(cheerful music) – Hi, I'm Connie from Prosperity Finance.
Thank you for watching this video.
Today I want to continue talkabout another three reasons you should consider refinancing.
Now, in the previous video, Italk about these three reasons for refinancing and they areincrease your interest only term, access someloan products features that your current bank not offering, and thirdly is to increaseyour borrowing capacity.
There's actually anotherthree set of reasons that you should considerwhen you refinance.
Number one is derisk.
Now, a lot of people, when they purchase their second property,it could be a new home or a rental property.
By default, they more likelyto go to their current bank and use equity in the first property and then just increasethe lending and offer the second property for security.
You can do that, butthe downside is the bank actually have a controlacross both properties and if you have experiencedany cashflow issues, then the bank actuallycan control both properties and take a position.
Also when you sell one of the properties, it's not just to repay theloan amount that you borrowed when you purchased a particularproperty at the time.
It's actually a quite different way.
The bank will look atyour current income status and also look at theremaining security value and then decide howmuch you have to repay, so it's not really up to you.
And in a situation youwant to sell the property in order to access the surplus cash, you probably would disappointed if your income is not thatgreat because the bank basically take everythingfrom you after taking out the legal costs and realestate agent commissions.
So it's really importantthat you derisk your assets by splitting the banks, rather than put everything in one basket.
So number one is about derisk.
Number two is about restructure.
Sometimes you want to sell one property to another entity of yours.
It could be a trust or LTC.
There's a lot of reason for doing that.
We're not going to cover that because it's really complex area, but if you decide to do that, you can do it through your own bank.
But because there is no increase lending, you don't really get a cash back.
But in those situation, you more likely to have a really big billfor your legal costs.
By refinancing to another lender, you probably can recover that cost or maybe have extra cash surplus.
So number two reason is restructure.
Finally, it's not so common,but apply to some people, is the LVR.
We all know the LVR rule forhome and rental property.
Sometimes the bank, eventhough the same purpose, for example if you haveapartments is for investment purpose, maybe one banktreat it as different from the other banks.
One bank probably just lend you 50%, the other bank lend you 70%because the apartment size.
Have a a quite different policyfrom one bank to the other.
And if you have multipleunits like five or more units that joint together, somebank treat it as a 50% LVR while other bank treat itas a normal rental property and give you 70%.
So if you want to unlock your equity, sometimes worthwhile consideringrefinance your property to a bank that's more friendly.
So today I shared anotherthree tips about refinancing and they are derisk, restructureand unlock your equity.
I hope you find it useful.
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Thanks for watching,I'll see you next time.
Bye for now.