Which option would you choose?

Discussion in 'Investment Strategy' started by AMB, 27th May, 2020.

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  1. AMB

    AMB Member

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    Hi to all

    I’m interested to get some opinions on a situation I find myself in.

    I’m refinancing loans for two properties I have with a new lender. Valuations have been done on both properties.

    Property 1 LVR 76%
    Property 2 LVR 83%

    I have three options.

    Option 1.
    Pay approx $3500 in LMI for Property 2 (have never paid LMI before and generally think you shouldn’t unless you really need to)

    Option 2.
    Reduce the loan of property 2 by $15k to make the LVR <80% (No problem finding the $15k. I’m more concerned with the tax implications)

    Option 3.
    Cross collateralise the two properties (I don’t have any of my properties x-colled right now and I’m generally against it)

    Which option would you choose?
    Thanks
    AMB
     
  2. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Either Option 1 or Option 2.

    For Option 2 $15k should be done as a separate split if one property is an Investment, the other is an owner occupier property. Obviously with this option you save $3,500.

    I wouldn't go for Option 3 - as it ties you in and may cause issues e.g. if values go backwards and you wish to sell one of the properties.

    Which one are you leaning toward?
     
  3. Terry_w

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

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    Option 4
    Borrow against Property 1, under a new split and pay down the loan for property 2.

    Will that be possible with keeping both loans 80%LVR?
     
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  4. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    A new option...get upfront valuations from other banks and hope for both properties come back high enough to be 80%
     
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  5. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Oops - I misread your Option 2.

    I'd go with what Terry is saying. Get equity cash out against Property 1, and use that to reduce LVR for Property 2
     
  6. AMB

    AMB Member

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    Thanks Terry. This is an option I never even considered. It would keep both loans under 80% so it should work. I'll see if there are any issues with that from my lender. Appreciate the suggestion!
     
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  7. AMB

    AMB Member

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    Thanks for offering your opinion. Without Terry's advice, I would probably have gone with Option 2 but now I think Option 4 is a great alternative.
     
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  8. AMB

    AMB Member

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    Thanks Tony. This was actually the fourth valuation done on these two properties. It was hard enough to get one of them under 80%, let alone 2. :) Amazing how vastly different valuations can come back from various banks.