Forum Replies Created
Ok – so looking at what you’ve said…
ANZ is only on the portfolio – which has higher set up and higher ongoing costs – realistically not suitable or comparable in this sceario. The additional 750 set up fee and 550 annual fee for 12 splits versus CBA 350 for unlimited splits. Also under portfolio all securities are crossed via a floating multi product limit (the portfolio is not a specific loan rather a package / structure).
To explain – ANZ portfolio is an overall secured and guarantee limit. All parties guarantee the total limit and all properties support the total limit. You can then restructure loans captured within the limit without the need to restructure the security / guarantees ( they apply to the master limit). NAB and CBA offer these via private banking where the client can set up new loans and restructure debts between entities without new contracts / guarantee docs.
If you split the security – you have two portfolios as you need two master limits. Therefore 2 x 750 set up fees and 2 x annual fees (1100 p/a).
You agree with me Westpac need business banking and you were complaining the other day on a post that St George a crap with trusts…
Rate rise aside – the othe banks will likley follow. Why not go where the structure is not an issue?
The guy banks with CBA and probably rating one or two so would not even need vals and doesn’t need to cross collateralise?
Of couse we could talk more about ANZ but that is like comparing apples with a steak sandwich with the lot…
Banker
I’m not here to support the banks but it’s a little to easy to be short sighted and cry fowl at the RBA / Banks when this happens.
Keep in mind a first home buyer will pay far more (approx double) as a percentage of their weekly pay to buy a home in Australia than they would have when rates were at 17%.
It is important to note a couple of figures:
Cost of buying:
Loan of 300,000 at 7.0% = 21,000 per year
Loan of 350,000 at 6.5% = 22,750 per yearIf the rise stops a property jumping from 300k to 350k – the figures above show that not only would the debt be more affordable – you would also save 50k plus some stamp duty on your next purchase.
It is also worth noting. If housing affordability was addressed earlier and properties were 20% cheaper. The banks wouldnt be under the same funding pressures.
I think if you look at the figures a little more closely – even the example I used above. Property will be more affordable even with higher rates if we can control the growth; investors will also benefit as yields catch up with prices and their reqirement of ever increasing debt slows.
Personally, I along with many other investors would welcome another 1.0% increase to rates over the next year. This is assuming the government is still not taking any real steps to control housing affordability.
In short – I think current growth is worse than rates increasing (yes even for investors).
Banker
Hi Richard,
ANZ portfolio has a set up fee of $750 plus guarantee fees and an annual fee of $550. They don’t offer company / trust structures at standard pricing and portfolio is not suitable for a loan this small.
NAB need to be signed off by business banking which is a pretty hard sell without business exposure.
The dragon and trusts – let’s not go there…
Westpac also need trust deals to go through business banking as they can’t print trust docs from their Adelaide doc centre – retail bank cannot approve trust deals.
CBA is the only on that can approve a trust on the spot, without bending the system – and do the deal fast without a single exception to policy. By fast I mean within a week.
Couple of other things…
If it ends up being in a trust where is the benefit of a fully feature offset. It’s not as if the personal wage will go in to the trusts bank account?
Also – borrowing in personal name and then lending to trust will potentially take away the trusts asset protection – the bank(s) should make the full advance directly to the trust rather than a gift or loan from a related party / beneficiary. Gift can be reversed and loan is entered as the beneficiaries asset on the balance sheet…
Even with the 80% 20% split structure with the line of credit; you could place with CBA without cross-collateralising and have all debts contracted in the company name.
Banker
Thought I might add a comment…or three or four…
I would also prefer to mortgage only one title.
If you did get in strife you could sell the IP and pay the debt therefore the owner occupied home has minimal risk. If you have a funding buffer or funds in offset you will have time to sell the IP if in need.CBA are one of the only lenders that lend to either family (disc) trusts or unit trusts / with the option of company as trustee – at their discounted wealth package rates.
You could borrow 100% plus costs against your PPOR (keep the IP title at home) with the loan in the trust. You would need guarantees from anyone on the title of your home. CBA charges their guarantee fee per applicant rather than per guarantor so only one guarantee fee is applicable ($200) – other lenders charge per guarantee…
Terry’s option re gifting funds to the trust is ok but you will lose some asset protection as this can be reversed by courts / deemed your asset. However if a bank lends 100% plus costs you have no equity of your own in the trust and no gift than can be reversed.
With a trust your short term tax benefits will be lost but let’s face it the tax rate on 50k is not massive. Losses on the property can be carried forward and claimed in the future when the trust makes a profit or until the property is sold. If you do sell, at least with a trust you can choose who gets the capital gains.
It is also worth noting that if you have a company as trustee – your personal wealth package will not cover the company / trust. It will have it’s own 350 fee. Therefore maybe consider the economiser which at the moment has nil ongoing fees and NIL establishment, legal or Val fees.
Last but not least – CBA will currently cover your conveyancing cost (depending where you are / who you deal with) – all up not a bad deal if you exclude today’s rate rise. If the rate is good or not will depend on what the other banks now do with their rates.
Banker
P.s. This deal should be a no-brainer. Given that you are an existing CBA client with over 1m in net assets you should get a risk grade of one or two. This generally means same day approval, no vals and you could apply and be settled within a week.
It means less money available to borrowers.
Not only do buyers need to watch there own budget, the banks will take the higher rate in to their debt servicing calculators so everyones max loan amount will drop a little.
With some developers in Melbounre already having trouble moving stock, Property Investment companies sales dropping, AFG Reporting a terrible month in OCT for loan applications ( refer brokernews.com.au), and now higher rates again adding to the mix; I think this will be an absolute downer on the property market – especially investmet properties e.g. Off the plan, serviced / student accom etc.
Although this will tip a few people over the edge – I personally would like to see 10 years of nil growth or even a little price reduction to keep property ownership open to the average Australian. One thing I hate more than rates rising is the concept than my kids will never buy a property off their own back and that property in the future will only be available to kids with rich parents.
Will be interesting to see what the other majors will do. All have the same pressuress CBA…
Owch…
There are a few issues raised above that might or might not be relivant depending on the industry you are looking to start a business in.
For example the structure e.g. Sole trader, partnership, pty ltd or trading through a disc trust will all depend on: expected turnover, how you plan to get funds in and out of the business, how many customers you will have, how you want to be taxed and the types of risk relivant to the industry etc. You also need to think about how this will impact your ability to raise finance moving forward and what provisions you can set in place on your current income (lines of credit etc).
I agree with keeping the debt interest only and using offset. The rest will depend on what sort of business venture you are considering…
You might be right.
If the owner occ is in personal names it should be covered under the banks hardship policy. Assuming all debts were disclosed at time of application.
Either way it is important to keep communicating with the lender if you are going to be short on the payments.
Banker
All banks have put concessions in place for customers in financial hardship however you have a couple of problems.
1. Split banking: banks support their loyal customers. When you have split banking the banks have no way to assess your overall position on an ongoing basis e.g. Less ability to monitor you through your “hardship”. An example of this is waiving interest (yes all the banks can go as far as waiving interest for a period of time) – they will not waive interest if it simply allows you to maintain a debt with a different lender. They generally won’t consider waiving interest if multiple banks are involved – they also all will want to be first in line to part payments so it is near impossible to satisfy one without upsetting another.
2. Your properties are investment with even your own home in a trust. Depending on the strucutre e.g. If it is a company as trustee :- you won’t get the same consessions you normally would if it was your owner occupied house. Loans to companies are unregulated under UCCC along with loans for investment.
3. The banks credit / recoveries areas that manage clients in arrears have a common criteria. If the problems were unforeseen e.g. Being sick or made redundant etc – they all apply concessions. However if the problem is considerred self inflicted e.g. You left your job to start a business which did not go to plan – you can potentially be sent directly to recoveries. The majority of clients in recoveries with all banks at the moment are property investors- in many cases the clients have simply over-commited and underestimated the cost of property investing. The true unforeseen circumstances are far less common than the people overcommitting to invest without properly considering the impact on their cashflow.
One very important thing is whether or not you disclosed your liabiliies to each bank when you applied for finance. If not your loan applications were potentially fraudulent which could result in a very harsh a fast responce from the banks.
Personally: I would support the lender with your home to ensure they are paid first. Prioritize the lenders based on which properties are more important. Contact all of them and request information on their hardship program.
All banks have brochures in the branch outlining options in time of hardship so don’t feel that info is not available. Just go to your local branch for a brouchure – it will have all relivant contact numbers required.
Good luck.
Oh – the bank can also default you and issue a letter of demand; requiring you to repay the debt in full within short notice.
In addition to the post from MarJac your credit file will also show a list of companies you are director of. Often banks also complete ASIC searches that show if the company is trading and if the company has any charges e.g. Loans for cars etc.
Non disclosure of debt is very common however the new legislation (NCCP) will put more accountability on managers and brokers that do not disclose debt (noting if debt is disclosed the deal might not service – therefore be deemed unsuitable for the client).
If you ever end up in a collections and the bank discovers the deal was fraudulent you could be in strife as the courts will give the banks almost free access to all your assets to recover debt.
You also face potential fines and jail if convicted of fraud – very unlikley but possible if the bank lost money based on a false declaration.
It is the same as not disclosing how many dependents you have – no easy to justify how you forgot about your kids… Also noneasy to forget you own another property.
The MISA account number is the same as the home loan however different BSB.
If you have both the BSB and the account number I am pretty sure you can deposit via transfer from another bank – try it with $10.If that works simply give the BSB and Account no for the MISA to your employer for salary payments etc.
you can also salary credit to all CBA loans directly however there might be tax issues when you redraw for alternative uses.
I still support (as I’ve said in another post) not using your offset as your main trading account. If your goal is to not pay down your loan and put funds in offset instead – it can be harder to budget when you have your salary go in to an offset with 100k available. If you use an everyday bank account you can separate your day to day cash from long term savings.
The cost of keeping average of say $1000 out of offset is minimal. You can also use a cc to pay your bills and get online once per month to transfer funds out of the MISA and pay your bill.
There are still a lot of areas CBA is more flexible than other majors (mostly credit policies / waiver of policies) Depends how badly you want a fully transactional offset. Westpacs is great however you will lose more on rates that you will gain from the account.
BankerYou need to speak to a good banker or broker.
The 400,000 needs to be split to reflect personal and investment portions (unless all currently investment use ). The 314,000 and 245,000 are OK but should be interest only if you have other non-deductable debt.
You want to offset income against personal debt. Depending on your business, trading through a family trust may allow you to move money from the business to personal accounts easier. This lets you offset cash you might have generated in the business (can’t do this easily without trading through a trust).
It is often cheaper to restructure with your existing lender (assuming it's a good deal). If you currently have 4 properties it will costs around $1600 in titles fees (200 per release of mortgage and 200 to register new mortgages), up to $1400 to discharge fees from outgoing bank ($350 per title or loan is common), plus deferred establishment fees if applicable. These are all before the new lenders fees.Which bank are you with?
Be careful with both bankers and brokers as they will want you to change lenders. You might not need to.
Banker
FrugalOne wrote:If I was to purchase a property purely for investment purposes, and it was purchased outright for say $100000, would I recieve the tax proportion of the $100000 back as a tax deduction?No. Think of it as having 100k in cash and then buying 100k property. You have not lost the 100k. You have simply transferred it from cash holdings to property holdings. Therefore cannot claim.
No different from a car. If you buy a car for 30k and pay cash. It is again transfer of asset from cash to car. Cannot be claimed.
If the asset you purchase reduces in value. You can claim reduction in value as a loss. This is usually referred to as depreciation which is claimed annually.
In the case of property or any other asset in a balance sheet (in a company) there is a written down vale. That is the property value less depreciation claimed.
Therefore when you do claim depreciation. The tax benefit is largly short term only. It hits you at the end when you sell and pay capital gains.
E.g.
Purchase 100k (cannot be claimed)
Reduction in value (fixtures, fittings etc) 10k claimed over several years.Written down value is now 90k
If you sell for 120k you pay capital gains on 30k rather than 20k.
I lot of people doent realise this when they claim depreciation….A lot of accountants also dont account for it properly.
Banker
I have no problems with kickbacks to clients. It’s better than putting an ad in the paper – better to have the money in the clients pocket than James Packer or Rupert Murdochs pockets…
I would like to see commissions to any other parties banned. As soon as your broker pays your real estate a commission you need to wonder; are they looking after their client; or helping the agent secure a sale.
Brokers need to have their clients best interest at heart. A financial interest to referrer represents a conflict of interest ( kick back to the client does not).
When you talk about aggregators disliking refund style brokers; I bet you half their brokers are splitting commissions with accountants and agents:- in many cases not disclosing this to the client…
Banker
Hi Jack,
The title will say something like this;
99 of 100 shares; mr Jack…
1 of 100 shares; mrs Jack…If this is the case you will get 99% of income / deductions
Your wife will get 1% of income / deductions.The upside for you is tax benefits if neg geared – you claim…
The down side is capital gains if sold while you have high income… Tax at your tax rate…Another alternative is a family trust. Trust will receive income / deductions. Profits are then distributed each year in at any desired split between beneficiaries / then taxed at their individual rates. Therefore you can give profits to your wife if you sell
Downside of a trust is that you can’t distribute losses (only carry them forward to future years). You have high income now; therefore I would assume want some tax benefit now… Rather than not being able to claim losses until the future when the trust is profitable…
So it depends on if you will sell in the near future.
Peninsula is a great spot but there are pockets that have always under preformed. I would stick to Mornington, Mount Martha and Mt Eliza:- on the beach side; walking distance to cafes. You should easily get this in your budget.
Re the structure; 20% and 80% is fine. When the investment goes up in value you can role the 20% into the core debt; thus moving 100% of the debt to the one property once it has increased in value.
I wouldn’t worry about split banking. If the loans are not cross collateralized there is no major benefit and you will get a lower rate and single annual fee for all loans if with one bank.
I’d disagree with Otta that self employed deals are complicated. In some cases yes but for most small family businesses they are very simple.
The average of two years and the 20% growth rule discussed above is more of a generalisation. It is simply a trigger to ask some more questions to make sure you understand what is driving the growth. If it is reasonable to assume the growth will continue you can look at using the later year, interim accounts or in some cases projections (needs to be very strong to accept projections).
You can’t simply choose not to provide returns if you have them; and simply declare a higher figure on low doc to get approved. I don’t care who the lender or broker is; this won’t be accepted by any lender; only dodgy operators who opt to withhold information from the lender.
In many cases a requirement of a low doc application is an explaination as to why the tax returns are unavailable; saying you had them but choose to not supply them is not acceptable. If your banker or broker tells you this is an option; they will be making up a reason the financials are unavailable for the lender…
As of the end of September you can use the Year to Date on your payslip x 4 (you can work off YTD when more than one quarter completed). Broker Chanel at CBA is stricter than dealing direct.
No different to NAB advantage loans. Which of course are not actual NAB loans. Just funded by NAB. For now.
Are you married?
If so you may be able to tranfer for NIL stamps in VIC. Rather than a dollar amount on the transfer it states “in love and affection”
Also, keep in mind you don’t need to both be on title to get a loan in both names – if one person is on title the other can be on the loan as a second applicant however needs to have a financial interest in the tranaction. Being married or defacto will cover the financal interest part…
Banker
