Somehow in all my reading of this forum I completely missed this scenario!
I was surprised when the bank's mobile lender (franchisee) said that I could move a part of the PPOR debt to a new IP loan to bring it up to 105% LVR, while keeping all properties with the bank under 80% LVR.
Here's a simplified 2-property scenario:
PPOR value $350k, loan of $150k. Offset has say, $40k.
New IP purchase, value $400k.
New loan, 105% IO, ie. $420k to cover purchase + costs.
The PPOR loan reduces by $100k to $50k, with offset still at $40k.
In other words, the new $420k loan is secured by multiple properties: $320k (80%) of the new IP, and $100k of security from existing PPOR.
The existing PPOR loan does NOT get refinanced or modified in any way. I really made sure of this! It simply gets reduced by $100k.
(my actual scenario is a little more complex - some of the offset goes towards the purchase, and there are more properties involved, but the principle is the same.)
I particularly like the way this maximises good debt, reduces bad debt and still retains an offset balance for emergencies.
Are there any pitfalls to look out for? I must be overlooking something but I can't find any. The bank already has security over all the properties involved so it's not like I'm signing away any extra leverage. There's no refinancing or other fees except on the single new mortgage.
I asked whether this involved cross-collateralisation. His response was that since the abolition of stamp duty in SA, "cross-collateralisation" as a concept doesn't really apply any more. Is this correct?
I was surprised when the bank's mobile lender (franchisee) said that I could move a part of the PPOR debt to a new IP loan to bring it up to 105% LVR, while keeping all properties with the bank under 80% LVR.
Here's a simplified 2-property scenario:
PPOR value $350k, loan of $150k. Offset has say, $40k.
New IP purchase, value $400k.
New loan, 105% IO, ie. $420k to cover purchase + costs.
The PPOR loan reduces by $100k to $50k, with offset still at $40k.
In other words, the new $420k loan is secured by multiple properties: $320k (80%) of the new IP, and $100k of security from existing PPOR.
The existing PPOR loan does NOT get refinanced or modified in any way. I really made sure of this! It simply gets reduced by $100k.
(my actual scenario is a little more complex - some of the offset goes towards the purchase, and there are more properties involved, but the principle is the same.)
I particularly like the way this maximises good debt, reduces bad debt and still retains an offset balance for emergencies.
Are there any pitfalls to look out for? I must be overlooking something but I can't find any. The bank already has security over all the properties involved so it's not like I'm signing away any extra leverage. There's no refinancing or other fees except on the single new mortgage.
I asked whether this involved cross-collateralisation. His response was that since the abolition of stamp duty in SA, "cross-collateralisation" as a concept doesn't really apply any more. Is this correct?