4.59% from Bank of Melbourne on 2.1M lending

[HiEquity]

2) I don't ever want to be in a situation where my exposure is that high that I'm over extending myself and squeezing every last dollar out of valuations to have an LVR < 80. My current LVR is more like 60. Others might have a different acceptable level of risk.

3) If a bank started ramping up their rates relative to the RBA, I'd likely look to refinance the whole lot anyway.

4) My situation is a little complicated as I'm using commercial properties as security against a new residential investment property. The interest rate difference between residential and commercial lending is even worse, 100+ basis points. Some banks allow 100% lending against the residential investment property with the commercial property used as a secondary security. To me this seems to be a reasonable trade off to get a residential rate but with some limited cross collateralisation.

After reviewing various options I ended up going with CBA @ 4.6% (1.3% discount)

I highly advise you to stick around this forum for a bit longer and have a look through some threads of people who went down the path you are following now. Some points to consider are:

- You should borrow as much as you can while you can on each property and stick the proceeds away in a safe place. That way when you lose your job, get sick, have long vacancies etc etc you have as much cash as possible to fall back on. The lower risk strategy is the one that puts the largest amount of money in your hands because no-one will lend you anything when you really need it.

- It can be very difficult to refi everything once the SHTF

- On your commercial / resi mix is looks highly likely you have given the bank far more security than they need to have. Give a bank a lot of security and you will get a low rate every time, regardless of whether it's a CIP or RIP. Doesn't make it a good idea though - unless you're the bank!

 

[Excess Research]

I highly advise you to stick around this forum for a bit longer and have a look through some threads of people who went down the path you are following now. Some points to consider are:

- You should borrow as much as you can while you can on each property and stick the proceeds away in a safe place. That way when you lose your job, get sick, have long vacancies etc etc you have as much cash as possible to fall back on. The lower risk strategy is the one that puts the largest amount of money in your hands because no-one will lend you anything when you really need it.

- It can be very difficult to refi everything once the SHTF

- On your commercial / resi mix is looks highly likely you have given the bank far more security than they need to have. Give a bank a lot of security and you will get a low rate every time, regardless of whether it's a CIP or RIP. Doesn't make it a good idea though - unless you're the bank!

I'll definitely take your advice and keep following the forums. There is always more to learn.

On the commercial / resi mix, the residential investment property was bought at auction for $850K and we have a commercial shop worth around $350K. The lending we are seeking is 900K to cover stamp duty etc. The commercial lending can only be a max of 70% so we are pretty close to the max LVR without LMI anyway. (80% of 850K + 70% of 350K = 925K).

To clarify, when I said I have an LVR of 60, that is total lending / total value of properties. Two of the properties are completely free of the banks. If I only include properties secured to a mortgage, it is more like a 78% LVR.

We also have liquidity in a share portfolio, a strong cash reserve in offset accounts, two good incomes covered by insurance and 10/25 years of continuous service in our jobs with lots of sick leave, so feel pretty comfortable with our situation.

 

[Rolf Latham]

2) I don't ever want to be in a situation where my exposure is that high that I'm over extending myself and squeezing every last dollar out of valuations to have an LVR < 80. My current LVR is more like 60. Others might have a different acceptable level of risk.

Finance risk is about perception

All else being equal a low lvr makes you a lower risk to the lender, but can substantially increase your risk, compared to against a surviveability structure

Ignoring the commercial security considerations for a minute.

if things get personally difficult for the borrower, which has a better surviveability ?


a) 600 000 loan at 60 % lvr or

b) 800 000 loan at 80 % lvr with 200 k in offset ( note NOT in LOC or redraw !)

ta
rolf