The Importance of Having the Right Loan Structure

A successful business couple approached us to review their lending arrangements as they began planning for retirement within the next five years. As owners of a large and thriving childcare centre, they had built a substantial property portfolio and wanted to explore refinancing options across their investment properties.

Following our discovery meeting, we identified a significant issue. Although the clients owned 14 investment properties, their lending was spread across 21 cross-collateralised loans. This meant that selling even a single property could trigger a reassessment and refinancing of their entire portfolio, severely limiting their flexibility and control.

By restructuring their lending, we were able to secure more competitive interest rates, saving them thousands of dollars in interest costs. More importantly, we aligned each loan with the appropriate property, creating a standalone structure that allowed any property to be sold independently without impacting the rest of the portfolio.

This provided the flexibility they needed to progressively reduce debt in the years leading up to retirement.

During the review process, we uncovered another issue. The bank still held security over the clients' family home, despite it no longer being required to support their investment lending. This arrangement had remained in place for many years and had simply never been revisited.

As part of the restructure, we were able to remove the unnecessary security and arrange for the title deeds to their home to be released. Not only did this improve their financial position, but it also gave them greater peace of mind knowing that their family home was no longer tied to their investment portfolio.

The result was a lending structure that delivered lower costs, greater flexibility, improved asset protection and a clear pathway towards retirement.

Tip

If your home has been used as security for business or investment debt, it's important to regularly review your loan structure. As your circumstances change and debt reduces, there may be opportunities to release your home from the lender's security, providing greater protection and peace of mind for you and your family.