Preparing for Refinance

Discussion in 'Loans & Mortgage Brokers' started by CHE, 19th Mar, 2020.

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  1. CHE

    CHE Active Member

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    Hi, our current situation (late 30's, no dependents) is:
    • PPOR (Northern Beaches) in my name, est. val $1.4M* owing $900k @2.75% P&I var
    • IP (Inner West) in wife's name, est. val $600k owing $450k @ 3% P&I var (rent largely covers)
    (*) Based on comparable sales in late Feb-20 and Dec-19. Q1: How long to wait for these comparable sales to be visible to a valuer, and is there any way of checking this (i.e. Valuer General website, or being able to see these in a desktop val report from the Bank)?

    Goal is to fund a knock-down rebuild of our PPOR via a volume builder. I'm main income earner at $170k gross, wife is at $95k gross. If my borrowing capacity comes back at around $1.3M, I estimate we could afford the final KDR cost (with some savings). Otherwise (and it may make more sense ATM), I would just equity refinance to 80% of the bank's val and then save hard to fund the balance.

    Potential Limitation - we both share one Credit Card ($15k limit, no other debt), account is in my name only and payments are direct debited from PPOR offset. This means my monthly expense will look high at around $6k per month.
    Q2: will my borrowing capacity be penalised for this arrangement, or will the bank take into account my wife's regular transactions into the PPOR offset to reduce my effective expenses (to say $3k/month)?
    If this arrangement was an issue for my borrowing capacity, I could easily cancel my credit card and get my wife to get one and pay all our expenses on this. But would have to do this soon (in case vals start coming down), as I'm assuming bank will want two months of income and expense statements when assessing my borrowing capacity.
     
  2. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    You'll need to put down your family expenses rather than just your own and report 2 adults plus dependents...irrespective of where expenses are paid from.
     
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  3. Lindsay_W

    Lindsay_W Well-Known Member

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    If they settled within the last 6 months then the valuer could use them as comparable sales IF they are in fact comparable to your property.
    Desktop Data takes longer to flow through, generally 3 months AFTER settlement of those sales

    Income/savings does not offset or reduce your expenses, if you spend $6K per month that's what you spend. There's no difference if the expenses are on your credit card or from your transaction /offset/savings account.
    Credit Card limits are assessed in addition to your expenses, the card will have a minimum monthly repayment applied regardless if you pay it off every month and regardless of the balance.

    I suggest you speak to a broker to work out your actual borrowing capacity, much better than trying to work it out yourself.
     
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    as an aside, but sobering q

    How long will it take u to pay off the new PPOR debt

    and as a further aside, why PI on an IP, while having non ded debt ?

    ta
    rolf
     
  5. CHE

    CHE Active Member

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    Okay, that is good to know. But this sounds different to my original loan application, where I am the only one on title and my wife's income/expenses were never factored in.
     
  6. CHE

    CHE Active Member

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    Thanks, will likely speak to my bank when we decide what to do.

    I was just doing some basic calcs with a monthly PAYG income of $9.4k after tax, less $3.75k mortgage payment and then having $6k credit card expenses (for two) each month. It didn't sound like I'd have much borrowing capacity left. But it sounds like my wife's income would just need to be taken into consideration as well to cover this.
     
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  7. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Was it done directly with a bank or a broker?
     
  8. CHE

    CHE Active Member

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    Yes, a large amount of debt, but saved around $50k last year. I did extrapolate out our current savings rate and it looked like my PPOR loan could be fully offset in around 15 year. Although it is hard to forecast salary increases and future interest rate rises.

    On the IP, I feel the PI rate we are on is too good to give up. I think they might have even left this on the OO PI rate. We would probably switch this to IO for cash flow purposes, if we have a child or take on an even more ridiculous amount of debt on our PPOR.
     
  9. CHE

    CHE Active Member

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    It was done directly with a bank. They never requested any income/expense statements from my wife. And our savings accounts and credit cards were separate back then
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    but they would still have coded u as married I assume ?

    Mrs obviously has income to cover her personal Liabilities

    ta
    rolf
     
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  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Perhaps look at an active debt recycling strategy, Getting the plan done now, but wait till the equity markets fall to a floor

    THE IO to PO spread thing is a pimple on the backside compared to the benefit of a decent managed DR jobbie

    ta

    rolf
     
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  12. CHE

    CHE Active Member

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    Thanks, will plan things out but no rush to commit to anything in the near future.

    Debt recycling on the PPOR is looking good at the moment, so another reason to tidy up things and refinance... in case the bank's start getting conservative on valuations/lending.
     
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  13. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    We are getting many peops like you that recognise and respond to data, that there is a challenge in most opportunities, while others are reacting in fear and " stop and drop" even though their portfolio is actually at significant risk by their fear driven inertia. I get both views.

    We had clients that bought tonnes of good quality equities post gfc because they were prepared.

    28 Bucks for CBA was pretty good.

    ta
    rolf