Loan Structure Query

Hello,

Hoping I can get thoughts on the below - the fundamental question i'd like an answer to is "can I get a top-up on a loan that has 90% fixed rate and 10% variable (without incurring fees / break costs)."

Scenario:

• Purchasing a PPOR
• Will look to undertake some reno's ~50k worth (new kitchen, flooring throughout)
• Lender is CBA
• LVR is 90% (LMI waived)

If I were to fix 90% of the loan repayment (looking at 2.19% for 1/2/3 year) and have 10% variable (2.9%), would this still allow me to do a top-up after a val in 2-3 months - allowing us to borrow more for renovations. We have limited cash to do renovation and if possible would like to borrow - property was bought under general market value, and we would do some enhancements ourselves

(of course the val in 2-3 months may by impacted be possible market conditions, but putting that aside for now)

Hope that makes sense. Let me know if I can provide more information

Cheers

 

yes as long as all other requirements met.

 

Assuming you meet the lender's criteria, it's not a big deal. You can't change the fixed rate (without breaking the fixed contract and potentially paying penalties). However you can increase the variable loan or set up a separate account alongside the other two accounts for the equity release. Specifically how you do this would depend on the circumstances, but no big deal overall.

 

Excellent, thank you Terry and Peter!

 

True - good point. The purpose of the cash out would be for renovations to the property.

I would almost be wanting this scenario to play out:
90% LVR purcahse. in 2-3 months get a valuation and based on this the LVR is 80%... could we then borrow back up to 90%... Am I dreaming?

 

I think expecting 10% growth in 2-3 months is a bit optimistic.

The argument that you bought under market value probably won't work. Best case scenario is valuers will look at what you paid for the property and at best apply the average growth in the area over a couple of months.

With a building contract and plans for the renovation, you might get they to view it as a construction loan and value based on the 'end value'. This might work, but depends on the scale of the renovation you're proposing.

 

Right OK yep I hear you. The place needs tidying up and we were planning on doing some work on it ourselves prior to valuation. But I suppose you're right in that a valuer would look at what it sold for - the photos would be pretty underwhelming and compared to hopefully the way we can have it looking prior to valuation would help... If we did this would it influence the valuation much or do you still think it wouldn't have much bearing? (not experienced at all with valuations)

Thanks for the comments and thoughts - really helpful. I think the renovations may not be enough to consider a construction loan but again that's a good thought provoker.