Background:

Our client approached us with a goal to streamline their finances by consolidating existing debts into their mortgage. They aimed to reduce monthly repayments and improve cash flow efficiency.

Financial Overview:

• Credit Cards
  

  • Card 1: $10,000 at 18%
    

  • Card 2: $5,000 at 20%
    

• Car Loan:
  

  • $30,000 at 12%
    

• Current Mortgage
  

  • Balance: $480,000
    

  • Interest Rate: 6.49%
    

• Home Value: $750,000
  

Consolidation Details:

We proposed consolidating the existing debts into a new mortgage amount of $525,000, which included the current mortgage balance and the consolidated debts. The new mortgage carried an interest rate of 6.24%, slightly lower than the existing mortgage rate.

Payment Calculations:

• Current Monthly Payments:
  

  • Credit Cards: $300 (minimum payments)
    

  • Car Loan: $668 (monthly payment for $30,000 at 12% over 5 years)
    

  • Mortgage: $3,034 (monthly payment for $480,000 at 6.49% over 30 years)
    

  • Total Current Payments: $4,002 per month
    

• New Mortgage Payment: $525,000 at 6.24% over 30 years results in a monthly payment of $3,220.
  

Outcome:

Our client not only reduced their monthly financial obligations by $782 but also secured a more manageable repayment structure. This strategic consolidation not only improved their cash flow but also simplified their financial management by combining multiple high-interest debts into a single, lower-interest mortgage.
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Through careful analysis and tailored financial advice, we enabled our client to achieve their goal of financial consolidation and savings, enhancing their overall financial stability and flexibility.

Client Profile:

Our client, a full-time property investor and public servant, manages a diverse portfolio of residential properties, each currently cross-collateralised with a single lender. This setup posed challenges in terms of risk management and flexibility in leveraging individual property assets.

Objectives:

• Un-cross-collateralise Loans: Separate loans for each property to mitigate risk and enhance flexibility.
  

• Expand Portfolio: Acquire a fifth investment property to diversify and increase income potential.
  

Current Financial Structure:

• Portfolio: 4 properties across residential and Airbnb sectors.
  

• Average LVR: 70%.
  

• ‍Total Equity: $870,000.
  

Strategy:

• ‍Engage a Mortgage Broker: Partnered with Goodwin Home Loans (GHL) to evaluate current loans and market conditions.
  

• Property Valuation: Updated valuations to determine current equity positions.
  

• Lender Negotiation: Secured finance for a fifth property, ensuring it was de-cross-collateralised from existing loans via refinancing and restructuring.
  

• New Financing: Secured finance for a fifth property, ensuring it was de-cross-collateralised from existing loans via refinancing and restructuring.
  

Steps Taken:

• ‍Initial Consultation: Discussed client goals and assessed currentfinancial structure with GHL.
  

• Property Valuation: Updated valuations:
  

  • Property 1: $800,000
    

  • Property 2: $600,000
    

  • Property 3: $1,000,000
    

  • Property 4: $500,000
    

• Equity Analysis:
  

  • Total Portfolio Value: $2,900,000
    

  • Current Loan Balance: $2,030,000
    

  • Total Equity: $870,000
    

• Un-cross-collateralisation Plan: Devised a strategy to refinance each property with standalone loans, leveraging lower LVR properties for improved terms.
  

• Securing New Loan: Identified and financed a $750,000 investment property with an 80% LVR, requiring a $150,000 deposit plus additional costs.
  

Outcome:

• Risk Mitigation: Each property now secured by individual loans, reducing exposure to cross-collateralisation risks.
  

• Enhanced Flexibility: Ability to independently manage and optimise each property's financing without impacting the entire portfolio.
  

• Portfolio Growth: Successfully integrated a fifth property, enhancing income potential and portfolio diversification.

Financial Summary:

• Pre-Un-cross-collateralisation:
  

  • Total Loan Balance: $2,030,000
    

  • Total Portfolio Value: $2,900,000
    

  • Equity: $870,000
    

  • LVR: 70%
    

• Post-Un-cross-collateralisation and New Purchase:
  

  • Total Loan Balance: $2,830,000 (includes new property loans)
    

  • Total Portfolio Value: $3,650,000 (includes new $750,000 property)
    

  • Equity: $820,000
    

  • LVR: 77.53%
    

Lessons Learned:

• Flexibility: Importance of strategic decision-making enabled by un-cross-collateralisation.
  

• Equity Utilisation: Effective use of existing equity for portfolio expansion.
  

• Broker Expertise: The pivotal role of a knowledgeable mortgage broker in optimising financing terms and facilitating portfolio growth.