Help me restructure my lending

Hi, I want to save some money on my biggest expense - interest.

Currently I have 4 loans

3 loan of $280k with Macquarie at 4.54%. The properties these are against are worth $420k, 380k and $370k.
1 loan of $280k with AMP at 4.52%. This property is worth $430k.
1 LOC loan with CBA against my PPOR of $260k @5.1%. This is fully deductible as the entire loan was for deposits on investment properties.

I am currently overpaying the LOC loan as I want to be rid of it. I am not currently planning on buying more investment properties as I am diversifying into shares (currently with some unrelated income I have from an overseas investment property).

I need to find the best way to reduce interest charges and be free of the LOC. The plan is then to use the money that I was previously using to overpay the LOC to purchase more shares.

The highest charges are on the LOC, but it is my in/out transactional account for all my investment properties.

Am I doing the best I can, or is there a more cost-effective way to finance?

Thanks for any advice.

JB
 
Hello Bond,

Have you spoken to the lenders about lowering their rates? That's usually a good first step, as they're all very competitive with pricing at the moment.
 
You've got a huge equity position, so there's any number of ways you can probably go about this. The best solution is going to depend on what your future plans are and how the rest of your financials looks towards meeting those plans.

If all you want to do is purely remove cross collateralisation, the solutions are fairly simple.

* Switch the CBA LOC to an interest only loan. This should be fairly quick and easy. Get an offset account set up against it. This should save you a bucket in interest. How deductible this loan is will depend on exactly what has gone 'in and out' previously.

* Do a partial release of security for each of the Macquarie loans so you remove the cross collateralisation. I'm assuming that they are crossed (they might not be). It might be possible to negotiate slightly better rates, but what you've got is reasonable.

* The AMP loan is already stand alone, nothing appears to be needed there. AMP can be tricky to negotiate with.

All this requires no real credit assessment or applications. It's quick, simple and cost effective. If you want to release equity as well for future purchases, that can probably be done but would require more effort and probably a bit more planning.

What you've got is competitive, but not the absolute best deal you could get. That might involve consolidating everything with a single lender. There's plenty of reasons why this might not be the best outcome and the costs of refinancing everything probably aren't worth the savings you'd get.
 
Thanks, just to be clear, there is no cross-collateralisation, and everything is deductible as my PPOR was fully paid for before I opened the LOC against it to pay deposits on the investment properties.

JB
 
Hi, I want to save some money on my biggest expense - interest.

Currently I have 4 loans

3 loan of $280k with Macquarie at 4.54%. The properties these are against are worth $420k, 380k and $370k.
1 loan of $280k with AMP at 4.52%. This property is worth $430k.
1 LOC loan with CBA against my PPOR of $260k @5.1%. This is fully deductible as the entire loan was for deposits on investment properties.

I am currently overpaying the LOC loan as I want to be rid of it. I am not currently planning on buying more investment properties as I am diversifying into shares (currently with some unrelated income I have from an overseas investment property).

I need to find the best way to reduce interest charges and be free of the LOC. The plan is then to use the money that I was previously using to overpay the LOC to purchase more shares.

The highest charges are on the LOC, but it is my in/out transactional account for all my investment properties.

Am I doing the best I can, or is there a more cost-effective way to finance?

Thanks for any advice.

JB

Refinance each portion of the LOC into the respective loans secured by each IP. e.g. If you borrowed $20k from the LOC and $80,000 from AMP to finance a $100,000 property then incorporate this $20,000 loan into the AMP loan by increasing it.

Free up the LOC so the balance is nil again.

Consider also setting up further loans each secured against the IP - if you feel you want to invest further.

PS I hope you are not using the LOC as a transaction account (ie money going in and out) as part of the interest will not relate to borrowings for investments and it won't be deductible.

Use a 100% offset account as well. I assume you have no non deductible debt.
 
PS I hope you are not using the LOC as a transaction account (ie money going in and out) as part of the interest will not relate to borrowings for investments and it won't be deductible.

Hi Terry, thanks for the info. I am using the LOC as a transaction account, but only for transactions relating to the 4 investment properties. ie rents come in, interest and other costs go out. No non-investment transactions pass through this account.

I hope this makes it 100% tax-deductible?

I have no non-deductible debt, my PPOR was paid for before I started buying investment properties.

JB
 
There are myriad of finance options available to you with that amount of equity.

You should be able to shave the Mac Bank rate by 20-25bps and the others by considerably more.

Which part of the UK is your IP located ?

Cheers
 
There are myriad of finance options available to you with that amount of equity.

You should be able to shave the Mac Bank rate by 20-25bps and the others by considerably more.

Which part of the UK is your IP located ?

Cheers

Yep, now CBA has come to the party and is offering 4.4% across all 5 of the loans........

The UK IP is in Rochester.

JB
 
Hi Terry, thanks for the info. I am using the LOC as a transaction account, but only for transactions relating to the 4 investment properties. ie rents come in, interest and other costs go out. No non-investment transactions pass through this account.

I hope this makes it 100% tax-deductible?

I don't see any issues here as long as you are not taking out cash to live on etc.
 
Ok Rochester in Kent.

Mine are in Bournemouth and in case anyone missed it ....We were promoted to the Premier League last Monday whooooooo.

Cheers
 
Actually this cba preapproval I got from a broker. Rolf is right the broker told me the price will be better if put both loans with cba. The broker also told me the way cba calculates serviceability is with the assumption of 8% interest rate and 80% of rental income. That's quite strict.
 
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Actually this cba preapproval I got from a broker. Rolf is right the broker told me the price will be better if put both loans with cba. The broker also told me the way cba calculates serviceability is with the assumption of 8% interest rate and 80% of rental income. That's quite strict.

....make that 4.35%

see what happens Tuesday.....

JB

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