hi all. I’ve never had to refinance before and i’m a little hazy on all the ins and outs. My current situation is this. I have $195 000 left owing on a loan that started at $206 000. My current fortnightly repayments are $600. Is it possible to get another loan for the amount owing [$195 000] and thus reduce my fortnightly payments? Hope this question makes sense and thankyou to all who can throw me a bone!
$$financial freedom by 30$$
Yes it may be possible, depending on your income etc.
You could reduce your repayments by one or more of the following:
– increasing your loan term
– changing to IO
– finding a cheaper interest rateTerryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
monopoly man Posted – 22/12/2005 : 20:17:36
hi all. I’ve never had to refinance before and i’m a little hazy on all the ins and outs. My current situation is this. I have $195 000 left owing on a loan that started at $206 000. My current fortnightly repayments are $600. Is it possible to get another loan for the amount owing [$195 000] and thus reduce my fortnightly payments?Hi mm,
I have just re-financed for that amount and my monthly repayments are $1151.11 (which becomes $531.28 per fortnight). this consists on one I/O loan of $27.5K and a standard variabl rate P/I(negotiated down) of $168K. Both loans are over 30 years with the I/O loan being fixed for 3yrs.Hope that helped. BTW I am making $1200/month payments on the P/I loan on a fortnightly basis to get ahead faster! This way, the estimated pay-out time for the P/I loan is 18 years. [thumbsup2]
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonDon’t let reality be the benchmark for your Dreams
I am making $1200/month payments on the P/I loan on a fortnightly basis to get ahead faster! This way, the estimated pay-out time for the P/I loan is 18 years. [thumbsup2]Hi Calvin,
I appreciate that investment beliefs etc are different but have you considered the possibility of I/O loans instead of your existing arrangement.
Using 7% interest rate and converting your $168K loan repayments to I/O will reduce your repayments to $980/month. This then leaves you with an additional $220/month towards other investments.
This $220/month will enable you to hold another property in most instances – even a NG one at that.
The long term effect is significant.
Assume the property was bought for $200K and it doubles twice in 18 years (keeping it simple)
This means you have an asset base of $800K. Ie $200K + $200K + $400K = $800K – nil debt = net $800K
If on the other hand you used these additional funds to hold another property and you purchased property to the same value.
Using the same doubling twice example you will end up with a net equity position of $400K + $400K + $800K = $1.6m – $400K debt = net $1.2m.
The power of compounding growth and a larger asset base extends the ‘gap’ even further. Certainly food for thought.
As an aside you can always make your loan interest only but, if you prefer, make P and I payments. This gives you a little breathing space should you need it.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958I’m with Derek and prefer Interest Only; at this stage I’m not too interested in reducing the principal..
If need be you can have IO-FI Loans with the ability to pay a lump sum each year anyway, the Bonus is the payments are less each month, giving you additional income to invest with as outlined by Derek
Additionaly how much equity have you got Calvin, you may be surprised at what you can do..
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Derek & redwing
I honestly never considered your alternative! Bit surprising actually, thought I had it all figured out! [baaa]
I would prefer, for the moment, to pay down the Principle. Depending on how things go, say in the next 12 months, I might very well reconsider as it is a powerful argument you have put forward.
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonDon’t let reality be the benchmark for your Dreams
Originally posted by calvin@thirty4:I would prefer, for the moment, to pay down the Principle. Depending on how things go, say in the next 12 months, I might very well reconsider as it is a powerful argument you have put forward.
Hi Calvin,
Whack the surplus into an offset account. This means you reduce the monthly interest bill while retaining easy access to the funds should you need them in the future.
If you do want P and I have you considered the $27.5K loan for P and I?
This will pay this bit off faster meaning you can increase your equity levels even quicker and gets rid of a serviceability issue in the future. Offset even better.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Stop it Derek! – you making me look bad! LOL
I might have to go away and think this whole thing thru a lot more! I must admit I’m feeling a litle foolish right about now.
The 27.5K is fixed for three years so I’d have to look into seeing if it is worth it. Damn it ……[grrr]
Not at you, just at my own stoopidity.
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonDon’t let reality be the benchmark for your Dreams
Hi Calvin,
No problem – while I may be making some suggestions to you and they could enhance what you are currently doing it must be said that you have made the most important step of all – bought an investment.
The rest is all ‘small stuff’
Cheers – enjoy the Hedland summer.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958hehehe, just came back into the door from my Bus round (jog #2) and had some time to think about what was said earlier.
I love the way my subconcious is working! Wish the rest of my brain worked that well, hehe, anyway the reason for our current setup is that the $168K is for the PPOR, plus payout of our Personal loan, plus some minor imporvements on our home while the $27.5K is a deposit on an IP.
The idea is that the non-deductible debt ($168K) is to be paid of as quickly as possible thereby reducing the debt fast. While the Tax deductible debt ($27.5K) can remain as is (I/O) to further the increased debt reduction of the nondeductible loan. I don’t know why this had escaped my mind (doesn’t say much for my mind!), but that is the plan.Now if I combine that with your suggestion, turn the PPOR loan into an I/O in say 12 months, that would allow us to buy something in the vicinity of $225K. Any improvements on that amount?
Hmmm, food for thought! [headphone] …listening to Stay Alive, the remix…
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonDon’t let reality be the benchmark for your Dreams
I know you’ve been doing up your place Calvin, any idea of the current value?
If you can ascertain that then post the value vs the loan I’m sure that Derek and some of the great brokers here can give you further options, as I said before you may be surprised at what you can do (look out 2006)
Have a great New Years !
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOriginally posted by calvin@thirty4:is that the $168K is for the PPOR, while the $27.5K is a deposit on an IP.
C@34Hi Calvin,
A minor [exhappy] detail overlooked in your original post – I thought the two loans were for investment purposes. I will modify my original comments somewhat.
Retain the $27.5K loan as it is fully deductible – do not pay this out at this stage.
I must admit I am a pay off your home as quickly as possible type person too however I have been rethinking this too. At the moment I am leaning towards I/O with the excess (about $1200 month) being thrown into other investments.
When the time comes to retire flog one IP and pay out this debt. If I make the sale in a low/no income year [exhappy] I will minimise my CGT liabilities.
We currently put all our income (wages and rent) into our offset account which is linked to our home loan and buy as much as possible on credit card (requires discipline) and sweep the cc on the due date. This way we maximise our inroads into the home loan thereby paying it down much quicker.
But as I indicated in an earlier paragraph we are rethinking this and looking at the benefits of I/O on our home loan.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Cheers Guys,
estimated value of our PPOR should, when finished, br close to 250 maybe 270K. We have big back yard and now it’ll be finished and fully self-maintaining (except the lawn mowing).
We got 220K for the unfinished product so finished all nice’n’pretty should come in at the expected prices above. Other houses, not as nice and fresh as ours got that much, so , as long as the market trend doesn’t change when we have it re-valued, we should benefit from our efforts.All I need now is a good paying job to keep the momentum going and we might just get IP#2 before the end of 2006!
I’m pumped![suave3]We currently put all our income (wages and rent) into our offset account which is linked to our home loan and buy as much as possible on credit card (requires discipline) and sweep the cc on the due date. This way we maximise our inroads into the home loan thereby paying it down much quicker.But as I indicated in an earlier paragraph we are rethinking this and looking at the benefits of I/O on our home loan.
Derek, the off-set account would have cost me another 0.15% in interest and our MB suggested that unless we had a balance of 10K or so in it it wasn’t really worth it. And, at this stage, we wont! so we didn’t go with the off-set, but it is definitely on the cards very soon!
I do like the idea of the I/O for a PPOR though, just not quite there yet to be able to sleep at night (SANF). Give me time, I’ll get there.Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonDon’t let reality be the benchmark for your Dreams
Derek
If you are paying PI you could always withdraw money (lif you loan allows it) and then use that for investments. This way you are paying your non-deduct debt down too. If you pay IO and leave the money in an offset, then when you use it the interest on the home loan goes up again.
And on retirement, have you thought about flogging your home and moving into an investment ppty. That way you avoid CGT altogether. This would depend on what your investments are like compared to your home.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
We do have free redraw capacity and have used this to fund investments through reduction of the loan limit (after allowing some breathing space for ‘bad times’) and ‘transference’ of the equity into equity loans/loc.
Might be a little convoluted but it does clearly distinguish between personal and investment expenses, on paper and also in my bookkeeping processes.
If I even dared suggest that we flog the PPOR and move into one of our IPs at retirement I am sure the wife will dislodge my reproductive organs and reassign their normal place of residence. Not a pleasant thought.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958I must be tired..
Why has Calvin got the 27.5k Loan..is it for when he is ready to buy an IP?
The other Loan $168k is P&I
(7% @ 25 yrs is $273.79 p/wk or $1,187.39 p/mth)PPoR is $260k for arguments sake when completed and total loans are $168+27.5k =$195.5K
LVR = 75%
EQUITY= $64.5kIs this correct or do I need coffee?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Redwing,
Calvin has an IP in Nollamara (from memory)
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958redwing Posted – 02/01/2006 : 08:32:20
I must be tired..Why has Calvin got the 27.5k Loan..is it for when he is ready to buy an IP?
The other Loan $168k is P&I
(7% @ 25 yrs is $273.79 p/wk or $1,187.39 p/mth)PPoR is $260k for arguments sake when completed and total loans are $168+27.5k =$195.5K
LVR = 75%
EQUITY= $64.5kNah, you’re spot on! Although the initial valuation has been only $220K and I am looking for something more once we get revalued after the end of our current reno stage. Around the corner is a 3×1 fully fenced, not in great condition, but it was valued at $250K so I am hopefull.
Derek Posted – 02/01/2006 : 10:01:35
Hi Redwing,Calvin has an IP in Nollamara (from memory)
Right also, and the $27.5K is the deposit for the IP in Nollamara. I ummd and Ahhhd but my wife was ready to committ to it and I had not seen that before. Looking into it there was nothing that showed up as bad and even though it isn’t an outstanding performer, it got us started. I have my wife’s support and that means a lot. [strum]
Time for sleep, hope that helped.
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonDon’t let reality be the benchmark for your Dreams
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