Advice needed - how to access equity

[Banawarra]

Hi there,

After some advice for my situation, hope the wise heads here can help me

I am wanting to access equity from my property (which is also our PPOR) to purchase a few more IP's. I am looking to get out early to mid $200k.

The main issue is my property is a farm, it is financed by a business loan, and it produces an income. The interest is claimed as a deduction as we run a small primary production business as well as earn income from a full time job.

The property is worth around the $500k mark. The business loan is IO and was originally for $315k but has a balance now of $85k. There is $230k available as redraw now. My issue is redrawing this it can't be keep separate from the 85k owing and it becomes messy as to the use of the funds.

Being a business loan the interest rate is closer to 7% and not as attractive as a residential loan. My bank have given two options, the first as I mentioned above is the redraw. The second it a seperate loan to the $85k but as it is a business loan the rate is around mid 7%.

If I went down the refinance route what is the timeframe from the first enquiry with a broker if I had financials ready to go, to getting the money in the bank? Are we talking a matter of weeks or over a month?

I also have around $100k in the bank that I was saving to keep the wife happy with a Reno, without wanting to use this up is one option to pay off the loan and start with a refinance from scratch.

The loan is with a major bank, that might be blue in colour, if any broker has an idea of any of their products.

 

[Peter_Tersteeg]

From what you're suggesting, you're implying that a 'refinance' will get you a residential loan product to access your equity? Unless your farm is small enough that it sneaks in under some lenders residential policy, this isn't going to be the case. It's a business loan because of the nature of the security property. An equity loan won't change this.

Probably the simplest move would be to split the existing loan into two parts. One with $85k owing (as you are now) and the other for $230k that's essentially paid off. You can then use that $230k as an equity loan to fund some IP deposits. It'll still be a business loan on business rates, but at least you've accessed your equity in a structured manner.

 

[Rolf Latham]

Size does matter.

if your place is hobby farm, and the current and new loans can be serviced by "off farm" income you may have access to resi based lending with rates close to the 5s

I have seen to 400 + acres get in under this rule.

ta
rolf