Advice Please - Valuation & refinance

Hi All,

I am hoping I can get some advice please so I can plan my next move forward in my portfolio. I currently own 4 IP's and my PPOR. I am looking at possibly selling one of two of the poorer performers and buying another in Sydney. My current situation is this :

Property Loan amount Current Value Equity

Medowie NSW 330,000 350,000 20,000
Burton SA 390,000 460,000 70,000
Townsville 420,000 440,000 20,000
Caddens NSW 575,000 650,000 75,000
PPOR NIL 600,000 600,000

I have approximately 1.7M debt with about $ 185,000 Equity without PPOR or $785,000 with it. I refinanced with ME bank 18 months ago and we are locked in for fixed for 3 years. So if I refinance there will be penalties.

Q1. Should I get individual valuations on each of the property to gauge what is really happening ? I previously used HTW but they were very expensive. Any recommendations or is it a case you have to go to each state/place and find one there to use.


Q2. Releasing equity is often brought up here ? Is this an option or don't I have enough to worry about when you take my PPOR out of the equation.


Bit depressed about my situation. I have worked hard, had a decent crack but cant seem to climb the mountain. Not getting any younger either.

Any advice is greatly appreciated. Take care.
 
I suspect you've chosen ME Bank based on their cheap fixed rates, but there doesn't appear to have been any consideration to a good structure or a future strategy. :(

I'm going to hazard a guess and say that all of these properties are cross collateralised with your PPOR? If you want to move forward, you're going to have to refinance pretty much everything and remove the cross collateralisation. Unless you're willing to wait, this means you'll need to break the fixed rates.

Until that's done, it's going to be very difficult to access any of your equity for more deposits.

Getting more valuations simply for the sake of it is a waste of money. If you do refinance, new valuations will be done by the appropriate lender.
 
Pete's right, it's not an easy one to sort out without some (potentially significant) expense.

However, sometimes breaking the fixed rate can be worth it if it means you can clean up and move on with your life. You have to weigh up the opportunity cost of sitting around for 18 months waiting for the fixed period to finish.

Why not get a pay out figure from ME just so you know exactly what you're dealing with?
 
Thanks Guys, now where is that bridge LOL.

As they say it pays to have a good team behind you. Something I regret now.
 
fixed rate break fees can be tax deductable if the purpose is income producing. run the numbers, with the tax deductability, savings with a new cheaper rate, and being able to purchase another investment it might well be worth switching.
 
Breaking a fixed rate with 1.7m in debt and 18 months to go is likely to be quite expensive. I don't know how much exactly, but i'd hazard a guess it'd be 15k+.

Is your PPOR linked to your other mortgages? Did you pay any LMI for your IPs? If you didn't, its likely they used your PPOR as security.

If your PPOR is unsecured completely, you may be able to re-borrow against it as an investment loan. You could then use this as your deposits to move forward. If this is possible, do it all at a new bank and with the right structures.

Then in 18 months, revisit and uncross your loans. At the same time ensure that your broker is aware of a pretty big refinance on the horizon and has keep that in mind while you're planning your next steps.

Cheers,
Redom
 
Re valuations, brokers/bankers can order them upfront for free. Its usually done with the process of a refinancing. Re equity, based on your numbers, unlikely to have enough unfortunately.
 
Thanks Guys, now where is that bridge LOL.

As they say it pays to have a good team behind you. Something I regret now.

It's not too late and definitely not bridge material!

You're not alone here, we've all done things that in retrospect we'd do differently. Sometimes those mistakes are the turning point :)

There is hope here in the form of your PPOR.

In theory, you might be able to release your PPOR as security without needing to break any of the fixed rate loans.

What it would look like is ME would have to get the whole portfolio revalued to let you know how much cash/alternative security they need to release your PPOR.

Once you have that figure, you organise a refi of your PPOR and pay ME what they need at settlement.

You still have all your IP's crossed, but you home is out of the mix and you can use equity in your home to further invest if you so desire.
 
Here's a summary of what I think you need to do:

1. Decide if you want to make a move now or wait until the fixed rates expire. Contact ME bank to determine what the exit costs will be, this will help you with your decision to get started now or later.

2. When you're ready, contact one of the brokers to discuss more specifically how you can clean up the existing loan structure so it's more favourable. This should also reveal what you can actually do to move forward in terms of how much equity you can realistically access and what you can do affordability-wise to move forward. This all starts to build a more structured investment plan.

3. Clean up the loans on the properties you already have. The 'how' of this comes from the previous step. It's not an overnight process, it will take anywhere from 1-3 months depending on any number of variables.

4. Now you're in a good position to continue moving forward. You'll also have a better understanding of what you can do and how to do it. :)

None of this happens overnight, but things need to be fixed if you want to continue investing. Once everything is in place properly, you should be able to see a clear way forward.
 
Back
Top