Refinancing ppor must I split loan?

I’m talking to a mortgage broker. My current loan amount is 392k but like 3.5% interest so I want to refinanace. I want to borrow 656k (80%) as My ppor has been value by the bank at 820k. To refinance my pops they say I can borrow 392k on the ppor rate 2.7 but the remaining 266k has to be an investment loan at 3.5%. Is this standard?

 

What will you be using the extra money for? Sounds like investment so most lenders would charge different rates - not all though.

There are also tax consequences if you don't split

 

I’d like to have the extra money available in case so will sit in the offser for a while in case I want to buy another investment property or maybe the Extra money will go into crypto and the share market. I may be naive but I didn’t realise it mattered where the money would go.

 

Given you're telling the banks the funds will be used for a future investment purchase, they'll set up the equity release portion as an investment loan since that's what the money will be used for.

If you don't split the loan then it would be very difficult to determine what the money is used for, leading to problems with tax deductibility.

Given the rates you're quoting, I suspect you've been recommended one of the Big 4 banks. There are significantly more competitive lenders out there. The Big 4 are useful if there's a quirky policy reason (short term employment seems to be on my radar a lot of late), but they are far from the cheapest lenders out there.

 

Yeah I’ve been recommended cba. Im up for using someone else tho if I can get better rates

 

I earn purely investment income, wife is on a good wage with no issues on short term. But we have a discretionary trust so not sure if smaller lenders dislike this. The other thing is some of our properties are regional. But ppor is Melbourne

 

Might be the investment income, is that just rental or is it other stuff as well? The rest of it is fairly straight forward.

 

rent, share dividends, share trading, income from the trust, they just listed me as unemployed on the application forms and said my income was zero so the serviceability was just from wife’s income

 

The rate given to the loan taken out is based on the usage of what the loan is used for. If youre using for investmnet purposes then you'll get investment rates.

There is a couple of lenders out there that will give you rates based on the type of security usage. Eg if you cash out of owner occupied property they will give you owner occupied rates.

But cashing out for share purchase isn't something most banks have appetite.

 

Do you know what rates these banks offer? Any chance you would share the names of them with me?

 

This is intellectual property or valuable knowledge, why don't you engage a broker?

 

I have engaged a broker

 

So what if I needed to cash out for overdue school fees, living expenses holidays, a new tv, new crazy expensive table, medical expenses, a substantial gift to a relative, could I release cash if it was for something like this?

 

Then there must be a reason why these products weren't offered.

 

None of those reasons would be acceptable reasons for cash out and in fact could be considered irresponsible lending eg. if you cant afford to pay school fees/living expenses then how can you afford to pay the extra loan repayments?

If you wondering why the Broker hasn't recommended other lenders then simply ask them, there will be a valid reason.