Security substitution/ loan porting

Hi all,

There’s very limited info out there on the subject and many lenders themselves are confused so I hope to gain some better understanding on here!

I have a property in an estate we built in 2016 as a FHB (northern Goldcoast - had little deposit etc) a ton of land around and won’t perform in the foreseeable future.

We had a valuation done 12m ago which come in at $650k - with current loan of $575k so about 89% LVR

Im wanting to sell this place and purchase in Brisbane, as we have our last 2 Buy & holds.

Issue is we would be realistically selling for $620k approx as the market here isn’t strong. -

This brings me to the confusion of substitution, selling for $620k minus fee’s would leave $600k on a loan of $575k

Can we purchase for $575k or less and transfer the loan across as security or would we then have to come up with an extra 11% deposit to keep the LVR at 89%

IE new purchase of $575k
11% deposit $63k
New variation loan of $511k
(No LMI as we paid huge LMI at a 95% lend originally)

OR

Can we purchase for $575k
Loan ports and takes security over new address leaving outstanding loan amount the same.
Only having to come up with stamp duty and fees for example

Would appreciate any info or knowledge to see if it’s a viable option

 

in theory if you replace that security with a new security of the same value or more you can substitute. You will still have to come up with extra costs.

 

So theoretically

Sell $620k
Minus costs leaves $600k
Current loan $575k only leaves 25k.

Without putting in anything extra, to keep loan at 90% LVR. Could only substitute to a $250k purchase with the $25k deposit left over.

 

If the value was $650k when the loan was done you would probably have to substitute a security of $650k or more to keep the loan at $575k.

You should get specific advice.

 

Thanks Rolf. As you know I’m dealing with Rams - which tend to not be very sophisticated and actually didn’t even know what it was until they asked 3 people in the business. At a high LVR I can’t move either unfortunately Other wise I would’ve come and seen you again. Cheers

 

Technically you could go back up to the original LVR of 95% if your LMI premium was not capitalised (ie borrowed on top of your original loan).

With $600k in hand, you could purchase a $575k property and use $28,750 to reduce your loan to 95% lvr ($546,250).

 

That is exactly the answer I was looking for thank you, I’ll explore that as an option. I remember the LMI was huge at around $21k and was capitalised from memory. So we may need to re jig and go lower but I’m not opposed to the idea of spending less and could easily go to $500k

Cheers

 

No problems Codie. It would be a good idea to put through the substitution request and request to talk directly to the assessor. That way you can ask what the exact pre-cap LVR is and do the numbers with them.