Join Australia's most dynamic and respected property investment community

Refinance on fixed loan

Discussion in 'Property Finance' started by Cash Flows, 1st Sep, 2015.

  1. Cash Flows

    Cash Flows Member

    Joined:
    18th Jun, 2015
    Posts:
    19
    Location:
    Gold Coast
    Hi everyone,

    I currently have an IP that has $100k fixed until 2019 and $70k variable.

    Property purchased for $185k and now worth $240k.

    Am I able to extract the equity on this while on fixed loan?

    Ideally i want to refinance to 80% and get the equity for anther IP purchase.

    Cheers

    Cash Flows
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,949
    Location:
    Sydney
    Yes you can extra equity while it is fixed. Just approach your lender.

    refinancing is also possible but that means breaking
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,091
    Location:
    Melbourne, Nationwide
    I take it you're worried that you'll have to break the fixed loan in order to access the equity?

    That's not necessary unless you need to change lender. You can simply increase your existing $70k loan or set up another loan account alongside the first one to access that equity. The best solution will depend on what the current loans are being used for and what the new loan would be used for.

    You'd only need to break the fixed loan if you have to move lenders. In most cases this isn't necessary.
     
  4. Cash Flows

    Cash Flows Member

    Joined:
    18th Jun, 2015
    Posts:
    19
    Location:
    Gold Coast
    Thanks for the prompt replies Peter and Terry. That all makes sense to me.

    I am still deciding whether the next purchase will be an IP or PPOR. Is there anything I need to look out for if I decide to purchase PPOR and use the approx $25k extracted equity?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,949
    Location:
    Sydney
    Just make sure you keep different purposes as separate loans.
     
  6. Cash Flows

    Cash Flows Member

    Joined:
    18th Jun, 2015
    Posts:
    19
    Location:
    Gold Coast
    Hey all,

    So I called the bank today to see if I can transfer securities in my IP loan.. Apparently I would still have to pay the break costs.. Is this correct?

    I am just weighing up my options and I am now thinking I might sell the IP to get more capital for my PPOR purchase.. the break costs are $5k so just trying to find a way around not paying it.

    Any info would be great.

    Cheers

    Cash Flows
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,091
    Location:
    Melbourne, Nationwide
    Depends on the bank. I've done a transfer of security on fixed loans with a couple of lenders before without any break costs.
     
  8. Cash Flows

    Cash Flows Member

    Joined:
    18th Jun, 2015
    Posts:
    19
    Location:
    Gold Coast
    Thanks Peter - I would have thought a small fee would be applicable to transfer the asset but not necessary to break the whole fixed loan...

    The loan is with ANZ. Have you had much experience with them?
     
  9. Angel

    Angel Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,277
    Location:
    Paradise, Brisbane
    Would selling costs be greater or less than the potential Break fee?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,949
    Location:
    Sydney
    Ask for a 'substitution of seccurity' for the loan. shouldn't have to break it
     
  11. Cash Flows

    Cash Flows Member

    Joined:
    18th Jun, 2015
    Posts:
    19
    Location:
    Gold Coast
    Hi Angel,

    Selling costs will come in at about $7k - Break costs about $5k.
    Selling will free up approx $70k for PPOR deposit.
     
  12. Cash Flows

    Cash Flows Member

    Joined:
    18th Jun, 2015
    Posts:
    19
    Location:
    Gold Coast
    Thanks very much for th reply Terry.

    I first contacted ANZ and they advised that a break free will apply.

    I will go back to them and ask about the substitution of security and see what they say.

    Cheer

    Cash Flows