All Topics / The Treasure Chest / When to refinance

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  • Profile photo of B.DerosB.Deros
    Participant
    @b.deros
    Join Date: 2003
    Post Count: 34

    Hi,
    I am a young first-time investor. I bought several townhouses with good returns at the end of last year. After tax I am just about breaking even which is great, but it seems there has also been a modest capital gain in the six months.
    I am keen to keep acquiring property so I want to refinance at an appropriate time and make another purchase.
    I have had an offer 25% higher than my purchase price already and all agents in the area agree there has been a capital gain, albeit a slightly more modest one than my offer indicates.
    Is it too soon to refinance? I am quite highly capitalised and don’t want to do this prematurely.
    Ben

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Ben

    You could refinance now, but beware of exit fees and Application fees for the new loans. If you just want to use the extra equity you could just approach your current bank asking for an increase. Also beware that the bank valuation may not come in as high as you had hoped.

    What was the LVR when you purchased? You can generally only refinance to 90% of the value (tho one lender will do 95% -with slightly higher rates). How much you can get out will depend on serviceability as well.

    Are the properties x-collaterlised? If not you could refinace one at a time?

    what interest rate are you paying now?

    Terryw
    (Mortgage Broker)

    Terryw
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of DavidUDavidU
    Member
    @davidu
    Join Date: 2001
    Post Count: 101

    Hi Terry

    What are the steps with just asking the lending institution with an increase? And what’s the ‘normal’ time frame in getting this approved?

    Thanks

    David U

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    David U

    Just give them a call – or search the web site first. You may have to go into a branch to do the paper work. They would have to order a valuation which could take a few days, it could be done in a couple of weeks, but knowing banks better allow double that. Shoudn’t cost you too much. Maybe try to imply that you are thinking of changing banks…

    Terryw
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of DavidUDavidU
    Member
    @davidu
    Join Date: 2001
    Post Count: 101

    Thanks Terry

    My mortgage company are already on the case… and the valuation will be ordered in the next few days.

    Does anybody have any pointers about how to get the best possible valuation figure; the growth in my area (as in almost everywhere else) has been great 25% in last 6 months $80k props now selling for $100k.

    I was thinking of preparing a list of ‘similar’ properties recently sold and also a curent list of properties for sale to show that the growth is real and not perceived.

    Can anybody else think of another data/presentatin material I can supply to the valuer in order to maximise price.?

    Thanks

    David U

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    make sure you put yourself down as the contact for access to the building, so you can be there when the valuer comes around. Talk up the property.

    Show him/her figures of all the recent sales etc. Tell him what you think it is worth (but add about 10%). Maybe say you need it to be valued at $X for the finance to get approved etc.

    Also ask him what you could be to increase the value of the property. eg add carport etc.

    Terryw
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of B.DerosB.Deros
    Participant
    @b.deros
    Join Date: 2003
    Post Count: 34

    quote:


    Hi Ben

    You could refinance now, but beware of exit fees and Application fees for the new loans. If you just want to use the extra equity you could just approach your current bank asking for an increase. Also beware that the bank valuation may not come in as high as you had hoped.

    What was the LVR when you purchased? You can generally only refinance to 90% of the value (tho one lender will do 95% -with slightly higher rates). How much you can get out will depend on serviceability as well.

    Are the properties x-collaterlised? If not you could refinace one at a time?

    what interest rate are you paying now?

    Terryw
    (Mortgage Broker)

    Terryw
    [email protected]


    Hi Terry,
    The properties are each financed 95% LVR + mortgage insurance so effectively 97%. This would be more risky if all the circumstances weren’t so ripe for capital growth. I have 5 yr fixed rate loans at about 7%.
    Not sure what you mean by ‘x-collaterlised’. Do you mean the loans are somehow linked? They are all with the same lender but not linked apart from that.
    I guess there’s no chance of a valuation coming back LESS than what it was at the time of my loan approval, but from what I understand valuation methods vary wildly, so recent growth in the area may not be reflected in a particular valuation.
    rgds,
    Ben

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