Refinance or best options

Discussion in 'Loans & Mortgage Brokers' started by Ronald86, 10th Jul, 2019.

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  1. Ronald86

    Ronald86 Well-Known Member

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    15th Jan, 2018
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    Location:
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    Hi all

    Looking for some insights on refinancing for cash flow/reducing debt.

    PPOR: 850k (joint)
    Loan: 650k
    Offset: 100k
    P&I 3.5%

    Ip1: 320k (me)
    Loan: 200k
    P&i: 4.5% (called bank and seeking better rate or otherwise refinance hence checking my overall options in this thread)
    Term: 13 years left ~ this was my first loan so I made it a 15 year term for some reason with a pretty high deposit. Loan repayments fairly high therefore vs rental income. At least option 1 is to make this 30 year. Ppor loan was obtained after this one with same lender.

    Ip2: ~350k (partner)
    Loan: 290k
    P&I: 3.5% or so
    30 years

    Are there any other better options I could pursue? Would I be better off going IO on IPs? Both IPs are in QLD and goal is to hold for long term.
     
    Ronald86, 10th Jul, 2019
    #1
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I'd refinance IP 1 to a 30 year loan term. This will reduce your repayments significantly. Given the loan amount, most likely a second tier lender with a basic loan will be more cost effective.

    It looks like your partners loan has been classified as owner occupier by the lender. I'd probably leave it as it is. If they reclassify as an investment loan, the rate is likely to increase.
     
    Peter_Tersteeg, 10th Jul, 2019
    #2
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Perhaps we can look at a more comprehensive strategy than just "loans n rates"

    On the assumption you have the capacity and risk profile to work with an active debt recycle strategy, to repay the home loan say 5 to 10 years earlier, the loan structure and lender mix may need to be different than what looks to be obvious now

    ta

    rolf
     
    Rolf Latham, 10th Jul, 2019
    #3
  4. Ronald86

    Ronald86 Well-Known Member

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    In layman's terms what would the active debt recycle strategy entail at a very high level?
     
    Ronald86, 11th Jul, 2019
    #4
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Using your advance repayments on your home loan to invest in income producing assets, in such a way that the borrowing becomes deductible

    say you have a 100 k home loan with a master limit facility

    start with a 90 and a 10 k split

    pay down the 10 k

    redraw from the 10 k buy shares/lic/etf/property - the new borrowing is deductible

    use the increased income from the 10 k to repay another 10 k from the 90 k

    Ask lender to lower 90 k limit to 80 k and increase the 10 to 20

    redraw from the 20 k limit buy 10 k of shares/lic/etf/property - the new borrowing is deductible

    Rinse and repeat.

    This is a rolls royce version, can be achieved with many a loan product but is easiest with Global Limits/ Master Limits

    Can save many years off a normal mortgage repayment strategy, but does have some increased risk and isnt for everyone.

    AMP and Macq are the best lending products for this in my view

    Please seek your own specific tax credit and financial advice :)

    ta
    rolf
     
    Rolf Latham, 11th Jul, 2019
    #5
    Ronald86 likes this.
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The repayments on this must be so high that you are well and truly debt recycling in reverse. This would be diverting large sums of cash from the main residence to the investment property and costing you potentially thousands of dollars in lost tax.
     
    Terry_w, 11th Jul, 2019
    #6
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