All Topics / Finance / Equity Release

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  • Profile photo of Shehan TambiShehan Tambi
    Participant
    @shehantambi
    Join Date: 2017
    Post Count: 27
    February 3, 2018 - 10:17 am

    Hi All,

    Looking for some advice please

    I am currently working with my broker to get the equity built up on PPR released so I can commence my Property Investing career

    The only debt I have is a personal loan and the bank has advised the broker that if I do not agree to absorb the loan into the equity release they will not refinance me

    If I agree to this condition then it means my available equity will reduce by the amount of the loan.

    I was not keen on that and in fact asked the broker to go back and negotiate or lets try a different bank

    I wanted to know if anyone has come across this before and if I am being unreasonable

    I know that a lot of the time with these situations it is a case by case scenario so without knowing details of my income and loan etc it is hard to advice but was hoping someone could shed light on if this was common practice. If it was then do I have any hope of negotiating with the bank at all?

    I was not keen on the idea of absorbing my personal loan into my equity release even if it meant I was paying a lower interest, I was hoping to get as much equity as possible of course

    Thank you in advance :)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    February 3, 2018 - 10:37 pm

    Prob a serviceability issue. Short term loans will have very high repayments compared to same loan over 30years

    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

    Profile photo of Shehan TambiShehan Tambi
    Participant
    @shehantambi
    Join Date: 2017
    Post Count: 27
    February 4, 2018 - 10:23 am

    Thank you Terry :)

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282
    February 4, 2018 - 6:47 pm

    Agree with Terry, it does sound like a servicibility issue.

    Two ideas come to mind to mitigate, which may or may not suit your specific needs but probably worth exploring:

    1. See if you can reduce the personal loan limit instead of closing it. This way you would satisfy the lender’s requirements and release as much equity as you can.

    2. Does the lender know the reason you’re releasing the equity? If you’ll tell the lender it’s for property investing, then that loan split would be tax deductible, making your borrowing power greater. On the down side, the lender may charge you higher interest on this split (in line with their investing interest which is higher with most lenders these days than their owner occupier interest).

    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 Shehan TambiShehan Tambi
    Participant
    @shehantambi
    Join Date: 2017
    Post Count: 27
    February 4, 2018 - 8:41 pm

    Hi Ethan,

    Thank you very much for giving me those options I really appreciate it !

    I will follow up with my broker

    Appreciate the time and effort :)

    Kind Regards,

    Shehan

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