Refinance existing loan or borrow seperately

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pale ale
Member
@pale-ale
Join Date: 2011
Post Count: 6
September 27, 2011 - 9:23 am
Hi everyone, I have been studying these boards for a while now but cannot find an answer to my specific situation.
I have an investment property worth 380k, slightly negative geared. I currently only owe $13k as I have been paying extra into the offset. I can redraw $64k.
I would like to buy another IP, worth about 500k.
Is it better to just refinance my existing loan, or redraw the 64k and start a seperate new loan with a different lender?
I am not asking about competing interest rates etc. Just the issue of having two loans compared to one. It would be much less paperwork etc if it was all bundled into one loan.
Please give me some pros / cons in regards to having 2 investment loans.
Many thanks
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
September 27, 2011 - 11:14 am
Hi pale ale
If you do a search on "cross collaterisation" you will find a number of reasons as to why separate loans are a much better alternative compared to crossed loans.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
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Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
September 27, 2011 - 3:17 pm
As Jamie says but if you want it written out in black and white shoot me an email and i will send you an article extract i wrote some years back for the API magazine on such.
Some of the points might be slightly out of date but could easily be replaced with another dozen reasons.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
September 28, 2011 - 1:05 am
pale ale wrote:
Hi everyone, I have been studying these boards for a while now but cannot find an answer to my specific situation.
I have an investment property worth 380k, slightly negative geared. I currently only owe $13k as I have been paying extra into the offset. I can redraw $64k.
I would like to buy another IP, worth about 500k.
Is it better to just refinance my existing loan, or redraw the 64k and start a seperate new loan with a different lender?
I am not asking about competing interest rates etc. Just the issue of having two loans compared to one. It would be much less paperwork etc if it was all bundled into one loan.
Please give me some pros / cons in regards to having 2 investment loans.
Many thanks
There are a few other issues to consider such as tax. Since the existing property is an IP tax issues will probably no arise. You would just use redraw and have one big loan. You would the just have to apportion the interest between the two properties. If the first property was a owner occ you wouldn't want to do this though.
If you use redraw I would just take the deposit from this loan and then borrow the rest from another lender – or even the same lender. It is possible to use the same lender and not cross coll too.
Also, when you said you have been paying the loan off, I think it may be best to use a IO loan with a 100% offset account rather than paying a loan off. Paying loans off ties up you money and using an offset account can acheive the same result but in a more tax effective manner.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au