Refinancing Questions

[AndrewS]

I am considering refinancing my Investment Loans, and would appreciate opinions as to a couple of issues.

Currently I have three loans.

Bank A is a home equity facility (on PPOR) with money from this used as a deposit on two IP's.
Bank B is a seperate loan for IP 1 I/O
Bank C is a seperate loan for IP 2 I/O

At the moment each IP is security for it's own loan. There is no link to PPOR.

The proposal is to refinance with one bank only. A split loan facility where all income goes into the account, then the amount of the loan is reduced and interest payable is less per month than it would have been.

This would enable reducing the interest burden and also pay off some of the capital.

My concern is in having my PPOR as well as the two IP's covered by the one loan. Up until now, my PPOR is seperate from the IP's.

Do people see that having all three properties under one loan is a problem?


I look forward to hearing opinions on this issue.

Regards

Andrew

 

[Rolf Latham]

Hi Andrew

Its called cross collateralisation and its only a problem if:

1. You never want to extract a property quickly to sell or pull equity
2. You never want to qucikly pull some increased equity when props have grown( 3 val instead of one)
3. You take your existing lenders word for it when they say no more, xcoll makes it sooooooooo much harder to move.

Do a search on cross collateralisation, rarely is it in the borrowers interest, more commonly bank policy, or an ignorant/lazy broker.

Find yourself a good independent mortgage broker that knows what they are doing.

Sometimes xcoll can not be avoided, this doesnt sound like one of these times

Otherwise sounds fine, try and look for soemthing with a 10 to 15 year IO period if you can, with 100 % offset MAY suit you for the future as well.

TA
rolf

 

[Rolf Schaefer]

Hi Andrew,
looks like they are trying to sell to you x-coll as good thing. It can be good tiimes, but, like Rolf L is saying, it's so much harder further down the track to do what you want to do.

Please get advise from an independent mortgage broker.

 

[geronimo]

Hi Andrew

Sounds like you're really up on your mortgage reduction ideas. Well done!

You should still be able to do this without cross-collateralising.

Good luck!

Brendon
---------------------------------------------
Acute Mortgage Reductions
'Better Finance for More Homes Sooner'

 

[AndrewS]

Many thanks for the replies so far.

Am I right to assume from what each of you have said, that it is still possible to have a 'portfolio' style loan and not cross collateralise?


Regards


Andrew

 

[Rolf Latham]

Hiya

Yes and no, it depends what you define as a portfolio loan.

There is nothing to stop you from having ONE loan with either LOC (yuk) or with Offset secured against just one property.

Into this loan or linked offset park all your cash.

The other 2 loans can be just el cheapo variables, or fixed or whatever you want.

ta
rolf

 

[geronimo]

Aye

And you can still get the rents (and your salary) paid into your PPOR LOC first to reduce the balance on which the interest is calculated.

Brendon
------------------------------------------
Acute Mortgage Reductions
'Better Finance for More Homes Sooner'

 

[Rolf Schaefer]

Andrew,
am I right in assuming that you are talking about the Portfolio Loan from St George or CBA???

The CBA Portfolio loan is an all-in-one product (it works by consolidating all your lending facilities under one umbrella, and therefore requires x-collateralisation). This is at least as far as I remember from the product training and after reading the brochure.

The St George Portfolio Loan is simply another name for their LOC product.

 

[AndrewS]

Yes they are the types of products that I am thinking of. You all have certainly encouraged me to not X-coll. I will take your advice on that. And yes, I think I have a very lazy salesperson trying to flog their product to me. He will not last long. But at least he got me thinking.


Andrew

 

[DAAJ]

Hi,
If you refinance an investment property and withdraw say $40,0000 in cash do you pay cgt on this amount Eg loan 100,000 value $200,000 .New loan $140,000.
Any help would be appreciated.
Dom

 

[Rolf Latham]

Hi Dajj

No CGT payable because a Capital Gains Event has NOT occured. You are only using the security to borrow against, not to sell the thing

ta
rolf