Refinance possible

[Joostoz]

Hi people,

I think I know the answer to this, but would still like to throw it out here to see whether I may be wrong.

We bought a PPOR in June last year, run down house (ex-rental) in good suburb. It's our first home. Wife works part time, 2 kids. Wife wasn't working when we bought it, so mortgage serviceability is based on my income alone. We financed 95% and paid hefty LMI.

We then took out a personal loan to renovate the place, to the tune of appr 65k. We obviously feel that this will have added at least 65k in value to the property. Would there be a way in which we can reduce the 12% interest payable on the personal loan by bringing it under our home loan? Or would that not be possible because we would still be >80% LVR?

And who would we need to talk to, our mortgage provider or the bank where we have the personal loan.

Note: with my wife now working serviceability is not the issue, but it's just that we would like to reduce the repayments obviously!

 

[Kinnon Bell]

Possible. Get a valuation done to see where you stand. You've paid LMI with your current bank and if there's an equity increase then you may be able to use that increased equity to cover the personal loan.

 

[Redom]

Hi people,

I think I know the answer to this, but would still like to throw it out here to see whether I may be wrong.

We bought a PPOR in June last year, run down house (ex-rental) in good suburb. It's our first home. Wife works part time, 2 kids. Wife wasn't working when we bought it, so mortgage serviceability is based on my income alone. We financed 95% and paid hefty LMI.

We then took out a personal loan to renovate the place, to the tune of appr 65k. We obviously feel that this will have added at least 65k in value to the property. Would there be a way in which we can reduce the 12% interest payable on the personal loan by bringing it under our home loan? Or would that not be possible because we would still be >80% LVR?

And who would we need to talk to, our mortgage provider or the bank where we have the personal loan.

Note: with my wife now working serviceability is not the issue, but it's just that we would like to reduce the repayments obviously!

Definitely, you can save heaps by simply adding the personal debt to your home loan and save 7% interest. Given youve already paid a hefty LMI wont need to pay much more as it will be recredited.

Which bank are you with? Give your bank a call or a broker.

Best to stay with your current bank and do a top up loan rather than a refinance.

Cheers,
Redom

 

[Brady]

Definitely can. But eyes wide open that dollars spent on renovation doesn't always equal same amount as increased value. Comparable sales will determine the value, have a look for similar properties that have sold recently (not on the market). And if there aren't any similar properties and your property is unique don't be surprise if valuation doesn't come back at your expectation, unique properties are the most common val shortfalls I see.

Best of luck, should be straight forward for the bank pending valuation. Don't want to be changing bank as you have already paid LMI at existing bank. You will get credits for the LMI you have already paid if you stay at the same bank. Make sure you know how much extra LMI you will need to pay, sometimes yes it's great to be paying a lower interest rate but defeats the purpose if it cost you a lot of LMI. I've seen the cost of the LMI outweigh years of interest. I would factor in what you think the suburb is doing at the moment, could be in best interest to wait and refinance at later stage after some CG.

 

[Joostoz]

Thanks guys, will give our bank a call once the renos are 100% complete. Which will probably be after the personal loan has been repaid ;-)

 

[Peter_Tersteeg]

Success will depend on the valuation result. The property will need to be valued and the renovations will be given consideration to that end.

Most lenders would happily consolidate the loans at a 90% LVR. A few will consolidate up to 95%.

 

[Jamie M]

Which lender is it with Joostoz?

Debt consolidation at 90% is usually ok - but as others have mentioned, it will all come down to the val. Hopefully you're with a lender that allows brokers/bankers to order valuations upfront.

All the best!

Cheers

Jamie

 

[Marty McDonald]

I've seen a few people come unstuck doing this. Seems like a good idea at the time then the loan repayments get a bit too much, you get further extended on credit cards then you get a poor valuation and or a reluctant lender and all of a sudden you have a big problem.

Hope it works out for you but to those reading in the future don't do it!

 

[Joostoz]

Home loan is with BOQ, personal loan with NAB. Marty, as indicated all financing was based on single income, even though we now have two. Even in the current scenario we can save approximately 2.5k per month, if we would want (meaning we could potentially pay off the personal loan quite a bit faster than the 7 years we got it for). I don't worry too much, yet...

 

[Qlds007]

BoQ not ideal and rather conservative in Western Brisbane but get the local BOQ manager to order a valuation (try and get a full valuation done given the renovations) and see what comes back.

 

[Joostoz]

BoQ not ideal and rather conservative in Western Brisbane but get the local BOQ manager to order a valuation (try and get a full valuation done given the renovations) and see what comes back.

Funny you say that, a broker I spoke to before going straight to BOQ provided pre-approval up to 525k. We needed around 550k. BOQ was happy to go even higher if needed. I got the tip from a REA in our area to talk straight to the BOQ branch manager and both my wife and I were very happy with the service he provided personally. Most lenders were not happy dealing with the high income, no deposit type people that we are (mainly due to never have owned, lived in various countries where we paid high rent so not a lot left to save, plus we do like to keep the Australian economy turning ;-) )