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Use equity via LOC or cash - Is there a difference?

Discussion in 'Property Finance' started by andrew_dc, 27th Apr, 2016.

  1. andrew_dc

    andrew_dc New Member

    Joined:
    27th Apr, 2016
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    Melbourne
    Hi All,
    I have a P&I loan on my PPOR of $655K. I have 255K (cash) sitting in this loan that I could redraw as required giving me a net loan position of $400K. My house is worth 1.8M. I'm wanting to buy some IP's and want to maximize my borrowing capacity and ability to service the investment loans. I'm thinking of refinancing my PPOR loan with a different bank. Is there any advantage to me in paying down the 655K and establishing a new loan of say 420K with 35K sitting in a savings account for emergencies.... or is there little advantage/difference to changing the status quo from a borrowing and serviceability perspective?
    Regards,
    Andy D
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  3. dean2012ad

    dean2012ad Member

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    To quote a wise man....
     
  4. andrew_dc

    andrew_dc New Member

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    Thanks Terry ... From a tax perspective it makes sense... From a banks perspective in terms of me maximising my borrowing capacity does having a larger loan of 655k with cash in the loan or having a loan of 420k with no cash make any material difference ?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    From a borrowing perspective that would be assessed as an outstanding loan of $655k. If you paid $420k off the loan (and no redraw) it would be assessed as an outstanding loan of $235k. So there is a big effect on having large amounts of cash in offset accounts.