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Loan structuring advice needed

Discussion in 'Property Finance' started by Patc4, 18th Oct, 2016.

  1. Patc4

    Patc4 New Member

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    HI everyone, long time reader from SS, first time poster. I have been umming and arring over the last couple years about investment properties and have not gone ahead due to prices going up at extreme levels but time to bite the bullet. Need some advice please.

    Sold my first PPOR 3 years ago and purchased new PPOR in Sydney for $640k with a loan of $500k under P&I even though I asked the broker to do it IO at the time somehow he missed that part and it was too late to make changes and organise new loan application etc.

    Anyhow since then, I have refinanced the PPOR to a new lender with a lower rate and the loan is still P&I with say $480k remaining to pay. I have around $200k in the offset account and the current PPOR is worth $1,050,000 to be conservative.

    I am looking at buying an investment property or two in QLD for the time being and more later on. There is also potential to turn the current PPOR into an investment property later down the track.

    Looking at buying properties in the $450,000 to $600,000 price range each with rentals accordingly at say $450 to $600 for arguments sake

    Some questions are;


    1) Should I use funds from offset account and go to my current lender/ possibly a different lender and get a loan of 88% to stay in the 'sweet spot' and reduce paying too much LMI but keep as much funds in offset as possible.

    2) Should I refinance my existing property with current lender or alternate lender if better suited in order to use equity from the PPOR and leave my savings in offset account?

    Cant think of anything else to ask at the moment as I have been reading the forums for hours and too many properties going through my head to think clearly. Im sure I will add more questions to the list

    But any other advice would be appreciated


    thanks everyone
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Hi Patc,

    There are a couple of better options than using cash.
    1) Use equity in your PPOR for hte deposit and costs.
    2) Pay the cash into your PPOR, split the loan and use that for hte deposit. This will make that loan split deductible and will reduce your non-deductible debt.

    Both these options are better than using cash for your deposit.

    You may or may not be best off refinancing - a closer look at your lender and personal circumstances would be needed.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Fairly simple:

    * Set up an equity loan against your PPOR to give you funds for deposits and purchase costs (stamp duty, etc).
    * Borrow separately against the new purchase for the balance required.

    Given your equity position, I'd suggest going with 80% lends instead of paying LMI. You've got a lot of equity available, probably more than needed before most people would hit a servicing roadblock. There's no point in paying LMI if it's not going to be useful and you'll find it easier in the long term if you don't need to use it.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    o_O Hmm?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Refinancing is not necessary - but you wouldn't want to use the savings.
     
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  7. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Refinancing with the same lender is not really refinancing in my books. I just played on there :)
     
  8. tobe

    tobe Well-Known Member

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    Leaving savings in the offset account isn't really an option, unless the income/borrowing capacity is indestructable. More than likely needs to pay down the loan and set up a new split for the deposit on the new purchases.
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No, its not. It might be restructuring the loans, but refinancing is changing lenders.
     
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  10. albanga

    albanga Well-Known Member

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    One thing missed here is that if you do plan on turning this into an IP then paying down the loan and drawing the equity will mean a lower loan amount when that occurs (less deductible).

    If you do have plans to turn the PPOR into an IP then how far on the horizon is that? If close then IMO your best option is to buy that first using the cash in your offset. Depending on how much you purchase for you may still have enough to then split from their and purchase another IP. I appreciate you will not have as much to play with but you will keep all deductible debt intact.
     
  11. Patc4

    Patc4 New Member

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    Thanks for everyones replies, completely different responses/approaches than recommendations from my broker.

    in relation to these responses; are they the same thing just written differently?

    1) Use equity in your PPOR for hte deposit and costs.
    2) Pay the cash into your PPOR, split the loan and use that for hte deposit. This will make that loan split deductible and will reduce your non-deductible debt.

    * Set up an equity loan against your PPOR to give you funds for deposits and purchase costs (stamp duty, etc).
    * Borrow separately against the new purchase for the balance required.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You would only need to pay down the PPOR loan if you don't have enough equity to borrow further against it.
     
  13. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    They're essentially saying the same thing.