Hi all,
Just wanted to know if anyone has had anything to do with a firm called CharterEquity. They have an office in Mawson Lakes SA.
Basically they are pushing the whole “we can cut you home loan by several years” action. I was very dubious at first but after spending about 4.5 hours till midnight last night with us I am nearly convinced.
The scenario is this: We refinance with our existing bank and change a few small things. We pay all expenses including IP costs from credit card and place all incoming monies against the Home loan. Obviously before the interest is due we transfer the money back from the home loan with the advantage of reducing interest faster and using all available income instead of just the repayment.
I know the obvious pitfall with regard to overspending ect. In fact he was very clear that of the 15% of people who are managing their home loans in this manner 90% fail because they can’t control spending.
Here is the kicker! They charge $5490 GST incl and help you manage this process for three years. You initially give them all your spending habits and they tailor they monitor your loan balance against what it should be to ascertain if you are overspending or not. They encourage you to keep on track and basically hold your hand for 3 years until you have become proficient with this new way of doing things.
The benefit is that we can pay our home loan of in 7.5 years instead of 28.5 years and then if we still have IP we can start to pay it down as well. All IP deductibility is retained.
Has anyone used this method or company? Can you tell me what your thoughts are… pitfalls, advantages ect.
Thanks
You will always miss 100% of the shots you don’t take!
They seem to be charging an arm and a leg for something most mortgage brokers set up for you for nothing.
Big deal they manage it for the next 3 years to tell you you are spending too much. If you don’t have your own discipline then having someone tell you this will do nothing.
I have to say in 4.5 hours i could show you long hand how to save money let alone looking at some fancy computer graphics.
I can show you how to save $5490 straight away and that is pay what they want to charge you off your principal debt and that will put you years ahead already.
My opinion – give them a wide birth and talk to a local mortgage broker.
Cheers
Richard Taylor
Residential & Commercial Finance Broker
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I recall when we bought our first PPOR it coinsided with a lot of publicity from the big banks about this method (ie pay all on a CC then pay CC off). It doesnt take alot of commen sense to realise that if you pay more off your loan (or spend less – ie account for you spending) then you will pay off you loan sooner. When I asked the loan officer to compare the traditional structure to this one where all your $$ go in and use CC, BUT leaving the same amount paying off the loan each month, they were unable to. I was told it ran on the assumption that you would leave more in the home loan account than required – hence a faster repayment.
Now to all those brokers, I am not disregarding these types of products, they have their place (not if you spend too much[exhappy]), but at the end of the day, everything else being equal, it is a formula. If you put more $$ in, the quicker you reduce your loan.Or am I just being too simplistic?
Ronulas,
This method is called line of credit and most banks do it. I have a similar set up with ANZ.
Having an investment property yourself, I am sure you will have the confidence about controlling your spending, which is required to managing a successful portfolio anyway.
Speak to your existing bank about this set up and I am sure they will be happy to help and keep you on as a customer!TD
^^^What richard said
Regards
Joshua McEwen
Finance Broker – WAhttp://www.prestigeloans.com.au
Brokers Lic 1297
Licensee Brett Christiehmm, so this is how I see it.
You grab a credit card and max it out by transferring the money to an 100% offset account, reducing your monthly repayments but also remembering to take that money back when you need to(free-days expire).
I feel I am on the wrong track to you guys.Christopher.
Originally posted by Josh-Prestigeloans:^^^What richard said
Regards
Joshua McEwen
Finance Broker – WAhttp://www.prestigeloans.com.au
Brokers Lic 1297
Licensee Brett ChristieWhat Josh said [biggrin]
Maybe put that exhorbitant fee into an Offset Account on the PPoR, you can also have your wages go in there and take out the least possible for living expenses etc.
They even warn you up front that 90% of people with this product experience problems…
If however you are still interested; check out Mortgage Free Australia’s web-site as well for further reading
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsSave the $5490 and increase your repayments. What a massive rip off.
If you are not disciplined enough to do this on your own, best to just increase your repayments each month and get the same result without spending $5,490 in the process.
Wylie
Originally posted by DraconisV:hmm, so this is how I see it.
You grab a credit card and max it out by transferring the money to an 100% offset account, reducing your monthly repayments but also remembering to take that money back when you need to(free-days expire).
I feel I am on the wrong track to you guys.Christopher.
Not quite.
You have all your incoming funds go into your PPOR mortgage. Rent, dividends, pay etc.
Use a 55 day interest free credit card for everything.
Each month (or 55th day for the well organised) pay out the credit card from the home loan.
Theory is that every cent you have reduces your daily interest bill and hence the life of the loan.
Package this up with some budgeting tips and you have a Mortgage reduction company able to fleece people for thousands.
It does work but it isn’t worth spending money on when you or a broker can organise it for free.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Ah i get it now. So my income will be working full time to reduce my interest that i pay, while i use the banks money to fund my lifestyle(though i will have to keep to strict spending regimes as that credit can become bad if it is not paid off).
This seems like common sense, why is no one i know doing it. Hmm, they might just not like talking about their debt and instead chat about their ultra-depreciative vehicle they have sitting in the front yard(dollars rotting in front of your eyes).Originally posted by DraconisV:Ah i get it now. So my income will be working full time to reduce my interest that i pay, while i use the banks money to fund my lifestyle(though i will have to keep to strict spending regimes as that credit can become bad if it is not paid off).
This seems like common sense, why is no one i know doing it. Hmm, they might just not like talking about their debt and instead chat about their ultra-depreciative vehicle they have sitting in the front yard(dollars rotting in front of your eyes).It does take a certain degree of organisation. To turbo charge it you need to have a strict budget and lifestyle. This is not the choice of most people I suspect, although I do not know your friends!
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi DraconisV, hi everyone,
I banked with the Bank of Queensland and they set this up free of charge! Another postee said they bacnked with the ANZ and they could do it, check around. If you can be disciplined with your expenses so you don’t transfer more than you are spending and don’t spend more than you normally would or should, the extra money in the Home Loan Account reduces the amount of interest you pay by the extra income banked into the account. If you draw out more than you should to pay off your credit card, you end up going backwards and paying more interest! Take it as a great idea that has just saved you over $5k and could save you $1,000s more and run with it if you can make it work for you. Banks are busting to give you money any way they can. Make them work for it for you for free!
CheersQuote:Originally posted by DraconisV:hmm, so this is how I see it.
You grab a credit card and max it out by transferring the money to an 100% offset account, reducing your monthly repayments but also remembering to take that money back when you need to(free-days expire).
I feel I am on the wrong track to you guys.Hey!!! I was on the way to do the same but a little concern of how often I can do such transactions with credit card!!!
????????????
Which credit card better to use?Every month or every year? What are the disadvantages? If this is so easy then why so many people do not do this and still pay interest only while they can reduce pricipal repayments as well!!!!
Thanks
I have an IDEA
Lets organise a Credit Card borrowing club.
1. Club will have 10 credit cards 20 000 each200 000 all together.
A person can borrow this money for 55 days – interest free period and return them back at the end of the period. Club will take comission of 30-50% of saved money. [biggrin][biggrin][biggrin][biggrin][biggrin][biggrin]Originally posted by Zorge:I have an IDEA
Lets organise a Credit Card borrowing club.
1. Club will have 10 credit cards 20 000 each200 000 all together.
A person can borrow this money for 55 days – interest free period and return them back at the end of the period. Club will take comission of 30-50% of saved money. [biggrin][biggrin][biggrin][biggrin][biggrin][biggrin]Wont work.
No credit cards will let you transfer cash on 55 interest free. Interest will be charged from day one and will be higher than your home loan rate.
The credit cards make money from the Merchant fees which is why they give the 55 day interest free – after this time they make money from you.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Dont want to put a dampner on this, but the way I understand it the credit card is not the vehicle to save the money. It just defers 1 month of interest in the credit card balance.
Eg if you spend:
Jan 1000
Feb 1000
Mar 1000You could pay directly from your LOC, or put on the card.
If on the card, you LOC will feel it something like:
Jan’s 1000 in Feb
Feb’s 1000 in Mar
Mar’s 1000 in Apr.So you have not really saved much (IR = say $1000 at 7%pa divide by 12). However you have increased the risk of paying a rediculously high IR on the card if you miss the payment due date.
I hope this makes sense!
MatOriginally posted by mathewc73:Dont want to put a dampner on this, but the way I understand it the credit card is not the vehicle to save the money. It just defers 1 month of interest in the credit card balance.
Eg if you spend:
Jan 1000
Feb 1000
Mar 1000You could pay directly from your LOC, or put on the card.
If on the card, you LOC will feel it something like:
Jan’s 1000 in Feb
Feb’s 1000 in Mar
Mar’s 1000 in Apr.So you have not really saved much (IR = say $1000 at 7%pa divide by 12). However you have increased the risk of paying a rediculously high IR on the card if you miss the payment due date.
I hope this makes sense!
MatMatt what you have missed is the effect of keeping every spare cent in the LOC and just transferring your monthly expenses from the LOC to the credit card.
You cannot hand the LOC to the guy at Coles and buy the weeks groceries or arrange to have your electricity bill come out of it. A credit card lets you do this, gives you interest freee period and points towards whatever you choose to buy.
The major effect on the LOC is not the deferring of some interest but the accumulation of your savings in it.
If over the year you can save $20K then this cuts the daily interest on the LOC considerably. No point being paid a taxable 6% in an online acount when you can save 7.5% on your LOC tax free.
Don’t fight it – this really does work and is ideal for the family who have bought their dream home and wants to pay it off ASAP and not buy IPs.
There are other strategies out there. Perhaps accumulating 3 IPs in 5 years and then using the growth to kill the PPOR loan is one that is faster and less painful then a strict budget but only if you pick a growth market!
The main thing is to think about it and learn what is possible.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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