Loc and PPoR mortgage

Discussion in 'Property Finance' started by turnthestaticup, 12th Mar, 2016.

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  1. turnthestaticup

    turnthestaticup New Member

    3rd Feb, 2016
    I have recently seen a mortgage broker about organising finance for an investment property. This is the the first time I have invested, but own home with a mortgage.

    The meeting happened about a month ago, where he explain a lot of new concepts and terms. The meeting concluded with him putting in for an valuation on my house and submitting applications for a LoC.

    He has since found a LoC with Suncorp at 4.72%, and would also like me to refinance/move my home loan for my PPoR to Suncorp.

    He did explain the relationship between the PPoR mortgage and LoC, but given that it was a month ago, I am finding it difficult to remember who the two are related.

    Can anyone explain how my PPoR mortgage and LoC are related. Is it necessary to have my LoC and mortgage with the same financial institution? Or is it possible to have my PPoR mortgage with one financial provider, and my LoC with another provider?

    I am very new to investing.

    Thanks in advance.
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    18th Jun, 2015
    Melbourne, Nationwide
    A Line of Credit is simply another loan product. It has a few features which a regular variable rate loan doesn't, but it's still a loan. There's no special relationship.

    The features a LOC tends to have that variable loans don't is that a LOC is usually interest only for the entire loan term. If you only make the minimum repayments you'll never pay it off. It also tends to be fairly transactional, meaning that you can deposit and debit funds directly from the loan account; you can't always do this with other products, money needs to go through another transaction (savings) account first.

    Most banks also make you pay higher interest rates for them, in some cases (such as Suncorp), significantly higher.

    In many cases a cheaper variable loan can do the same job, but there are occasionally circumstances where a LOC is more useful.
    Last edited: 12th Mar, 2016
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    18th Jun, 2015
    Perth WA
    Your PPOR will be the security for the LOC, so it will have to be with the same lender that your PPOR is with.

    It's good he's using a separate LOC/loan for the deposit, just make sure that he doesn't then x-coll the new IP into the mix.
  4. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

    18th Jun, 2015
    A mortgage is the security that is taken over the property. A loan is the money you borrow and is secured by the mortgage.

    Where the one property is used to secure 2 loans the loans generally need to be with the same lender.