All Topics / Finance / Quick one: Thinking of selling PPOR, how will it affect existing loan structure?

Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of NEWGENNEWGEN
    Participant
    @newgen
    Join Date: 2004
    Post Count: 151
    September 15, 2008 - 5:21 am

    Hi guys,

    Just a quick question, I'll keep it as brief as possible:

    –  PPOR:  owing $100k, worth approx $250k
    –  IP:  owing $290k
    –  Both with same lender

    If we decide to sell the PPOR to buy another PPOR, do ALL of the funds from the sale have to go towards paying off the remainder of our debt?  i.e. the loan on our IP?  Or can we direct these funds towards our new PPOR?  Keep in mind that holding onto the current PPOR isn't really an option for us.

    The main reason I'm asking is that the current rate we have is quite good, and my fiance doesn't want to lose the rate on that loan amount (even though it's only $100k…).

    Thanks in advance,

    Newgen

    Profile photo of gibbo1gibbo1
    Participant
    @gibbo1
    Join Date: 2008
    Post Count: 152
    September 15, 2008 - 6:16 am

    Are the loans for the two propertes seperate or crossed?  You will need to look at the existing product that you have and whether the loan is portable.  If the loan is portable depending on the lender there will be fees for changing the security.  The other factor is the value of the new PPOR, and whether you will need to borrow additional funds.

    Profile photo of NEWGENNEWGEN
    Participant
    @newgen
    Join Date: 2004
    Post Count: 151
    September 15, 2008 - 6:24 am

    G’day gibbo1,

    The loans are crossed. I’ll have to check to see whether the loan is portable or not. We’re looking at spending no more than $450k on the new PPOR and will need to borrow additional funds. I spoke to a broker a few months ago and he was going to speak to the bank to see if we could retain the $100k or so at the existing rate… might have to give him a call. Thanks again. :)

    Profile photo of Shaun M SmithShaun M Smith
    Member
    @shaun-m-smith
    Join Date: 2008
    Post Count: 18
    September 15, 2008 - 8:01 am

    Hi Newgen

    Substitution of security is fairly standard accross lenders. The issue will be simultaneous settlement. You will need to settle on your property sale the same day you settle on the new purcahse. This can often be difficult.

    Profile photo of NEWGENNEWGEN
    Participant
    @newgen
    Join Date: 2004
    Post Count: 151
    September 15, 2008 - 10:52 am

    Hi Shaun,

    Thanks for shedding some light on the situation, there is hope! :) The simultaneous settlement might be a problem :(

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    September 15, 2008 - 11:34 am

    if you can't arrange a simultaneous settlement, the lender will require the LVR on the investment to be 80% to avoid LMI. You don't say the value, but if it is over $363,000 you shouldn't have a problem. You can then take your cash and spend it. If it is under this value, you may have to pay down the loan a bit or pay LMI.

    Another possible option – tho the banks don't like doing it. You could just keep both loans as is and place some money in a term deposit which will be the security in place of your house. You will then have up to 3 to 6 months to find another property.

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 6 posts - 1 through 6 (of 6 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.