Selling non performing property to buy new one

Hi all, I am currently assessing my property portfolio and identified a couple of likely non performing properties in terms future prospects with currently and near future trends so I am seriously thinking about selling it and buy something with better potential. I am currently maxed out serviceability wise. If I sell and buy equal amount, do I still need the rigid financial assessment and might not be able to buy the same amount or will it be easier? Thanks in advance.

 

If you bought when lending was loose, you may find that you are so far above the new max that even if you sell, you can't reborrow the amount.

Best to speak to a mortgage broker first.

Can asset substitution on a same day settlement avoid a full loan application?

 

I would probably speak to your mortgage broker, so many changes

 

Yes it will be reassessed as of today's assessement criteria.
Substitution of security might be possible though, and this could potentially allow a new property to be purchased with finance without needing to requalify.

 

When you say "might", are we talking about "if all the stars perfectly align" might or "it's generally possible but on the odd occasion it's not going to work out" might?

Just ball parking it here, what are the chances a reassessment is needed? If we're playing a game of musical chairs, what's the chance of that chair getting yanked?

 

Is the 'might' depending on the lender? i.e. some lenders allow substitution of security without a full assessment, and some do not?

 

And for lenders that allow it without a full assessment, is there ever a chance something might trigger one? Or is it pretty much a guaranteed thing they won't?

 

It will depend on the lender and the timing

 

thanks for the reply guys, I will call my loan manager @ CBA on Monday to check if that's possible under the substitution. Anyone done similar for themselves or clients through CBA?

thanks,

 

if settlement is with in 5 days apart you may be able to transfer security.

 

Usually they will need to hold the cash as a term deposit and use it for the security to keep the loan open - if you sell the first one before the other one settles. Thats why it won't work with non-bank lenders.

 

I would suggest to use a mortgage broker rather than direct to CBA. Very high chance you will be able to increase your borrowing capacity if you look elsewhere.

 

I think if they do a full re-assessment, our serviceability will be way down as my wife is only doing 3 days part time as to 5 days at the peak of our ownings. We have 2 young kids also so that will effect it negatively. The only way for it to work is that we can swap our security without trigger a full assessment, but looks like the settlement window is to small to worth the risk even if it's technically possible for some lenders.

 

What about using non bank lenders?

 

It's like 6 months isn't it?

 

Selling and making the most of your BC is generally a strategy worth considering.

Would need to do some detailed figures as the in/out transaction costs in property will distort the return profiles. As a general rule of thumb, the first ~6-8% of performance differentials will be eaten away in transacting.

Also in a moving market, the time difference to actually do these changes may push that up a few percentage points. E.g. sydney will likely move well past 1% MoM this year and in Q1, so the time difference in actually swapping assets can push that transaction cost higher.

Also note the finance limitations - you may need to re-borrow the funds, so will need to see what your capacity is like. Because you've already been lent the money, it doesn't necessarily mean it can be reborrowed on the same terms. The actual debt against the asset is part of the risk profile of the portfolio, so worth considering this part to it too.

Overall, deploying your leveraging capacity better may be worth the return/action of changing. Nonetheless, changing assets in property isn't the same as other asset classes - its costly and a difficult ship to move in a different direction.

 

We currently have a loan portability facility with Westpac after selling an IP for the same reason as the OP.

Facility (secured by TD) is for 6 months but in this market, not sure that's going to be long enough....