2nd home loan options

[airofu]

Currently I have my PPOR home loan with ANZ which I do not mind keeping - I am wanting to upgrade to a bigger place as my PPOR but keep my existing place as an investment property using that equity as a deposit for this new loan. My main question is how should I best structure the 2 loans?

Is it better/worse to get the 2nd loan with ANZ still - have it seperate to ANZ? (Does this make any difference in the process of have financial diffulculties at some stage/bank control?) Thanks

 

[Rolf Latham]

Hi Air

Hard to say without more info

In general, lenders will suggest one large loan to cover the purchase + costs secured over both places is the way to go.

Generally, most brokers would split it into 3 loans

the current loan on the PPOR, now to become IP secured only to the old place

a new loan for deposit and costs ( say 25 %) secured to the old place only

a new loan for the purchase ( say 80 % ) secured to the new place only

Be aware that you may be able to gain significant financial advnatge by structuring things for YOU, not for the lender.

ta
rolf

 

[Jamie M]

As Rolf said - and convert current loan to IO if not already.

Cheers

Jamie

 

[citystar]

Hi Air,

I went through ANZ with both of my first two investment properties. I found the process straight forward. Got the first property revaluated (for free due to Breakfree package). They sent loan documents for the Line of Credit Equity Loan which I planned to use as the deposit for the second property. I pay an extra 1.5% on this LOC compared to the standard variable interest rate. You can organise the LOC for the deposit and the second mortgage at the same time however if one of them is slower than the other it could create complications you don’t want. I was lucky I carefully read the loan documents for the second investment property because it was written using both properties as security which was not what I had discussed with the mortgage broker. A few emails later and one express posted loan document arrived that only used the second IP as security for its loan. Just don’t make the mistake I did with the LOC. I had asked the broker to link it to my offset account for automatic drawing of the interest fees however this is not currently possible. So a week after the first end of the month I receive a call from ANZ advising me I was overdrawn to my surprise. I setup a monthly reoccurring transfer from the offset to the LOC to cover the estimated interest repayments. The Line of Credit is automatically IO, just make sure you ask the second loan to be setup as IO otherwise it can be a minor hassle changing it once it is already established.

 

[Rolf Latham]

At ANZ that minro hassle means a full new credit critical app, new pays etc etc
: (


ta
rolf

 

[airofu]

Thanks - so what are the various loan types and general terms % rate/term for the ways I can use my equity/money for a deposit?

EG. LOC, Supplementary loan, refinance current loan?

 

[Marty McDonald]

You can do a loc (bit higher rate) or just use the standard variable rate loan I.O. with offset account (slightly better rate). The flexibility of the loc means no reapplication is required at any stage, wheras with ANZ at the end of the 5 year interest only period on the standard loan you need to submit a full application again if you want to extend the interest only period further. I prefer loc personally but standard loan is a bit cheaper. Both can be taken under the breakfree package.

I wouldn't bother with the supp loan that's more for buying depreciating assets it's like a personal loan at standard variable rates.