Refinancing investment loans

Discussion in 'Loans & Mortgage Brokers' started by bobbyj, 7th Nov, 2017.

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  1. bobbyj

    bobbyj Well-Known Member

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    Wanted to share with the good people on PC that I’m refinancing my loans to Virgin money

    Interest only
    Investment loans
    $3mil or so
    4.39% fixed for 2 years

    Anyone else fixing rates? What rates? Any issues with banks?
     
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  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Lots of people are fixing.

    Lots of banks are causing headaches :-( that’s nothing new though.

    Rates vary widely - especially for IP loans. Some lenders are beggining to price competitively in this space again though. If you’re willing to put that sort of volume of lending with one lender you should be able to obtain a decent deal.

    Cheers

    Jamie
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    I'm fixing heaps at the moment and have been for the last few months. There's some good deals, especially for P&I. Even IO is not too bad, the majors are at about 4.49% for 3 years. It's a good option especially if you're stuck in place due to servicing constraints.
     
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  4. Foreshadow

    Foreshadow Well-Known Member

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    How hard is it to obtain IO loans on refinances and new loans?

    Been out of the loop lately, last I heard was talk about pushing you into P&I. Did that end up happening?
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Sub 80 % lvr and if servicing is ok, its still doable, though some lenders that advertise lo IO rates, get you to apply, and then force PI are playing a dodgy game.

    ta
    rolf
     
  6. Kassy

    Kassy Well-Known Member

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    We refinanced some of ours so we could purchase a new Property earlier this year and got IO without a problem at 80% on those properties. Term was meant to be 5years though but ended up 3years. The property we bought has increased in value as have the other refinanced properties. Just waiting for 6months to go by and we are doing work at one of the properties(PPOR) so we can revalue and I can ask them to extend the IO term. Just something to watch out for.

    We have another property we didn’t touch so we still have some equity to tap if we need to. Servicing is our issue as I am working part time atm and am primary breadwinner, check your servicing if you can first...
     
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Obvious but GOLD !

    I see many plans where this resource hasnt been considered

    ta
    rolf
     
  8. Kassy

    Kassy Well-Known Member

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    @Rolf Latham we checked our servicing before committing but the rules changed as things progressed, everything got approved though but the 5year term became 3years.
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Didnt mean YOU :)

    Yup, dem changes on the fly can kill a deal real quikc


    I meant generally ; )

    1 in 3 planning enquiries we get, clients are well down the goals path yet cant readliy make it work just yet in the real world

    ta

    rolf
     
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  10. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    In LMI territory, yes definitely. Under 80% with most lenders it's all good as long as your borrowing capacity hasn't shrunk - with most lenders renewing or extending IO terms requires a new assessment even if you're not changing lenders. If you have a large portfolio it's worth having a review done on your lending to plan IO period ending and the potential that you may not easily be able to extend them.
     
  11. Mason

    Mason Member

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    I guess you can view being pushed into P&I as a bad thing but if you can take advantage of the lower rates then you're not losing a huge amount and paying off principal at the same time.

    Having said that, if you now go P&I on most or all of your loans then your buffer will be eaten away more quickly! Maybe in an ideal world you hedge your bets re P&I vs IO.
     
  12. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    The problem many investors face is that when reverting to P&I it's not over 30 years - it's usually over only 20 or even 15 which makes the hit to cash flow huge, especially when there's a few properties flicking over.
     
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  13. LaoBan

    LaoBan Well-Known Member

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    Lots of non-bank/union-backed/online-based lenders are now offering very competitive rates compare to the big lenders.
    The question is: what are the cons of using this type of lenders, other than probably worse customer service (?)

    Will it be harder to restructure/refinance loans with these smaller institutions?
    Valuations will be lower?
    I also read somewhere in this forum that using smaller lenders mean you are 'tied' to them with nowhere to go, even though I don't know what that means..
     
  14. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The serviceability and policies are of the of many of the smaller lenders is usually more conservative than the larger lender.

    The non-conforming lenders are a bit more open minded, but that's not where most people go for cheaper rates (because they're generally not cheaper).
     
  15. Ethan Timor

    Ethan Timor Well-Known Member

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    The issue for most investors with paying P&I on IPs is that it doesn't make sense for a taxation point of view. The P component isn't tax deductible at that FY and would have been better used to reduce principal of PPOR than of the IP so in that sense paying P&I on IP is a 'bad' thing.

    Alas, in our current APRA world, investors are forced to make decisions that are not necessarily great... :confused:
     
  16. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Yep fixing plenty atm.

    "Any issues with banks" is a bit of an oxymoron.

    Still doable but at 80% generally.

    Finding not a great deal of difference in repayments between IO and P&I on PPORs.
     
  17. Terry_w

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

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    It does make sense if PI rate lower than IO rate.
     
  18. Ethan Timor

    Ethan Timor Well-Known Member

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    Sometimes, I guess. Depends on borrower's tax rate and if funds could instead be used to offset non deductible debt?

    Anyway, it's not that PI rates are lower. It's that IO rates were made higher (banks thanking APRA behind closed doors I would presume?) o_O
     
  19. TreeChange@50

    TreeChange@50 Well-Known Member

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    Engineer, not an Acct so forgive me if i am misunderstanding the point here, but if one's choice was to pay an extra 0.5%, say $210 on a 500k loan at 5%, but using $500p.m. less in non deductible cash to do so, and that cash would cost the best part of say $1k to generate (at top marginal rate), wouldn't you be better off paying the io rate? Even at 38c/$ you're still in front. The $500 could then be used for deductible activity, or not withdrawn from trust/company, or put in super or whatever suits personal circumstances to maximise benefit and minimise tax liability. Example at today's rates, obviously there is a tipping point.
     
  20. Terry_w

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

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    I would argue you are better off with PI as the interest savings would be greater than the tax savings.
     
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