Just wondering if anyone else is experiencing the same difficulty as I currently am...
I own 6 financed properties, including my own home. They were all purchased between 2001 and 2015, before any form of LVR restriction came into force. The lending for all properties is with the same bank, and the properties are cross collateralised.
I recently decided to sell the first rental property I ever bought, so that I can pay off a decent chunk of my own home (purchased in 2015).
I have low lending on the rental property I'm planning to sell ($31,000) and it has a market value of around $170,000. I approached my bank to clarify how the discharge of mortgage would work in a cross collateralised scenario and I was a bit shocked by their response. They told me that if I choose to sell any one of my properties, the bank will demand that all other lending must then fall in line with current LVR rules (60% for investment, 80% for owner occupied). Essentially they told me that if I sell, they will take virtually the entire sale price to pay down all my other loans so they are below current LVR rules. I am not massively leveraged by the way - my total lending across all properties is currently 77% of the bank's own recent valuations.
I must admit I didn't see this coming. I am not refinancing the other properties, so I didn't think this would be an issue. I assumed that the LVR applicable at the time of acquisition would continue to apply. Compounding my confusion, I searched out and read a few publications from the Reserve Bank, which all specifically stated that selling one in a group of cross collateralised properties did not constitute refinancing from the RB's perspective, so there should be no compunction to adhere to the new lending limits.
The specific wording used by the Reserve Bank is as follows: "The Reserve Bank considers that repaying part of a mortgage (selling one or more of a pool of securities) need not constitute a new commitment as defined by the Reserve Bank, so such activity can be considered outside the scope of LVR restrictions".
The fact that I was going to give all the sale proceeds back to the banks anyway is a moot point. I want the debt on my rentals to stay as high as possible for tax purposes, while I want to reduce my own home lending as I pay for this from my after tax employment income.
I recently approached a mortgage broker to discuss the situation, and he advised that switching to another bank may be an option, especially since the Reserve Bank also considers switching banks to also be exempt from the new LVR rules. However, the mortgage broker has more recently contacted me to advise that the banks he was investigating for me all now seem to be doing a backflip, so it appears the retail banks may be ignoring the Reserve Bank's guidelines in favour of reducing their overall risk - and using the LVR rules as an excuse for doing so.
Anyway, I am keen to hear if anyone else has come up against this, and if so, whether there is a creative but above-board way to get around it. Having to make my existing properties conform to the new LVR rules will stymie my future plans far more than I ever perceived it could.
I own 6 financed properties, including my own home. They were all purchased between 2001 and 2015, before any form of LVR restriction came into force. The lending for all properties is with the same bank, and the properties are cross collateralised.
I recently decided to sell the first rental property I ever bought, so that I can pay off a decent chunk of my own home (purchased in 2015).
I have low lending on the rental property I'm planning to sell ($31,000) and it has a market value of around $170,000. I approached my bank to clarify how the discharge of mortgage would work in a cross collateralised scenario and I was a bit shocked by their response. They told me that if I choose to sell any one of my properties, the bank will demand that all other lending must then fall in line with current LVR rules (60% for investment, 80% for owner occupied). Essentially they told me that if I sell, they will take virtually the entire sale price to pay down all my other loans so they are below current LVR rules. I am not massively leveraged by the way - my total lending across all properties is currently 77% of the bank's own recent valuations.
I must admit I didn't see this coming. I am not refinancing the other properties, so I didn't think this would be an issue. I assumed that the LVR applicable at the time of acquisition would continue to apply. Compounding my confusion, I searched out and read a few publications from the Reserve Bank, which all specifically stated that selling one in a group of cross collateralised properties did not constitute refinancing from the RB's perspective, so there should be no compunction to adhere to the new lending limits.
The specific wording used by the Reserve Bank is as follows: "The Reserve Bank considers that repaying part of a mortgage (selling one or more of a pool of securities) need not constitute a new commitment as defined by the Reserve Bank, so such activity can be considered outside the scope of LVR restrictions".
The fact that I was going to give all the sale proceeds back to the banks anyway is a moot point. I want the debt on my rentals to stay as high as possible for tax purposes, while I want to reduce my own home lending as I pay for this from my after tax employment income.
I recently approached a mortgage broker to discuss the situation, and he advised that switching to another bank may be an option, especially since the Reserve Bank also considers switching banks to also be exempt from the new LVR rules. However, the mortgage broker has more recently contacted me to advise that the banks he was investigating for me all now seem to be doing a backflip, so it appears the retail banks may be ignoring the Reserve Bank's guidelines in favour of reducing their overall risk - and using the LVR rules as an excuse for doing so.
Anyway, I am keen to hear if anyone else has come up against this, and if so, whether there is a creative but above-board way to get around it. Having to make my existing properties conform to the new LVR rules will stymie my future plans far more than I ever perceived it could.
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