Loan Arrangements and Mortgage Brokers

Discussion in 'Loans & Mortgage Brokers' started by RB1818, 28th Feb, 2018.

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  1. RB1818

    RB1818 Member

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    2nd Oct, 2016
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    Location:
    WA
    I am hoping for some advice on Loan arrangements and Loan sources

    We have a PPOR and an IP. We used our PPOR as sole security to purchase the IP, and the IP provides some modest tax credits (mainly depreciation, with rent-interest being fairly neutral).

    We have decided to upgrade our PPOR and, with current time commitments and where we see the market at the moment, we would like to buy now, and then rent the new house out for maybe 6-12 months while we update and sell our current PPOR without feeling pressured to sell.

    The amount we want to spend on a new PPOR is slightly less than the value of the current PPOR + IP, and the bank would lend us the full amount without the need for a bridging finance arrangement

    Questions I hope someone can assist with are:

    · Is there anything we need to be mindful of in terms of loan set-up or longer-term implications if, prior to selling our existing PPOR and moving into the new one, we want to negatively gear the interest payments on the new purchase.

    · I have only ever dealt with the larger banks, and assume that I probably pay for the privilege. Is a mortgage broker a useful consideration. I must admit to knowing nothing of their services, affiliations, or fee structures. How do you begin the journey of ending up with a suitable one.

    Thank you
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    1. Yes,
    2. Yes, Read a few posts by some of the mortgage brokers on the forums.

    Also consider tax advice, you will need this in order to structure your loans effectively.
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Hi and welcome to the forums :)
    If you've been dealing directly with the banks, it's highly likely your current PPOR is cross secured with your IP. This may cause issues when selling your PPOR down the track, so before you do anything I'd suggest getting this sorted out by an investment savvy broker - the bank is unlikely to be at all helpful. It's very common for banks to cross secure, and it can cause real issues in some scenarios.

    If you go directly to the bank for this next purchase, they'll tie up all 3 and make it that much harder again to sell the current PPOR when the time comes, especially if values drop in the meantime - which, depending on your area, can be a real problem in WA at the moment.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    maybe, but you wont know............

    Further, the difference a broker can make is usually not around fees charges and rates per se ( thats the simple stuff) but some can actually help build your wealth,either through their own experiences and passing some of that knowlege on, or via associates that they have.

    Typically, but not always, you wont find that mix in a direct banking role, big or little bank.

    ta
    rolf
     
  5. RB1818

    RB1818 Member

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    Location:
    WA
    Thank you for the responses

    Terry - I appreciate economy of phrase (in others) but damned if I know whether you mean I should pick a broker based on the "quality" of their posts, or maybe you mean that by reading posts I will quite quickly glean the substance and subtleties of the industry.

    Jess - the mortgage document only lists our PPOR as security. To retain cash reserves, we would look to borrow the full amount for the new purchase. However, providing we do not pay significantly over value, I had assumed that the bank would only request that the new purchase and the IP be used as security - the value of the IP, which in unencumbered, is probably around 50% of what we would spend on a new purchase. We would look to sell our current PPOR before we considered selling the IP.

    Rolf - in some ways that sums up my uncertainty about Mortgage brokers - do they primarily sell a product or sell advice

    Thanks
     
  6. Eric Wu

    Eric Wu Well-Known Member Business Member

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    hi @RB1818 , agree with @Jess Peletier , from what you described, it is very likely that your current lender has crossed your PPOR with the IP.
     
  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Id say all brokers sell some form of advice and certainly majorly product.

    Some are client centric, some are product centric.

    How can you tell one from the other ?

    Shut up and let them talk...........

    If they spend more time jabbering on about rates,fees and charges and features than engaging you about your middle term goals , fears and aspirations, its pretty clear what you are dealing with.

    The majority of my industry dont demonstrate a passion for their craft or indeed "art".

    The last thing the average portfolio builder needs is a "door mat" or "order taker" broker/banker, because most borrowers dont know what they dont know, and need an adviser to lead them down the best corridor for them.

    Its simple........... but so not obvious.

    ta
    rolf
     
    Medine and Redom like this.
  8. Medine

    Medine Well-Known Member

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    And don't forget to talk to a property savvy tax accountant before you buy! They can save you thousands if they help you tweak your structure for the most tax efficient possible!
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    If you're looking to sell your current PPOR, you may be at risk of losing all your deductible debt when they discharge the loan.

    Please speak to an investment savvy broker, as it's possible to maintain all your deductions and put a much more effective structure in place moving forward. Ideally, you want max deductible debt and minimal non-deductible, and you're at risk of wiping out heap of deductible debt if you proceed as is.