Refinancing two loans

Discussion in 'Loans & Mortgage Brokers' started by Do Androids Dream, 4th Sep, 2020.

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  1. Do Androids Dream

    Do Androids Dream Well-Known Member

    Joined:
    6th Jul, 2015
    Posts:
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    Location:
    Sydney
    Hello again friends,

    I'm a tad bit late to the party given the banks began dropping their interest rates some time ago but I'm about to take a big leap and refinance my 2 x IP loans and wanted to see what you all thought about my mortgage broker's proposal below.

    One of my questions is whether to keep IP #2 Loan 2 as P&I, or as IO. Previously I kept all my loans as interest only but with the changing financial landscape, I am wondering if my borrowing capacity for IP #3 and IP #4 may be increased if I begin chipping away at my debt?

    The hope is to purchase IP#3 450-550k later this year or early next year, and eventually IP #4 :)

    What are your thoughts? Anything I may have missed?

    Thanks in advance!
    -------------------
    Offset - 65k

    IP #1 - loan 265k, purchased 292k, val now 428k, LVR 63.10%
    Move from BankWest, IO (5% int) to CUA

    CUA - 2.79% pa, IO, Fixed 3 years, 30 year loan

    2k cashback

    Plan is to draw equity (around 70k) for next deposit.

    IP #2 - loan 325k, purchased 342k, val now 450k, LVR 72.22%
    Move from Liberty (5.28% int) to NAB, split loan into 2 loans, 30 years

    Loan 1: $100,000 IO for 5-year Variable @3.5% (Indicative Rate) - Offset account to be attached
    Loan 2: $225,000 P&I @ 2.49% for 2 years

    2k cashback
     
    Last edited: 4th Sep, 2020
    Do Androids Dream, 4th Sep, 2020
    #1
  2. Terry_w

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

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    Taking IO loans and converting them to PI over a longer loan term and lower interest rate could result in repayments close to or less than you were paying before but with 2 main benefits, which are repaying the principal and improving servicing
     
    Terry_w, 4th Sep, 2020
    #2
    craigc, Tyla and Do Androids Dream like this.
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Location:
    Gold Coast (Australia Wide)
    Much depends on where you are on the servicing spectrum.

    If IP3 and IP4 are a MUST for you, and you dont service at PI with APRA based lenders, Interest only generally can boost your borrow cap with the likes of Pepper and Bluestone, since they use actual IO repayments with a small loading, vs APRA lender which must use PI at an assessment rate of between 5.5 to 6ish.

    In this scenario IO on total debt increases borrow cap by at least 50 %

    ta
    rolf
     
    Rolf Latham, 5th Sep, 2020
    #3