iRefi Insider School – Interest Only Extensions

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Extending interest-only mortgages

If you’ve got an interest-only mortgage coming up for renewal or you feel like you’ve had an interest-only lending at the same bank for quite a long time and you think that the bank that you’re with is likely to decline or deny you an extension or a rollover of your interest-only lending, what you might look to do is extend your interest-only lending at another bank or simply apply through a mortgage advisor back to your current bank and see if we can’t construct an application that entices the bank to reconsider their position on your portfolio.

We’re seeing it a lot with mortgage advisors being able to get loan applications over the line where you might have been talking to the bank, they’ve said, “Hey look, you’ve had interest-only for 5 years or 10 years on this property or your portfolio and they’re not going to extend it because of age or income testing” or there’s a bunch of reasons why they might decline it.

So, what you might need to look to do is apply through a mortgage advisor at your existing bank and just take into account there’s a lot of work that needs to be done to construct the right story and and [inaudible], you know, double-check the bank actually has a good reason to approve the interest-only lending or extension. You can’t just always just get it just because you want to, and it’s not like it used to be.

Interest-only mortgage bank guidelines and rules

There are few stricter rules and the banks do have self-imposed guidelines that they got to try and stick but in as well. So, what you might need to consider is going to a new bank. The reasons for doing this are you’re going to get a bigger new cash back, you might probably get lower rates.

And the key thing here is you get to have a look and see whether it’s worth restructuring as well. So, if you’ve got a couple of properties or you’ve been using interest-only lending anyway, you know, odds are, there’s more that you want to do rather than just shifting your debt dollar for dollar across from one bank to another. You might have credit cards you want to consolidate or personal loans, you want to do more lending for renovations, you want to see it revolving credit for another property, there’s probably a bunch of things that you might want to consider or you might not even know yet.

So, even if you’ve still got a year or two to go on your interest-only lending and, you know, you’re starting to think, oh, what am I going to do when it becomes, you know, potentially principle and interest. You really want to get in front of it, don’t necessarily have to wait till the end of the term, you can refinance it and reset it back on like a three or five or you know.

You can apply for a longer interest-only lending at the new bank and it’s not always refinancing for refinancing’s sake, you’ve got to anticipate that there’s a bunch of things that you don’t know that the mortgage advisor you work with will end up pointing out. And you know, it is a free service when you’re using the main bank with mortgage advisors, you might simply be swapping one loan to the other bank and then that loan to the other bank and it’s a loan merry-go-round, but it’s not refinancing for the sake of it.

It’s simply because of bank policy, because of how long you’ve had the interest-only lending with them and because for better or worse it’s often the case that banks favour new lending over attaining the current lending that they have. Not always the case, but sometimes it does apply. So, especially if age or income has changed significantly since you applied for the lending, now you might be getting closer to 60 or even beyond just know that this does influence the decision-making process internally.

And it really does mean that a well-constructed application needs to be put forward. And you don’t want to do this by yourself, get declined, and then after you’ve been declined, you start running out of options. It’s much harder to go back to that existing bank when they’ve already said no. So, talk to a mortgage advisor about an interest-only extension.