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  • Profile photo of PT18PT18
    Participant
    @pratik-tripathi
    Join Date: 2017
    Post Count: 6

    Hi folks,

    Looking for some help here.

    So here’s my situation:
    Current owner occupied home loan balance: $370k
    Available to redraw: $35k (so if I was to redraw all, it would make the loan balance $405k)
    Current balance in offset account: $20k

    Looking for re-financing and also looking to invest in near future.

    Can you please suggest your opinions?
    Should I refinance current balance and borrow maximum of investment loan which would lead me to paying LMI?
    OR
    I should refinance and get some cash out from equity to use towards investment property deposit so that the investment loan remains < 80% LVR which will save me LMI?

    Any help would be appreciated.

    Thanks in advance.

    Profile photo of JaxonJaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 282

    Haha mate will need to know the value of the property?

    then I will be able to eaisly break it down for you

    Kind regards

    Jaxon Avery

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Can you please suggest your opinions?Should I refinance current balance and borrow maximum of investment loan which would lead me to paying LMI?ORI should refinance and get some cash out from equity to use towards investment property deposit so that the investment loan remains < 80% LVR which will save me LMI?

    Hi there

    What’s your current property worth?

    Did you pay LMI on it previously?

    How much are you looking to spend on the next property?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of PT18PT18
    Participant
    @pratik-tripathi
    Join Date: 2017
    Post Count: 6

    Hi there,

    Current property value is $540k – $550k, yes, I paid LMI on this property previously.

    Looking for IP < $350k.

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

    Hey mate,

    If you’ll move to another lender, you won’t be able to enjoy LMI credit that was already paid.

    You might want to top up with existing, ideally to the sweet spot that won’t require additional LMI paid due to credit. The top up should be done as a split and used to buy the IP so the interest on it is tax deductible.

    If these funds aren’t enough to buy the IP, you might need to make some decisions regarding if and which loan should get LMI (most likely the new one, lower LVR).

    Are you doing this all by yourself or got a broker to consult with?

    Hope this helps? 👍😎

    Cheers,
    Ethan

    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 PT18PT18
    Participant
    @pratik-tripathi
    Join Date: 2017
    Post Count: 6

    Hi Ethan,

    Not sure if I have made myself clear here, but my current home loan is owner-occupied which I had paid LMI on and I will be refinancing to another lender for better interest rates. Now, although current loan balance is $355k, I can get up to $430k when re-financing without incurring any LMI. This can give me extra $65k in cash.

    Now, my question is whether I should use that $65k (+ cash from offset account) towards deposit on IP (& thus keeping LVR for IP to < 80%) or should I keep my OO loan to $370k (this will give me $15k + I can use cash in offset account towards deposit on IP) and apply for maximum investment loan which may incur LMI? What are the pros and cons with both of these approaches?

    Thanks in advance.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    PT18 Why would you use your own cash from the offset to keep the lvr under 80%.

    You would be better off to reduce the principal balance on the PPOR by the equivalent cash amount and then increase the equity sub loan by the same amount.

    That way the interest becomes Tax deductible whereas had you used your own cash to keep the lvr down the Tax deductibility would have been lost.

    Now as to whether you have the new standalone loan at 80% or 90% is upto you and dependent on your future investing strategies. If you are content to keep your portfolio at a single IP then keep it at 80%.

    If you are wanting to grow the portfolio over time then whilst you still can go to 90% and incur some Tax deductible LMI.

    Who knows in the next round of APRA guidelines recommendations the maximum lvr across the board could be 80% with all lenders and then you may well kick yourself.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    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: 16,190

    Might be better to incur the lmi on the investment loan for tax reasons. But it could work out cheaper for it to be incurred on both loans at a lower lvr.

    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

    Hi PT18,

    Agree with Richard and Terry. I’ll just add the following:

    Based on:

    Current owner occupied home loan balance: $370k Available to redraw: $35k (so if I was to redraw all, it would make the loan balance $405k) Current balance in offset account: $20k

    and:

    Now, although current loan balance is $355k, I can get up to $430k when re-financing without incurring any LMI. This can give me extra $65k in cash.

    Current property value is $540k – $550k, yes, I paid LMI on this property previously. Looking for IP < $350k.

    The scenario I see is as follows (please let me know if I missed anything):

    Current loan has a redraw of $35K and(!) an offset of $20K?

    So funds available now are: $55K?

    The current net loan amount is $370K, not $355K?

    If refinancing with another lender at 80% of $540K = $432K so you’ll get $62K + $20K you have in the offset = $82K available to you = only $27K more than you have now, not $65K extra as you said?

    Throwing away the LMI you already paid may not be the best way forward, I would consider utilising it by doing a top-up with your current lender. This way you’ll end up with more funds in your pocket.

    This is all a general discussion. Need to look at your situation in more detail to provide a specific advice. Suggest engaging a broker (ideally one specialising in investments). With a good broker, you’ll be very happy you did! :-)

    Hope this helps?

    Cheers,
    Ethan

    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 PT18PT18
    Participant
    @pratik-tripathi
    Join Date: 2017
    Post Count: 6

    Thanks all for your inputs. Much appreciated.

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