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If I would I wouldn’t be asking you such silly questions?
From my understanding, you don’t necessarily need equity to setup a LOC. It just needs to be secured against your property?
The income from the ASX 300 investment will be used to reduce non-deductible debt.
Terryw wrote:If they are the lender then they would actually be the mortgage manager, This would mean the loan is mortgage insured no matter what the LVR. This may not be a concern but if you are aiming for multiple properties it could restrict you.Rates will depend on the size of the loan some majors around 5.85%
Also you could do this on your own too.
How would you be able to do this on your own? You would have to fork out extra money to put into the investment. Whereas this doesn’t require you to do that. 30% of the principal repayment is put into the ASX 300 fund.
Terryw wrote:If it is a separate loan, the loc, then that is good. You must have equity to do this thenGood that they have a license too.
But who is the lender? 6.6% is very high at the moment. I hope the main loan isn't a LOC.
Not sure about the fees being deductible up front. Seek your own tax advice.
You mentioned you need equity to do this in the above post. But you don’t actually need equity as it does not borrow against the equity in your own home.
There is no redraw against equity for the LOC in the investment property, which is great!
Thanks Terry.
Wealth Maker Home Loans is the lender I believe. Yeah it is higher by a few basis points, but I guess the investment will make up for it. What’s the going interest rate at the moment?
The investment component operates as a separate line of credit account so I guess that’s how its distinguished for the mixed purpose. Is that still a concern?
They have a credit licence and AFSL so it looks fine from that end.
I spoke to the broker and the fees are:
$2,950 product packaging fee (tax deductible)
$25 loan servicing fee (tax deductible)
Interest rate of 6.6%Yeah I had a look and the fees are higher than for a standard loan product, but at least its all tax deductible. There a MER of 0.8% p.a on the investment. But I guess the gap protection is what appeals to me. The cost is $25 per $5000 that you borrow. So I was thinking about taking a loan of $500,000 so that’s $2,500 and that would cover me for any investment losses which could range in the tens of thousands of dollars if another GFC were to happen.
I gave them a call about this, however they have assured that it is a tax effective investment and operates as if the loan is being redraw and used to invest in the ASX 300.
I found the fees for gap protection, is $25 per $5000 in loan amount. I was considering taking out a $500k loan so thats $2,500. What do you think?
