Refinance IP

[jan]

Hi All
We have a IP managed serviced apartment. We took out an IO loan of $128,000 with Members Equity in 2003 against our PPOR as they would not finance a serviced apartment.This was done thinking that we would sell the apartment and pay off the loan. However,because the banks won't lend for this type of investment,it has been on the market for a year despite asking less than we paid in 1999.
Members Equity only do IO loans for 5 years and we have just been informed that the loan will convert to P&I in January. I foolishly thought that we would just request to carry on with a IO loan but we have been told we have to pay out that loan and take out another.

We also have a residential IP solely in my husband's name and my question is would we be better to borrow against the equity in that and are we allowed to do that?
Any advise greatfully received.
Cheers Jan

 

[House_Keeper]

Hi All
We have a IP managed serviced apartment. We took out an IO loan of $128,000 with Members Equity in 2003 against our PPOR as they would not finance a serviced apartment.This was done thinking that we would sell the apartment and pay off the loan. However,because the banks won't lend for this type of investment,it has been on the market for a year despite asking less than we paid in 1999.
Members Equity only do IO loans for 5 years and we have just been informed that the loan will convert to P&I in January. I foolishly thought that we would just request to carry on with a IO loan but we have been told we have to pay out that loan and take out another.

We also have a residential IP solely in my husband's name and my question is would we be better to borrow against the equity in that and are we allowed to do that?
Any advise greatfully received.
Cheers Jan

You need to talk to a good mortgage broker. There must be some lenders who would be prepared to take it on.

There are a few good brokers on this forum. Rolf Latham for example.

Cheers,

 

[Qlds007]

Hi Jan

You are right that Members Equity may not lend against a serviced apartment but i assure you there are lenders who do so even if on a lower LVR.

You would be better off to try and free up the equity in your PPOR so this could be used for deposits and acquisition costs for future investments.

 

[dantheman]

Hi All
We have a IP managed serviced apartment. We took out an IO loan of $128,000 with Members Equity in 2003 against our PPOR as they would not finance a serviced apartment.This was done thinking that we would sell the apartment and pay off the loan. However,because the banks won't lend for this type of investment,it has been on the market for a year despite asking less than we paid in 1999.
Members Equity only do IO loans for 5 years and we have just been informed that the loan will convert to P&I in January. I foolishly thought that we would just request to carry on with a IO loan but we have been told we have to pay out that loan and take out another.

We also have a residential IP solely in my husband's name and my question is would we be better to borrow against the equity in that and are we allowed to do that?
Any advise greatfully received.
Cheers Jan

Hi Jan,

Besides wanting to sell, how is the serviced apartment working out for you as an investment? Is it returning good income? What is your reason for putting it on the market?

How much is the serviced apartment worth?

Borrowing against the equity in your other IP is probably not needed depending upon the value of the serviced apartment. Also, these days the lenders are asking a lot more questions about the "purpose" of the funds so it may not work anyway depending upon how you go about it. So it's a good idea to first look at financing the serviced apartment directly and ending the old mortgage.

As Richard said, you're better off freeing up your PPOR for other uses. It's also good practice to not give your lender any more than the minimum security required. If anything goes wrong with your investment they can only take the one asset that they have secured.

Hope this helps

Dan

 

[jan]

Thanks All

We get $442.50 monthly rent [$5310 pa]. This is based on 4.5% of original selling price of $118,000.
The managers pay strata levy of $2300 pa and we get 2 weeks free accommodation which they value as $1200.
We pay annual water,rates and contents ins. approx $2200.

It's hard to say what the value of the unit is. We have it on the market at $115.000 and have had some interest but I think the banks scare them off.

We would be keen to secure as much finance as possible but our current loan secured on our PPOR is $128,000 and we don't want to incur high costs in doing this.

Happy New Year to all

Cheers Jan

 

[kathryn d]

I think I am missing something here.

Why is the rent so low?
Would you be able to rent it "not serviced" for a better return?
How do managers say your 2 weeks accommodation is valued at $1200 when you only get $102 a week on average.

 

[jan]

Hi Kathryn

We have a 5 year lease with the managers and this was negotiated collectively with all the other owners of the units.We didn't feel brave enough to go it alone and thought this was the easier option.
At least we are assured of the monthly rent without the worry and expense of going it alone with letting,maintenance, strata levies etc.