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Selling a property used to secure another? (Not Crossed)

Discussion in 'Property Finance' started by albanga, 4th Jun, 2016.

  1. albanga

    albanga Well-Known Member

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    A mate just asked me this question which I wasn't sure off? Cant say I have seen it come up in my 2 years on these forums.

    Say I have a PPOR and a second 100k split was created to use as a deposit for an IP.

    I then have a seperate loan with a different lender secured against the IP.

    What happens if I want to sell my PPOR at which stage I will need to pay out the main loan and the 100k equity split secured against the PPOR which was used to fund the IP (deductible debt)??

    How could you keep this loan? Or is there no way? Sorry if this is a silly question and the answer is obvious.
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Doing this at the moment. Need to either pay that part out with sale proceeds or port it over to another property with equity available. Need advice from broker on which suits your scenario; Corey has proven excellent.
     
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  3. albanga

    albanga Well-Known Member

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    Yeah I was thinking about it and realized you could probably use another property if equity existed, if not then I can't see another way?
     
  4. Bran

    Bran Well-Known Member

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    I was only thinking about that this week. Multiple splits on multiple properties...
     
  5. York

    York Finance Broker Business Member

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    If you didn't want to pay it out, you would need to refi away from that lender before the sale. If the IP has built up enough equity, you could use that to pay out existing split secured by IP. If not, another property with enough equity. Get your friend to speak to a broker before making a move.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  7. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    Since when do you sell anything?
     
  8. D.T.

    D.T. Adelaide Property Manager Business Member

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    All part of the game plan ;)
     
  9. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    Good to see you can come to sell something lol
     
  10. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    You can port a loan to another security, if there is sufficient equity in another property. The primary details need to stay the same. For example if property A has Joe Blogs as the owner, you can only transfer it to another property with only Joe Blogs as the owner - so if the property had Joe's wife on the title also, a simple port wouldn't be acceptable.

    If there is any other changes, the loan can instead be refinanced out to the other security before you sell the asset - really important if you have a PPOR you're selling for another, to maximise your cash deposit funds available.
     
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  11. albanga

    albanga Well-Known Member

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    Thanks @Corey Batt
    @Terry_w also explains this in his tax tip, the very interesting one being you can secure it by a term deposit if not enough equity exists which I definitely think is the case for my friend.
     
  12. chylld

    chylld Well-Known Member

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    Term deposit as per terry's tax tip. Don't drop your sausage :)
     
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  13. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You can secure the split with cash from the sale with some lenders - the big 4 are mostly okay with it. The smaller lenders not so much.
     
  14. albanga

    albanga Well-Known Member

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    Just so I get my head around the theory of how this cash scenario would work:

    Scenario:
    PPOR Value = 600k
    Existing Loan = 200k
    LOC Loan = 100k

    Sell PPOR and minus costs receive 580k.
    Existing loan is paid out leaving you with 380k.
    The LOC is now secured against a term deposit of 100k meaning you have 280k for a deposit on your next PPOR?

    If you then find another PPOR at say 700k value would you need to use 240k for the deposit?
    140k for the 20% deposit + 100k that the LOC will be secured against?

    PPOR Loan = 460k
    LOC = 100k

    That would then release the 100k from the term deposit. Your other 40k would have been used for stamp duty.etc.
     
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