    1. Pay down $100k on loan 1, making it $480k.
    2. Redrawing $100k on loan 2, making it $220k.
    Then Redraw would be available on loan 1.
    You wouldn't have redraw available redraw on loan 2.
    Sounds like you're mixing things up a bit, are the loans crossed?

    Why not do something like this
    1. Split Loan 1, making it $480k & $100k
    2. Paydown $100k and have $100k in redraw for later (note sure on the bank, make sure this doesn't close the facility)
    Can't see why you would be including loan 2 into the situation unless you have crossed loans, which should get sorted ASAP - especially prior to any fixing of loans.
     
  9. spludgey

    spludgey Well-Known Member

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    Because my IP interest rates are above 3.74%, so it makes sense to me to offset the higher interest rate.

    Loans are both on the same PPOR, so I think by definition, they have to be crossed, don't they?

    This would make it 3 loans on my PPOR, which I think are a little over the top. I think you maybe you didn't know both loans were on my PPOR?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I have clients with 6 loans on their PPOR - not over the top, but good tax planning.
     
  11. Brady

    Brady Well-Known Member

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    Doesn't make sense to borrow money from one loan to offset another loan, likely going to run into problems.

    Far from over the top, number of loans against the property isn't an issue. Key is 1 purpose per loan, 1 security per loan.