Refinance

Overview

Established couple in their mid-50’s approached Vision with two properties under finance: their home and an investment property. The client’s accountant had advised them to review their loan structure. We identified that the clients had 3 loans in total: one home loan (secured against their home) and two investment loans (one secured against their home and the other against the investment property).

In addition, the interest only period on their investment loans was about to expire meaning that the loan would roll to Principal and interest repayments. The higher cost of these repayments would reduce the monthly spending money available to the clients. In discussions, we identified that maintaining their current lifestyle was a higher priority to the clients than paying down the loan on the investment property as they intended to sell this property when the retired.

Obstacles

Many lenders do not readily lend to older clients as they perceive the time frame to repay the loans sits outside their policy. Prior to connecting with Vision, the client had approached their existing lender (a big bank) and this had already been discussed as a significant hurdle for them.

Advice

Since the clients had purchased the investment property, it had increased in value by more than 30%, from $545,000 to $720,000. With the increased equity available in this property, we were able to consolidate the two investment loans into one loan secured solely by the investment property.

Having less debt on their home gave them a greater feeling of security and in addition, when it came time to sell the investment property it would be very simple to pay out the one loan on this property.

The clients then had the ability to focus solely on paying off their home loan with the goal of having this property unencumbered within the next 5-6 years.

In addition, as the client were still paying off their non-tax deductible home loan, there was a significant benefit to extending the interest only period on the investment loan. This was a more tax effective structure that enabled the clients to pay off the bad debt (home loan) faster and retain more of the good debt (investment loan).

Outcomes

It was imperative to identify a competitive lender that viewed these older, well-established client’s as part of their ‘target market’. To ensure the loan was approved, the Broker then needed to develop a strong case to meet the lender criteria. This included:

Building a strong serviceability profile for the clients (show that they had strong capacity to repay the debt).

Explaining a clear and viable ‘Exit Strategy’ which included the sale of the investment property to show that the clients would have no debt carrying into their retirement years.

Vision Finance Australia initially provided the best fit bank lender for our home and investment loan refinance. We initially thought that this will just be a once-off service from them, a “set-and-forget” kind of service as most mortgage brokers tend to do. To this day, Vision Finance still continuously provide that great service through their Client Care Program by being able to negotiate and pass on to us as much savings as possible from our current lender – even long after that initial “honeymoon” phase with them. Talk to them first before you talk to your bank or any other mortgage broker.

Refinance

Overview

Obstacles

Advice

Outcomes

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