Refinancing structure 'seeking advice' please

[analyse]

Hi Everyone
Absolutely love this site it's a wealth of information. We would appreciate advice on refinance of our PPOR. We currently have $332k equity, we owe 160k. We have 1 inv prop finc'd with another lender which we owe $207k. We are about to refinance both loans with major bank (wealth pkge)aim is to reduce current int rates to take adv of lower rate under wealth pkge. Propose to set up 1 P&I loan on PPOR for $190k with an offset facility.(we need $30k for priv use this year). Plan to place salary in offset with the aim to reduce interest. Have read posts about going Int only with offset, but we don't plan to use our PPOR for IP in the future.
Also setting up 2 LOC using our PPOR as security.
1 x $110k to use for inv purposes only. This is to fund 2 more IP deposits.

1x $22k on current IP ($12k of this to fund shortfall to avoid LMI)bal $10k for buffer. Val came up short on IP1 so will have $195/-IO loan (with possible offset ac) & $12/-LOC.

Is this the best way to structure this loan. Yes all loans are with 1 lender but have to do it this way to take advantage of % rate discount. We figured doing it this way the loans will not be cross collatoralised. Once our equity in our home increases again can we just increase our LOC provided a new valuation is done.

Would really appreciate your thoughts as we have to get this loan going asap. Once again it's been great reading the posts It's confusing but the more I read the more it's starting to make sense.

 

[tobe]

The wealth package doesnt give the biggest discounts at the moment, and their serviceability calculator is a bit tighter than many other lenders. Also their offset account is woeful, it isnt transactional like a lot of other lenders, you would be better off tacking on a small line of credit instead of the offset if you wanted a practical transactional account.
You can usually get a very similar interest rate using diferent lenders basic variable rate, and save yourself the package fee. I'd suggest having a chat to one or more brokers and getting their opinions. If you have plans to buy more investment properties in the future, its worth getting the structure right so as to avoid xcoll, and undue risk etc..

 

[josko]

Welcome analyse,

The reason most people choose Interest Only on ALL of their loans is to keep the repayments down to a minimum, freeing up spare cash for more IP's.

Depending on your Long Term goals, that extra cash you are paying on your PPOR might save you refinancing costs etc, when you want to purchase more property further down the track.

You may also find that when you may NEED or want to change to IO that you cannot for various reasons, regardless of what the bank may tell you now.

Tobe is correct when he mentions that all banks have discounts for their packages. In fact, I hazard a guess that another bank could have given you a lower interest rate than the one you are recieiving for this package.

The fact that you have a few loans with the one lender atm is not a concern, but I would certainly be mixing it up from now on. Source your next loan through another lender , save yourself the hassle of shopping around and get a broker to do it for you.

The average banker in the bank cannot see any further ahead than the deal he/she is doing for you now.

As an added precaution against X-Coll, check the securing property attached to each Loan when you recieve the Contracts.

Regards Jo

 

[Rolf Latham]

whats already been said

My addition would be this.


While you dont have plans to turn your current PPOR into an IP........."life is what what happens to you while u are making other plans" ( Lennon)

Because IO with offset costs you no more than PI with offset, unless you have issues with money control.

One other thing.........already been mentioned .be aware that the MISA offset isnt as transactional as youd expect. Its ok but clunky and unless you want to be on the net bank every couple of days, you wont get full benefit from it. This compares to an ANZ WBC NAB offset ( but not STG on PPOR) thats basically just a normal savings acct linked to the loan .

ta
rolf

 

[Albertus 6]

I would agree with Rolf - I would have a look at the ANZ product which now has the ability to have an offset and LOC on the same account - A great way to park money untill you need it.

 

[analyse]

Refinancing structure "seeking advice"

Thank you to all who replied. We appreciate all help and advice given on this forum. We have decided to tack on a small line of credit on our PPOR like tobe advised. I hope the CBA will do something to update it's 'clunky' MISA account, it's not as if they haven't received many complaints about it.

What would you suggest we go with for the remaining equity left in our PPOR to fund our IP's deposits & possible buffer account for top ups. LOC or normal Variable loan. The LOC Interest rate would be slightly higher but it would be much easier to access funds etc.

Thanks
analyse