Should I delay LOC application until value adding is finished?

[4GH1RH]

I picked up the forms for an ANZ Equity Manager application today. As far as I can tell this is their LOC product that will allow me to access the equity in my PPOR. My intention for the LOC is as deposit(s) for IP(s).

As a part of the application PPOR will be valued. Here is the dilemma. I have a half finished granny flat on the lower floor. Would I be better off delaying the LOC application until the granny flat is finished so that hopefully the valuation will be higher and I can access more equity. I hope to finish the granny flat by January and then rent it out.

Thx

Cam

[Corsa]

Would I be better off delaying the LOC application until the granny flat is finished so that hopefully the valuation will be higher and I can access more equity. I hope to finish the granny flat by January and then rent it out.

Thx

Cam

Hi Cam

Depending on what the numbers look like (ie how much additional equity you expect to get from your half finished granny flat), I would get your LOC organised now based on todays valuation and then just get another valuation conducted when the granny flat is completed in January. Not sure about ANZ policies, but CBA have organised my LOC before and then revalued the portfolio at no cost to me and then extended my LOC limit.

That way you have access to your money now and then access to more money in January on completion. The nature of Line of Credits though is you have to be fairly strict on yourself otherwise you might end up dipping into your equity for "stuff" rather than just IP deposits but I am sure you have worked out how you are going to manage that.

The situation might be different though if ANZ charge for a valuation or a LOC limit increase so you might want to confirm there policy first as part of the decision making process.

Good luck!

Kind regards

Corsa

[4GH1RH]

Thanks Corsa, I am sure that I will have enough equity to acheive what I want in the next 6 months, I just did not want to have to pay another loan application or valuation fee in January. I will have to check that out with ANZ. I have a suspicion that they might try and suggest their BreakFree package which is meant for multiple loans structuring as far as I know, but I am not convinced it is good value, as it costs $150 a year, and from what I can tell they force you to have a gold Credit card which means more annual fees!

This might be a dumb question, but do I have to get the LOC from ANZ if they hold my current mortgage, or can I approach other lenders? My intention was to use ANZ for the LOC for deposits only, but to get the remainder of finance from another lender. I beleive this is to avoid cross collateralisation?

[Corsa]

....I have a suspicion that they might try and suggest their BreakFree package which is meant for multiple loans structuring as far as I know, but I am not convinced it is good value, as it costs $150 a year, and from what I can tell they force you to have a gold Credit card which means more annual fees!

I have looked up the ANZ Breakfree Package on the net, and on face value it appears to be comparable with the CBA Wealth Package.

Without knowing your situation, usually a package (formerly known as a Professionals package in most banks) provides customers with up to 0.6% off the interest rate, no application fees, no monthly fees etc, and you pay a package fee to get access to it. If you have been able to negiate 0.5% to 0.6% off, and pay no monthly fees or application fees...then you dont need this package. But if you havent, then it would probably be worthwhile getting a package particularly if you have planning on getting a few properties.....the $295 or whatever it is is usually is less than all the other fees if you cant negotiate them away....


This might be a dumb question, but do I have to get the LOC from ANZ if they hold my current mortgage, or can I approach other lenders? My intention was to use ANZ for the LOC for deposits only, but to get the remainder of finance from another lender. I beleive this is to avoid cross collateralisation?

If ANZ hold your current mortgage say you have $100k owing on a house worth $300k. And you are trying to get a LOC to 80% of your house value ($300k * 80% = $240k then LOC = $240k - $100k = $140k LOC = access to equity). Then you will have to get the LOC with ANZ...unless you refinance your house with another bank...which you probably dont want to do.

That way you have your LOC set-up with the ANZ secured by your home mortgage and access to your home equity. Then you can use this $140k as the deposit plus costs for each new purchase and just get a standard run of the mill loan with another bank or the ANZ, whoever is the most competitive.

Yep, that is the way to avoid cross colaralisation, sounds like you have it all worked out.

Good luck

Cheers

Corsa

[voodoo]

Hi 4GH1RH,

Why dont you have a look at St Georges website and their Portfolio Loan.
Your PPOR with a LOC is the main account and then you can take up to 10 sub-accounts off this.
Fees are about $10 mth per sub-account.
I have found this acc very good and easy with minimal fees.
The only down fall is you dont get points for using you credit card.

cheers

[pennyk]

Hi Cam,

We have the ANZ professional package - although it was called something different when we got it. I think we pay a yearly fee, but then the accounts and credit card are fee-free. Don't know if that has changed, though!

When we were looking at getting our initial loan, we had a loan approved with Westpac, that gave a better percentage rate off the loan. then we went back to ANZ and they matched it. So, once they have your business, they like to keep it and you can sometime negotiate better deals. Good Luck!

Pen