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when to refinance?

Discussion in 'General Investing Discussion' started by voigtstr, 24th Jun, 2007.

  1. voigtstr

    voigtstr Well-Known Member

    Joined:
    24th Jan, 2007
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    Hobart
    We currently owe 167902.02 on a unit bought for 180000 early 2006. The neighbours unit was recently sold for 200000, and we figure ours would be worth the same. At what stage could we refinance to and redraw some equity to use as depost for another property. Another issue is that its an ING fixed interest loan, if refinancing to another ING product are they likely to waive break fees?
     
  2. Jacque

    Jacque Team InvestEd

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    Unfortunately you're not yet in a position to have enough equity to draw down on, given that your lender will generally only lend you 80% of the new valuation (80% of $200K is $160K) minus your balance owing ($167K). Wait for some further growth yet- it will happen :) or else consider value adding (if possible) to your unit to build equity this way.

    How long is the fixed period? Banks are very unlikely to waive break fees (how are they going to make their money if they do this?!! ;) ) so you'll just have to wait a little while yet.
     
  3. DaveA

    DaveA Well-Known Member

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    Sydney, NSW
    it does seem the property was higher geared than 80% originally anyway, it would make sense it would of been 95% (borrowed 171000). You could refinance the property to 200k @ 95% and have a limit of 190k giving you about 22k redraw (enough for a 5% deposit on a 400k property) but fees need to be considered in refinancing to see if its worth it....

    however this hasnt included stamp duty that would be payable on the new place..Another 5% rise would see a nice buffer before redrawing though id think...

    how do banks usually treat refinancing on fixed loans??
     
  4. voigtstr

    voigtstr Well-Known Member

    Joined:
    24th Jan, 2007
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    679
    Location:
    Hobart
    We borrowed 170,999.74 the balance up to 180k was first home owner's grant and a little cash. Tack on 2,993.26 for LMI. Original borrow was 173,993.00 and we now owe 167,902.02. So far have paid 10560.10 interest.

    Loan is fixed for 5 years starting from 15/2/2006 with ING bank.

    Any mortgage brokers on this site have experience with ING refinancing a fixed rate loan?

    Or should we leave this loan as is.. save up deposit monies and and get another loan 95-100% loan (or line of credit) on a new place (looking at 260-280 range as place of permanent residency in Hobart)
     
  5. willy1111

    willy1111 Well-Known Member

    Joined:
    5th Jul, 2006
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    Location:
    Melbourne
    A lot of lenders will let you refinance to 90% LVR (in some cases 95% but more rare).

    The way you would get around the break cost fee is to leave the existing 5 year fixed loan in place, and take out a separate loan with ING for the difference (possibly an LOC or a basic home loan). Then after the increase you would have 2 loans with ING - your existing 5 year fixed and the new one you have just created.

    This also has the bonus of keeping the new funds separate from private funds (your existing 5 year fixed home loan) if you are intending to use them all for investing.

    You will need to pay more mortgage insurance although it shouldn't be near as much as the original amount just the top up. You will need to work out if the cost of doing the increase is worth it.

    The other thing is the minimum loan amount - some lenders it is $10K for additional splits in which case you would be right.

    I think it is possible you could access some equity, although it could cost a bit due to the extra mortgage insurance as you are over 80%.

    You would need to check with ING or your broker, whether they will refinance to 90 or 95% and what the minimum loan amount is for the additional split - also what the additional mortgage insurance would be.