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Refinance Portfolio loan facility

Discussion in 'Property Finance' started by The Falcon, 28th Mar, 2016.

  1. The Falcon

    The Falcon Well-Known Member

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    Hi Guys,

    Keen to get brokers thoughts as to what is being left on the table.

    currently 4.75% on SGB Portfolio facility size $1.2m, split between family trust and PPOR. As part of refinance would need to continue split loan facility but priority more around paying down PPOR debt, so would not be drawing further on trust account, so could fix a limit on that loan. LVR is 40%.

    Would something like this be able to be refinanced at 4.25% or lower?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What do you mean by split between trust? Is the trustee a borrower or did you on lend to the trustee?

    If you are the sole borrower you should be able to get owner occupied rates and 4.25% or lower.
     
  3. The Falcon

    The Falcon Well-Known Member

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    Trust is co borrower. In a portfolio loan facility I can sweep equity from joint names to trusts loan. I am happy to have this facility set though so treated as 2x loans without the ability to sweep equity from PPOR to trust.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Assessing equity and directing those funds to a trust isn't a function of the portfolio loan, that's a function of lender policy and an accounting process. The master limit of a portfolio loan is also subject to these restrictions. Portfolio loans do have their uses but unless you're actively using it as part of a debt recycling or similar strategy, they're a bit expensive.

    Understand why you've taken the portfolio loan in the first place. If that reasoning is still no longer valid then there's probably better deals available.
     
  5. The Falcon

    The Falcon Well-Known Member

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    forget the portfolio loan. What's doable with PPOR loan with LOC in trusts name attached, trust being listed as co borrower. Looking to reduce IR here.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Seek legal advice on your set up first. Some possible issues.


    If the loan is split into different names then you would need to refinance into these names from a tax and trust law ooint of view.

    You wont be able to get home loan rates for a trust loan on refiancing either.
     
  7. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Pending confirmation of the exact setup of the trust/personal borrowing - likely to be able to have the averaged rates between the two facilities to be <4.25%.
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Only the entities on the title of the property can be borrowers, so odds are the trust can't be a co-borrower.

    That doesn't mean that income from the trust to the borrowers can't be used to demonstrate serviceability. As long as there's evidence that distributions have been made in the past (tax returns) or that the trust and borrowers are essentially the same (may need to refer to the trust deed), then the trust simply forms part of the borrowers larger financial picture.

    Additionally you can borrow money and pass it onto the trust. The specifics of how is up to the accountants.

    I thing the scenario being described is really one of borrowing against equity in a home when you're the benificary of a trust. It's quite a common scenario amoungst the self employed and investors with large portfolios. Not a big deal as long as the paperwork is in order and the rates are deifitely lower than what you've currently got.
     
  9. The Falcon

    The Falcon Well-Known Member

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    Cheers Peter. Trust is not on title but is co borrower with us guaranteeing trust debt (home equity security)

    I'll give my accountant a buzz and we may just settle on a private loan to trust. Thanks all