Rate rises, serviceability & equity release.

I haven't been on the property band wagon for 4 months after we welcomed a new addition to the family. I have just evaluated our current situation and I have experienced a single rate rise on our PPOR due it being IO, and two increases on IP. Both where originally 4.55%.

In short, I would like to release equity for future investing (sooner rather than later hopefully), remove cross security on main residence and get some better rates. I am certainly not against refinancing either. I understand in these APRA times, it may not be possible.

Currently all with the CBA wealth package and I/O.
PPOR - 4.7% rate
200k loan, 450k value

IP - 4.97% rate
380k loan, 440k value

Single income family 80k with 2 dependents. We also have access to cash in an offset account for our PPOR.

Fire any questions you might have back at me. Or suggest any ideas. Thanks in advance!!!!

 

$500k+ worth of borrowings at 80% .....I'd be calling them and asking for a nice discount off the SVR before refinancing to another lender.

I'd uncross, release circa $130k in equity (that takes aggregate borrowings up to 80%) and ask for a nice discount off the rate.

Get your banker/broker to generate a couple of desktop valuations to ensure your numbers stack up.

$80k and two dependents though.....that could prevent any further investing for a while. I doubt the borrowing capacity is there.

Cheers

Jamie

 

Thanks for your comments Jamie. Late last year I did contact my broker who said we were already on a good rate. I will push him again to see where that takes us, however I wont hold my breath.

 

You're not on a good rate, sounds like he's being a bit lazy. If he also x-colled you, it's probably time for a new broker.

 

That has been my thoughts for at least 10 months. He x-cols all his clients as I found out late last year

 

No worries. Your broker could submit that pricing request for you. Should be able to reduce your rates by 0.3 - 0.4%

Cheers

Jamie

 

It's very common unfortunately, b/c most brokers don't understand or have never really thought through the risks. Also many come from banking backgrounds where they are taught to do so as standard practice.

 

You've hit the nail right on the head with that assumption.

 

So at what point would you go use another lender to finance another purchase?

 

I'd say first thing is to do is to do as Jamie mentioned and request an increase in discount from the SVR via broker. This should get you down to at least 4.3% for PPOR and about 4.6% for IP. That's a good start. If your broker insists your rate is still low enough then move on. There are great brokers like Jamie and Jess who can do this depending on your specifics. Also uncrossing should be done sooner than later. At an LVR of about 65%, that should be no probem.

 

When the one you're currently using isn't meeting your needs in some way, whether that be rates, servicing, policy or a combo, and also if you already have significant holdings with one lender. If it's for rate only, it's still important to consider policy though especially if you plan to release equity or similar at some point in the future.

 

I don't understand how some brokers are allowed to be in business.

 

I understand the risks in x-colling mortgages, but how do you access the equity in your properties without doing so?

 

Borrow against the property - one property at a time.
see Terryw’s Ideal Loan Structure

 

That's a bit unusual.
Was it someone from on here?
Name and shame!

 

If they were, they would already have been crucified!

 

@Raydar, as others have suggested:

1) Sort out those rates. If your broker is too lazy to submit a request, ask one of us to. Should save you a few grand a year.
2) Uncross.
3) Try to top up to 80%.

Your income may limit further investment at this stage but at the very least you can shave a bit off your current rates.

 

Thanks Steven,
Broker is back after Australia Day. Will let you know if it's a positive outcome.
Would you imagine any issues with the 3 requests.

 

I agree: but in every business there are people who should not be doing what they are doing..

 

Assuming you still have capacity to service the equity, it should be no trouble at all.