Downgrading PPoR - how does the finance work

Due to our unexpected change of circumstance and the sheer pain of trying to get a bridging lo-doc loan to build, I'm seriously considering downgrading to a cheaper but bigger house - and they certainly do exist, as there are lots of towns near here that are a lot cheaper than the one I am currently in - which just happens to be one of the most expensive here so it is actually doable to downgrade from a small 3br to a large 4br if we are willing to move again.

But how does the finance work? Do you need to apply for a full new loan or can you just do that 'security exchange' on the settlement days of both (assuming it is possible to get a sale and purchase to settle on the same day) and pocket any excess funds from settlement? Or does the bank take the change and make your loan smaller?

The price ranges I'm looking at are:

Current PPoR, worth around $180k, owing $80k. Secured by two properties, the other is the one I just rented out.
Looking at new PPoR around $130k mark, be nice to move the $80k loan to this one rather than getting a new, smaller one.
LVR of the new one needs to stay at 60%, although we have quite a bit of equity in the other two properties.

So basically looking at a $50k difference in downgrading, which if we get that back in cash sans selling fees I can then use to build on our land, which could put us in the rather nice situation of having a mere $60k debt on a $250k new build - can anyone say positive gearing?
port at 60 % lvr should be ok on th following assumptions

Same day settlement (though that can be fiddled with using term deposist in need depending on the lender).

That the security is ok for the lender in terms of type and pc

LVR the same or lower than original security

and a few other little oness which usually relate to loans with LMI

If you are propery stuctured the proceeds of the sale go to you.........but you can be in twouble sometimes where u are crossed up

We crossed the two originally when we bought the $65k one (which was valued at $90k a few weeks later) and needed the one at $75k as security, but that was over a year ago - now they are $180k and $85k, and by February we'll also have the $50k block of land unencumbered so we have so much equity it isn't funny. They could in theory be uncrossed *now* as the 'cheaper' one has tripled. When we have the subdivision through should I get the bank to revalue and uncross them?

How do you check the postcodes for the cheaper towns we'd be looking at? Is it even an issue at 60%? The two major candidates are Gladstone and Snowtown in SA, those two are reasonably big and have broadband/facilities but prices are being pulled down by one having an explosives factory in it that blew up a few years back and the other having some bodies in barrels or some such :rolleyes:

Wylie.........was totally intentional. I have been having so many issues with lenders of late that one has to take a Looney Toones approach to it


ask the lender for their postcode list

Might be an issue anyways at 60 % as you say

Broadband..........gee u know, one of my PAs is preggo and will be working from home

She lives in the Metro Brisbane area and has copper phone line but no ADSL of any sort possible. Pretty sad, my IT guy recckons coz Telstra doesnt wnt to put more infrastructure into exchanges while waiting for the NBN and instead are trying to push us to Wireless. at 50 g a month I dont think so

It is kind of funny that all these little towns out here have adsl or even adsl2, the really small towns you can get wireless with crap plans but 3Mbit speeds, and pockets of major metros right near the CBD have black spots :confused:
I thought Telstra was more public than not now and those DSLAMs would be paid for by the ridiculously exorbitant charges us Telstra customers pay ...

I'd call taxpayer subsidising if you could get 10G wireless for $20 a month not $169. With ADSL at least you can get good value plans from anyone other than Telstra.

But someone really needs to get rid of all the inner-city pairgain. Too many stories of people 5km from the CBD stuck on dialup, which was my point. You can be stuck on dialup in the middle of a big city as well as in a very small town an hour's drive out of the CBD.
Nah, the Government hands out a nice rebate to the country ADSL providers.
They are handing out money now too to the wireless providers to cover the city black spots now too so that problem will be all sorted out soon enough.
Learn something new every day. Good to see someone up there has realised there's a black spot issue, at least.

I wonder where you can find which towns are earmarked for ADSL ... Melrose has it and it is a tiny little tourist hamlet full of overpriced cafes and gift shops (I'd recommend the Blacksmith's Inn though, lovely food), and Snowtown is bigger, closer to Adelaide and doesn't, but then there's not much there either except extremely cheap houses. I wonder what criteria they use. Alphabetical? :rolleyes: