Refinance for lower rates on existing loan + equity release now for IP purchase in near future?

Newbie question for brokers input:

- I have existing IP1 worth with outstanding loan $400k and value of IP1 is $800k.

Wish to refinance for the following purposes:
1. I wish to refinance existing loan to take get off high variable IO rate and take advantage of P&I fixed rates.
2. I also wish to buy IP2 for say $500k at 80% LVR in the next 3-6 months so need equity release.

In terms of mechanics, which is the usual way to do this do both 1 and 2 now. ie:

Loan 1: Refinance existing loan to Fixed P&I
Loan 2: Equity release up to 80% value of IP1 = $240k so that I can just take what I need when I need it for IP2?

My broker didnt explain it clearly but said that I should do full equity release and if I only need a $100k for IP2, I will only pay interest on $100k loan.

Does this sound right or should I do a refinance now and then only get an equity release for what I need for IP2 at the time of purchase?

Thanks!

I don't mind doing a full equity release if it means I can access unused funds for future IP or PPOR purchase.

 

It will depend on the lender but your broker will know which lenders are happy to give all the cash without trying to control the IP purchase.

Normally, you'd have the equity in a separate split, then once IP1 is purchased, split the loan again to reflect the deposit.

I'd get the funds now while you can - you never know what the future holds in terms of regulations/valuations etc. As long as you're not going to accidentally spend it on shoes.

 

Always easier to get funds from the bank when not needed.

 

What Jess said. Makes sense to extract equity while you can as it may be harder to go back to the same lender to extract funds with new debt in place

 

Jess is right when it comes to you never know what the future holds, Westpac announced last week changes to their income policy and made significant changes to their assessment calculator which will penalize clients with existing home loans (love the American spell check)

I suggest speaking to someone about refinancing on to a better rate (as you mentioned you are on a high rate) and getting a pre-approval in place. If you would like to move quickly on an opportunity draw enough equity into a small interest only loan on the side (you only pay when you use it)

With the pre-approval you can set the amount to clear the small interest only loan at settlement of the new purchase (keeps things neat and if you opt for P&I repayments on the new purchase it will be at a better rate due to banks scrutiny on IO lending at the moment)

Most banks will honour the conditions of the pre-approval providing it is converted within 180 days (give or take depending on the Bank)

 

Get as much equity out now as you can and park the funds in an offset account. You won't pay any interest until you draw on the offset. This can be the deposit for your next purchase.
Absolutely get a pre-approval, but remember, it really is only an indication, and the bank can pull the offer at any time. I've seen people recently that have to pull out of a purchase because the pre-approval was not honoured. ALWAYS get a finance condition on any purchase contract.