Hi guys,
I need some help. I've got a couple of simple questions but just need a bit of clarification. I turned my PPOR into an IP a few years ago, but before i did paid about $60 g off the principle. Is it as simple as refinancing for the same amount but over a longer period to reduce my interest repayments? Would The bank charge me for this?
Also have been looking around and other banks have lower variable interest rates, with offset options? Is this bargaining power for me? Mine is 6.68% for 2 IO's with offsets. I'm heading to the bank next week so just wanted to get some ideas.
Thanks
Dave
Hi Dave,
What is your is the loan amount of each property and the approx value?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Dave
You have repaid $60k. Taking it out will be new borrowings and deductibility will depend on what it is borrowed for.
2 loans is not much bargaining power, but you should be able to get a much better rate than this.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
6.68% is really high.
Depending on the loan amount, sub 6% on a variable rate should be possible at present.
What's the loan amount and value of each property?
If the combined loan amount is greater than $250k and the LVR's aren't in LMI territory than you can certainly improve on rate.
But as always – it's not all about rate and the sub 6% loan may not work for you.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Shahin, I'm in debt about $700 k , approx value $1m +.
Terry I didn't want to refinance to use the equity, I wanted to refinance at the same principle but over a longer period? I don't know where I heard this or if it even works?
Eg I borrowed $300 k to be paid back over 25 years. If I refinance my loan now of $240 k over 25 years, my repayments should be less?
Thanks guys
Dave
Hi Dave
If you want to reduce your repayments to improve your cashflow then just convert to interest only and make additional payments into an offset account rather than paying down the principle.
You can get a much better rate than what you have now. There are also some lenders that will provide you with a cash rebate to cover some (if not all) of the costs associated with refinancing.
Obviously a lower rate will also lower the repayments – and it would make quite a difference on that loan amount and your current rate.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
The lender with the cheapest rate right now is 5.81% if you LVR is below 75% which it is and the loan amount is above $200k which it is. They also have all the regular features like an offset facility etc.The difference to what you are currently paying is $400 per month. I would seriously consider talking to my current lender and getting them to price match or refinance your loan.
Also re extending the loan term – yes this can be done. The only condition is your age, i.e. you cannot extend the loan for another when you are 70 years old and have no exit strategy to show the bank.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Jamie, is sub 6 with offsets? I had a bit of a look around and anything that low didn't seem to have 100% offset. Come to think about it, I'm not really sure if I am 100 %
Cheers
Dave
You should change your loan to interest only if you are going to use the place as an investment. This will lower the loan amount.
You could get under 6% with offset accounts – 100% offset
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Dave@PI wrote:Jamie, is sub 6 with offsets? I had a bit of a look around and anything that low didn't seem to have 100% offset. Come to think about it, I'm not really sure if I am 100 %Cheers
Dave
Yes.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Just to add to all the above, you mentioned that one of the loans was a PPOR converted to an IP. Is the other loan your current PPOR? If it is, I would suggest you only have one offset account and it is linked to this.
As others have mentioned, with $700K in loans, there are plenty of lenders out there who can offer under 6% variable rates. 6.68% is way too high. You really need to negotiate with your lender, and if they don't come to the party, you can always refinance elsewhere (bearing in mind that there are more lenders than just the big 4).
Cheers
Tom
Sorry guys, I may have told a little porkie!
My rate is 6.08 not 6.68 whoops… So pretty reasonable I guess.
Yes both my loans are IP's now with offsets and I rent where I live.
So if I refinance my loan on a longer term to bring the interest down, will it make it more difficult to access the equity later on down the track? Is there fees for doing these sorts of things?
Also I'm tossing up my options with with 300k equity, is this just like taking another loan out? Will it affect me at all if I sell one of the IP's that it came from? Anyone got any ideas what I can do with the equity? I'm a bit nervous as will put me in quite a lot of debt?
Thanks
Dave
Dave
Interest is calculated daily and added to the loan monthly so extending the term won't result in reduced interest payments. It may result in reduced overall payments if PI, but you should really look at using an IO loan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Dave
There's a difference between actual equity and useable equity.
If your property is worth $1m and you have a loan of $700k – then the actual equity is $300k.
However, banks won't allow you to borrow up to 100% of the properties value – most will allow you to borrow up to 80% and some as high as 90%
So if you could take your loan up to 80%, then you'd have $100k that you could access ($1m x 0.8 = $800k). You then subtract your current loan amount of $700k ($800k – $700k) = $100k
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Dave,
You would of course also need to understand whether you could service the loan that proposes to use this equity. It's still a loan and has to be repaid… well the interest part anyway…
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Interest only is as low as your repayments will get, barring a reduction in interest rates.
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