Refianace or Renegotiate - Selling PPOR to buy a new PPOR but xcoll.

[womble66]

I am looking to sell my current PPOR to upgrade to a new PPOR but I have a IP xcoll to this PPOR so want to know should I refinance to release the xcoll or just go and renegotiate the security against the IP (cash for my PPOR).

When I bought 2 years ago the aim was to sell PPOR and move into the current IP which much closer to my work and buy a new IP but my partner now has a job near my current PPOR so I am looking to upgrade to a new PPOR that is located between our places of employment and keep the current IP as an IP.

My current situation is as follows:

Current PPOR: $300K (xcoll to IP loan) --> $NIL loan
Current IP : $370K (2010 sale price) --> $390K loan WBC IO Rocket
Cash : $113K (in 100% OFFSET for IO IP loan)
Share : $50K
Credit Card : $NIL ($14K limit over 3 cards but any full balance paid monthly)
Other Debts : $NIL
Income : $73K (me - govt) + $25K (partner - causal + part compo)

Looking to buy a new PPOR up to $500K that may in the future become an IP as we may swap plans and move to the IP at some stage in the future.

So my question is should I just refinace if possible or go and see my broker (have lost some faith in him since reading this forum) or WBC? (also on the figures above could I get a the loan for the new PPOR given my wages arent great?)

 

[Aaron_C]

You don't have to refinance. If you sell the PPOR the bank will probably require you to pay down the loan to an acceptable level (which is open to negotiation). Plus you should sell your current PPOR first before buying a new one to make it easier for you.

 

[womble66]

Thats was the plan in my head, being that use as little of my cash as possible to paydown the current IP loan to clear the xcoll then bank the excess from the sale of my current PPOR into the offset until I find and buy a new PPOR. Will either rent for 6mths or move into my mums for 3-6mths and put my stuff in storage.

Just didn't know if that was the best idea.

So I should be able to borrow again from another lender (or WBC) in a new seperate loan after paying down my IP to 80% LVR (or negotiated best outcome, thanks for that advice Aaron) based on my basic info above.

If able, in the new loan I plan to use cash for an 80% lend on my new PPOR with another 100% offset and put all my excess cash into that and nothring in my IP offset.

Cheers, only early in the process but want to get it right this time around to make things easier in thr future where I may buy another small IP like a unit.

 

[Rolf Latham]

I am looking to sell my current PPOR to upgrade to a new PPOR but I have a IP xcoll to this PPOR so want to know should I refinance to release the xcoll or just go and renegotiate the security against the IP (cash for my PPOR).

When I bought 2 years ago the aim was to sell PPOR and move into the current IP which much closer to my work and buy a new IP but my partner now has a job near my current PPOR so I am looking to upgrade to a new PPOR that is located between our places of employment and keep the current IP as an IP.

My current situation is as follows:

Current PPOR: $300K (xcoll to IP loan) --> $NIL loan
Current IP : $370K (2010 sale price) --> $390K loan WBC IO Rocket
Cash : $113K (in 100% OFFSET for IO IP loan)
Share : $50K
Credit Card : $NIL ($14K limit over 3 cards but any full balance paid monthly)
Other Debts : $NIL
Income : $73K (me - govt) + $25K (partner - causal + part compo)

Looking to buy a new PPOR up to $500K that may in the future become an IP as we may swap plans and move to the IP at some stage in the future.

So my question is should I just refinace if possible or go and see my broker (have lost some faith in him since reading this forum) or WBC? (also on the figures above could I get a the loan for the new PPOR given my wages arent great?)

With with Westpac, a security substitution or reduction as in this case, is usually not credit critical.

That means Westpac upon request of release of the PPOR will do a valuation of the retained security, and will ask you to reduce the loan amount to 80% loan to value ratio of that security (or as Aaron has pointed out, if the lender wants to be difficult, they could ask you to reduce the loan to value ratio to the initially approved lvr 41 % ?? ....... although it is very unlikely that this would happen, this is just another really good example of why Cross collateralisation usually is not for the benefit of the borrower)

So they would probably want to to reduce the IP loan from 390 down to 296k.

Sure this looks simple, and in effect is the problem from the lenders point of view.

But, this is probably not the best for you. The only thing you can use to reduce the line from 390 to 296 is tax paid cash, either from current savings, or from the proceeds of the sale.

Depending upon the period between the settlement of your current PPOR, and the settlement of your new PPOR, you might want to consider a couple of options.

1. Use portability, if the settlement is back to back from old place to new place you can simply substitute security, and 390 loan is untouched.

2. If the settlement is not back-to-back, then Westpac can take a cash term deposit and use that as security against the 390K loan for a period. Now you need to assess as to whether that's a worthwhile exercise from a cash flow basis, because obviously the term deposit will only pay 5% or thereabouts, and the mortgage will continue to need to be paid on the full 390 at whatever your current rate is.

refinancing would give you more flexibility in some ways, but wouldn't fix the tax issue, even if you refinance the IP as a stand-alone security to 90%, you would still have to put in a fair slab of tax paid cash, plus pay lenders mortgage insurance, neither of which makes a whole lot of sense.

Just a couple of ideas to toss around

Thanks

Rolf

 

[womble66]

ta Rolf and Aaron, thats the info I need just so I can weigh up my options and choose the best fit.

Option 2 seems ok as I have the funds for the "Term deposit" security and the cash flow to easily meet the IO payments on the $390K IP loan and as its only for a short term the tax on earnongs @ 5% wont be much and living costs at my mums will be minimal (probably just pay for a O/S holiday for her once its all over).

Currently I don't see the settlement on my PPOR and new PPOR being being simultaneous as I feel I just need to get out to make a clean break from the current PPOR then take my time (or my partners time) to find a place that she likes as I pay and she chooses which makes life easier.

Also as its just a renegotiate to sart off with what is the the correct etiquette. Do I go direct to WBC or back to my broker (not using for next loan)?

 

[Rolf Latham]

Also as its just a renegotiate to sart off with what is the the correct etiquette. Do I go direct to WBC or back to my broker (not using for next loan)?

Id go lender direct on that basis



ta
rolf

 

[Aaron_C]

Yes for a loan renegotiation like this I would go lender-direct. If you want to change lender then go with a broker or another lender of your choice.