Hi Shank

Welcome aboard.

What would you do with the money of you sold it?

Cheers

Jamie

No worries Mitch – my pleasure.

Since you've paid LMI it's best to try and stick with your current lender for the equity release – it will save you quite a bit since you won't be up for a new LMI premium.

Offsets are great – I'd recommend utilisng one regardless of whether your loans is set up as P&I or IO.

Does your lender to upfront valuations? If so – get one of those done first before you start injecting cash to reborrow.

Cheers

Jamie

Hi Mitch

Welcome aboard

An offset isn't a type of loan – it's a feature of a loan. It's like a savings account that saves you home loan interest rather than accumulating interest.

A lot of people set up their PPOR loan as interest only with an offset just in case they decide to rent out their PPOR one day – it preserves the principle balance so you have a larger loan to claim a deduction from when it becomes an IP.

Moving onto the other question – Richard mentioned that if you're looking to purchase an IP – it's best to inject your cash into the loan and "reborrow" it as a second loan split. It would then be used to cover the deposit/costs on your IP purchase. This would allow your entire IP debt (including costs) to be deductible.

In your situation, you might be able to do something like this:

Assuming your home is valued at $480k – the max some lenders will you to borrow up to is 90% of the loan amount which would be $432k ($480k x 0.9 = $432k).

Take the current $410k loan away ($432k – $410k) and you're left with an equity release of $22k.

If you haven't paid LMI on this loan previously, you'll be slugged with a whole new LMI premium. If you have paid LMI previously, you'll just have to pay a small adjustment fee to the current premium.

Now – if you've got $25k sitting in the offset – you could inject that into the current loan and "reborrow" it as part of the equity release – so now you're equity release has gone from $22k to $47k.

With $47k you should be able to purchase something – but it ultimately comes down to your plans, the value of the property you're looking to buy and your borrowing capacity.

Also – if that $25k is your only savings then I wouldn't drop it all into your next purchase. Look to hold onto some (if not all) for emergencies.

Hope that helps – if in doubt, get a decent finance person to sort this out for you.

Cheers

Jamie

Hey Ezz

welcome aboard

Why are you looking to change lenders? Which lender are you preapproved with?

Cheers

Jamie

Hey Krystal

No probs – this article I wrote for API magazine explains your scenario in greater detail.

Cheers

Jamie

You're asking the wrong people.

If you ask the bank – they'll tell you x-coll is fantastic!

Cheers

Jamie

Don't worry – I'm sure it makes you look very distinguished

I'll join the grey haired club in 20 years time …..although the banks are doing their best to get me there sooner.

Cheers

Jamie

Co-broke. When two friends become poor together? 

Ok that was lame. I'll see myself out.

Cheers

Jamie

Hi there

Welcome aboard

Just avoid crossing – it's a massive pain in the backside. Your banker (and some brokers) will try to reassure you that it's fine to cross – but that's nonsense. 

Uncrossing loans can be as much of a pain – so it's important to set it up correctly from the start.

Cheers

Jamie

Hiya

They'll have to pay the agent commission regardless. It's also a bit harsh IMO – whilst some agents are a pain in the a** – there are some decent ones out there who are simply making a living.

Cheers

Jamie