Refinancing Check

Current Situation
- 2 loans with Bankwest are just about to come off Fixed IO from 4.29 to 4.74%
- 3 other Variable IO Loans with Bankwest have interest rates that have just nudged up to 4.79%
(All these loans are for 3 IP's)

- 2 loans with AMP are currently Variable IO at 4.32% and are due to go to P&I in August. (these 2 loans are in splits against PPOR for 20% deposits for IP's, ie tax deductable).
- Another IP loan with AMP that is variable IO at 4.62% that has about another 2 years before it goes P&I

- No bad debt
- About 620K sitting in offsets.

Proposal from Mortgage Broker:
- Payout loans against PPOR, effectively releasing title.
- Refinance all other loans with Westpac. Based on my serviceability, he has recommended:
a) 3 off the properties fixed IO for 3 years at 3.99%
b) I property variable P&I at 4.33%. This will be the property that will have the offset attached to it.
- I will still have approx 220K in the offsett.
- The interest and principal payments in this scenario will roughly be the same as the IO payments currently.
- My LVR will be sitting at 64%
- All vals have come in ok, calculators add up for this proposal
- Westpac will provide 2k per property (ie 8k) towards refinancing costs.

The other thing I should mention is that with AMP, I also have 400K in line of credit/ undrawn loans available - this was setup for the pending purchase of another property, but it never happened, so when the AMP loans close up, I will not have access to this money.

I suppose I have taken advice from many in this forum and preparing for this event, by ensuring that I was able to save up as much cash as possible, and I think it has paid off Also, the other thing thats happened is the loss of a reasonably paid job in automotive, and now in a similar engineering/management role, but with approx 30% pay cut at the moment.
- All vals have come in ok, calculators add up for this proposal
- Westpac will provide 2k per property (ie 8k) towards refinancing costs.

So, my question to all of you, does the above proposal sound reasonable. Is there anything I should be aware of, take note of etc......

Thanks,
J

 

Why do you want to pay off the loans secured by the main residence and discharge the mortgage?
Westpac rates are good, but ..

What is your aim here?

 

I don't think my serviceabilty will allow me to hold the additional loans.

 

Generally it may be better to have debt secured against the main residence rather than investment properties as you might get a better rate. However, the differential is decreasing these days - but could change in the future.

Do you have a main residence loan at main residence rates?
Your explanation is confusing to me.

 

Yes, the main residence loan is at PPOR rates. However, the only debt against it is for the 20% deposit amounts used to purchase IP's

 

whats the rates and amounts?

 

You might be able to get better rates by putting a lot of the debt against your PPOR, but there's also something to be said for owning your home outright. The rate differences are narrowing a lot these days anyhow.

At a glance I think this is probably a good plan.

 

!) 310K, IO 3yrs, 3.99%
2) 400K, IO 3yrs, 3.99%
3) 370K, IO 3yrs, 3.99%
4) 110K, IO 3yrs, 3.99%
5) 440K, Variable P&I, 4.33%

 

I wouldn't do that. I would leave at least a little bit of loan. Your Title is safe with the bank. A little bit of asset protection when you hide behind a bank.

 

Aren't titles electronically lodged these days?

 

As above, you could look at a lender that will price the PPR debt on security and not purpose (and get into the 3's)

 

not enough info to make an assessment I'm afraid.

 

When you say parity, best fixed P&I rate for PPOR is around ~3.6%, equivalent IP is still ~3.99% (some lenders are now at 3.89% when you push them). Are you suggesting this ~0.4% difference will close even further? As they say, back to good all days of investors paying no more than OOs? I remember those old Aussie ads with John Symons - ‘Why should investors pay more. Aussie changed it’.