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Need help with loan structure

Discussion in 'Property Finance' started by macdub, 30th Apr, 2016.

  1. macdub

    macdub Active Member

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    Location:
    Melbourne
    Hi all,
    I need help with the structure of the loans. Just wanted to make sure I am not stuffing it up. I will explain my situation and have number of questions that I will list below.

    PPOR
    Loan 1 - LOC 187k
    Loan 2 - SVR 188k
    approx value of the house 600k

    IP1
    Loan 3 - 46k (borrowed against equity in PPOR and secured against PPOR)
    Loan 4- 315k secured against IP1
    approx value 360k or even less than what I paid. So no equity.

    All my loans with CBA and I have paid LMI on both. Now I want to borrow more for deposit towards IP2. Broker said I should be able to borrow 45-50k provided PPOR valuation stacks up to 600k.

    Questions
    1. considering to refinance, only thinking of PPOR as no equity in IP1. Now, is it a good idea to just refinance PPOR loans or add up all the loans and refinance on total amount? Will bank allow refinance on whole protfolio or only on PPOR as it has equity? What are pros and cons?

    2. should I refinance with same lender or new lender? if I stay with same lender then I pay only difference on LMI depending on LVR as I have already paid previously, is that correct?

    3. what should be the ideal structure of the new loans? How is top up loan different to completely separate loan? for example, if I top up LOC by 50k and use that towards deposit of IP2, will the intrest be tax deductible? Or is it a good idea to set up completely different loan of 50k? If separate, this 50k loan should be another LOC or SVR loan?

    4. Should I combine loan 1 + loan 2 + loan 3 and refinance to only one loan with 100% offset? If I do that, interest on loan 3 (46k ) be tax deductible? Or is it possible to combine 1,2 and 3 and refinance to one big LOC?

    Apologies for too many questions. I got burnt with IP1 using buyers agent and now want to move ahead on my own and not rely on brokers and BAs.

    Thanks in advance.
     
  2. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Can't answer your Questions, but looks like a poor BA.
    You need a good broker to play this game.:)
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Relying on a forum isnt always going to provide any advice that will reduce your reliance on a professional's knowledge.

    In many cases it may cause further confused knowledge because we know little about your resources, goals and and risk profiles etc.

    On an average deal,one would do the 60 k separate loan as you have done for ip 1............as suggested by your current broker.

    If your goal i sto be bigger better faster,id look at doing a valuer shop on PPOR and perhaps look at doing a refi /top up to a higher val or even an 88 % lend.

    Dont touch your IP1 unless a valuer shop or a desktop shows some increase

    But as I suggested,without ALL the background and soft data, application of such data in isolation can actually result in poor outcomes

    ta
    rolf
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not enough info.

    What was the use of the LOC Loan 1? And Loan 3?



    1. not enough info

    2. First consider the same lender

    3. not enough info

    4. not enough info, depends on the use
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Why are you not going through this with your broker? if you don't think they're up to the job, find a new one who is. If they are, given they know the most about your situation it would be wise to go through these questions with them first.
     
  6. Redom

    Redom Mortgage Broker Business Member

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    Heya,

    I may have missed it in the post, is the purpose of refinancing based on an equity release? CBA are pretty good in this space, so you may find it trickier with some alternative lenders. If its a reasonably small one (50k) shouldn't be too difficult though.

    A few observations:
    1. Probably best not to combine your split loans, it looks like they're for different purposes (investment v owner occupied).
    2. Banks should allow a refinance of just the PPOR (so long as theres no x-coll there which it doesn't look like by the structure).
    3. Where is the 50k figure coming from - is it a cap on your valuations of the property or borrowing ceiling with CBA? Roughly looking at it you can borrow 480k of a 600k val (just run a desktop val to see where its at). It looks like you've got about 400 secured against the O/O, so that should leave room for ~80k pending serviceability.

    Given you've got LMI credits, it likely makes sense to explore your current lender as first option. There are transitional costs + lost credits with switching lenders. Releasing equity above 80% may be difficult anyway if servicing is tight.

    Good luck!
     
  7. macdub

    macdub Active Member

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    Thanks Redom. Loan 1, 2 and 3 are secured against PPOR however the purpose of loan 3 was for deposit towards IP1.

    Provided PPOR valuation comes to 600k, 80% will be 480k and thus I will have access to (480-187-188-46) 59k! is this correct?

    So all I wanted to know is if I should set up another LOC/SVR of 59k and use it towards the deposit of IP2? Am I x-coll this way?
     
  8. macdub

    macdub Active Member

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    because Its so hard to find a broker who can please me. My previous broker has expanded his business and he hasnt returned my email since last 3 weeks! Then friend of mine recommended one and I went and see him. and I got shock of my life how he operates. He was real dodgy. I can keep checking out brokers and waste 6 months in the process. I found people here more knowledgeable than any finance/real estate person I have dealt with. I have finally found one local broker but again he seems average and I have lost trust in them so just wanted to make sure what I am doing is right!
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Please hit one up from here - all the regular posters know what they're doing and I'm sure won't be a disappointment. You can see from their posts that they know their stuff so have a read through and choose one that sounds like a good fit.
     
  10. macdub

    macdub Active Member

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    HI @Terry_w ,
    Loan 1 is PPOR loan secured against PPOR and Loan 3 is equity loan that was used towards deposit of IP1.

    Can you tell me what info you need?
    The broker told me today that I can extract 61k in equity. All I want to know is - Should I set up this 61k as loan 4 LOC or SVR with offset? What are pros and cons? This 61k will go towards deposit of IP2 yet to be purchased.

    Thanks
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  12. macdub

    macdub Active Member

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    Hi @Terry_w
    Thank you for all your help. Your threads are immensely helpful for people like me. I have read a lot but still confused a little and just wanted to make sure.

    In relation to 61k borrowed money I mentioned above - I have 2 options.
    1. new 61k LOC which I understand how it works ( I pay more interest )
    2. new 61k interest only variable loan - now in terms of tax deductions, I am confused a little. To use this for deposit of IP, can I set up another offset account linked to this 61k loan, put 61k into this offset and use it for investment purposes?
    I read somewhere that bank doesn't allow to draw bank cheques directly from loan account to pay for investment costs?!
    Thanks
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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