How I saved this client over $11k p.a. in interest cost by restructuring his loans

By July 12, 2017 March 8th, 2018 Mortgages

Interest rate hikes

One of our clients had 5 investment loan accounts with a Big 4 bank which totalled just over $1.2 million. Due to the rate hikes which I have previously written about, the weighted average variable interest rate the bank was charging this client was 4.75% (as all loans were structured as interest only).

Our solution

We were able to restructure his lending (with a new lender) so that all of his loans were secured by his home only (not the investment properties which was previously the case). As a result, we were able to obtain a much lower interest rate of 3.84% p.a. (still with interest only repayments). I project that this will save this client $11,134 in interest over the next 12 months.

This restructure will not impact the tax deductibility of the debt.

In time, if/when interest rates (for interest only investment loans) return to normalised levels, we can restructure the lending and swap his home as security (i.e. use the investment properties as security so that his home is unencumbered). However, for the time being, at least he is able to save a reasonable amount in interest costs.

What you can do

Therefore, if you have investment loans and a reasonable amount of equity in your owner-occupier property, you might be able to benefit from undertaking a similar restructure. If you would like to investigate this, please don’t hesitate to reach out to us.