Refinance dilema

Hi Alll,

First post here so hope you guys go easy on me.

I bought a house around Aug last year at Summer Hill as my IP. Aug this year, i bought another house in Earlwood as my PPOR. Im planning to put a granny flat at the back of ppor, would need equity from the ip. While im confident my ip in summer hill has appreciated well, the valuation i did on April wasnt as we expected. The market has improved since then but im afraid valuation will not be 10% more than purchased price. Initial thought would be to wait till next year. But recent weeks, the market is boiling hot ( i attained auctions on the ground and can confirmed this) which made me scared as APRA will certainly do something about it and they might limit our serviceability. So the question is should i just go ahead with refinance and get whatever it takes or wait till next year with the risk that we can't get refinance loan due to serviceability limit.

Invest and prosper V

 

Get your broker to get vals from a few lenders - they can come up quite different sometimes.

 

Thanks Jess,

Our purpose is to extract the maximum equity possible from the ip and dont mind a bit of waiting so we lean toward next week. The problem is the market is just too hot and it may cause intervention from apra. Would you think that would happen? I heard from my broker that westpac has already applied many limitations.

To be honest sometimes i just want market to be moderate instead of going too strong at the moment.

 

Dear @hungusyd.
APRA doesn't care if the market is hot or cold, in a nutshell, APRA just needs to ensure the banks aren't lending money in a way that could make the banks (or more correctly, Authorised deposit taking institutions) go under and that the ADIs comply with BASEL regulations (basically, international banking regulations so we have a strong banking system).

I agree with Jess though, get a few more valuations and use the highest one. You might not be able to get it with Westpac so hopefully you can borrow from another institution. Talk to your broker.

 

If you think things will toughen up then it would be best to maximise borrowings now. do this by refinancing if necessary and no lmi paid.

 

That's why I would like to ask experts here will there be any policy coming out to cool this environment a bit? Last year it was APRA and banks increasing their buffer. What will be this year otherwise this market will just run away.

Invest and Prosper V

 

Some individual lenders may apply restrictions especially if it's an apartment. But your broker should be thinking outside the box to help you achieve the max valuation and equity release. Don't worry about what 'might' happen - use what's available to you right now with which ever lender will help .

 

If I were you, I would get out what you can, when you can if you have decided that is your plan and you have done all checks etc.

I agree, markets did heat up again after a lull, but instead of being scared of APRA, you should be worried about a natural downturn due to world events, a financial event, or even some other event such as talk starting of interest rate rises, instead of cuts, any of these things will put out the fire.

So, in a nutshell, I would take out now, and then if still going hot for next 12 months, see if it is worth doing again if you need more.

 

I expect it to get harder to borrow.

 

It always does at some point....

Why do you believe it will tighten soon......more intervention or natural market forces, other ?

 

My gut feeling tells me the same. That's why I am pressing my broker to start the wheels in motion for the next IP even though the previous one is not settled yet.

 

I never truly believe in free market in australia. It is always about a response to a certain policy. If pass behaviour is any indication then they will apply some pressures around feb/march next year in preparation for lowering interest rate

 

APRA locks in tougher mortgage rules

This is exactly what i was afraid

 

I see nothing there not already known and in practice.

I can live for free for example, or get very low cost housing, but they all load me up the same as everyone else now, which I think is wrong.

 

If you read between the lines, there are sublte changes even though small, will add up. Also you see how fast they are sending these signals out.

 

That is old news. We are already inside that era

 

Thats like a cuss word around here

Focus is on living expenses and brokers/banks making reasonable enquiries into individual situations.

If your spending habits are reasonably frugile on on average combined income it wont have a massive change, if at all to the status quo.

I agree. Its short term pain for longer term stability, hopefully.