Forums / Getting Technical / Finance / Selling but not discharging loan

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of RMAARMAA
    Participant
    @roslyn77
    Join Date: 2004
    Post Count: 21

    Hi all,
    I’ve got a weird question and I’m guessing the answer but wondering if anyone had come across it.
    I’ve got some family members, who due to age, are in the situation where they cannot service anything more according to the banks but don’t want to lose access to funds because obviously they will never get it again.

    They have a couple of properties with the same lender but they are stand alone loans.
    If they sell one, and there is equity in the other, is there a way to transfer any of the debt over to the other property so technically they are not increasing their debt with the bank (actually decreasing) and don’t need to reapply?

    TIA

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Yes.

    They can keep the loan open under different security. This could be a term deposit temporarily under a new property is found and then mortgaging the property at settlement.

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

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

    Profile photo of RMAARMAA
    Participant
    @roslyn77
    Join Date: 2004
    Post Count: 21

    Thanks Terry, but could they substitute the security the bank already holds if they don’t want to purchase again to leave access to the funds for contingency?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Will depend on the lender and what their policy is.

    Given their age they may still ask for evidence of income in order to show they can support the ongoing loan.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Yes but the loan will always need security to be kept open. This could be with cash.

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

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

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    If they sell one, and there is equity in the other, is there a way to transfer any of the debt over to the other property so technically they are not increasing their debt with the bank (actually decreasing) and don’t need to reapply?

    I may be missing something here but if they’re selling one property, why not place the funds in an offset or redraw of another property? This way they reduce the interest payments and still have access to the funds 👍😎

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of RMAARMAA
    Participant
    @roslyn77
    Join Date: 2004
    Post Count: 21

    Thanks Ethan. I know it’s a weird one.
    I’ve seen it before when they were crossed so they only needed to reduce enough to keep the LVR under 80%.
    But I was just asked the question and I hadn’t come across anything like it before when the properties weren’t crossed. So a bit like substituting security as Terry said but using another property that the bank already has mortgaged, not cash.

    If it helps it make more sense i’ve created some hypothetical numbers..?
    Property A worth $400,000 debt of $50k
    Property B worth $250,000 debt $220k
    If they sell and discharge they have $30k in the bank.
    If they could transfer the $220k over to the other property, with it 100% offset until such time they want to draw upon it rather then reapply for equity release down the track.

    I guess its just in this new environment where a lot of people don’t qualify for what they already have pre APRA, you don’t want to fully discharge debt as you may never get it again!

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    Oh! Now I understand what you’re after 😊

    Different lenders have different policies. Would you mind sharing with us who’s the lender? Do they have a broker or are they dealing directly with the lender?

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of RMAARMAA
    Participant
    @roslyn77
    Join Date: 2004
    Post Count: 21

    Lending with STG other with ANZ.
    Spoken to multiple brokers, finance strategists if you want to call them that, some even with the luxury of no response once details have been given.
    looking at speaking to them directly again, as last time was 12 months ago, just to see if anything has changed.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    ANZ are good with substitution of security and St G should be too..

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

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

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    shouldn’t be too much of a problem- just a normal substitution of security. Security substitutions work a treat as long as:

    *the owner of each property is the same
    *the borrowers do not change
    *there is sufficient equity in the end property to keep the total debts <80% LVR

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

Viewing 11 posts - 1 through 11 (of 11 total)

You must be logged in to reply to this topic.