[propertyboyParticipant@propertyboyJoin Date: 2008Post Count: 232]

January 24, 2011 - 12:06 am

Ok just ran the figures through a loan amortisation schedule and also did the calculation for interest only and the overall interest paid and loan balance outstanding at the start and end of each month remain the same, ASSUMING the principle component of the interest only decreases by the amount of the extra payment over the interest only. For a variable loan, does the interest only loans principle decrease by the amount you pay over the interest amount? You guys were saying it doesn’t but it effectively is via the offset account? So the principle component stays at the original balance but you get interest from the offset account?

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January 23, 2011 - 11:19 pm

So that is where I get confused. Why would anyone want an P&I loan when they can simply go for a Interest only. 

Say overall you still repay $1400 a month does the P&I principle get repaid down faster because of the way the interest is calculated?

Interest only Loan interest is calculated like this (for a year) – Interest (say 7%) x Principle outstanding  So, essentially as you pay down the $400 principle a month your interest would decrease each year as it is calculating 7% pa on a principle amount less $400 each month. 

However, for P&I they base it on the compound time value of money formula Principle owing = repayment/interest[(interest – 1(/1+interest)^number of years)] 

So for the P&I loan over the time of the loan the principle proportion of the $1400 increases and the interest proportion decreases.

Say over the 25 year frame if you paid down $1400 on each loan a month would you pay less interest  on the Principle and Interest loan? Or would the interest amount as a proportion of total amount paid be the same for both Interst and P&I? 

If it is the same why would anyone go for a P&I loan?

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January 22, 2011 - 6:14 am

If you have an interest only loan and it requires you to repay $1000 a month in interest but you have capacity to pay $1400 a month, if you have a variable loan what is stopping you from going interest only and still repaying $1400 a month?

That is pay $1000 interest and $400 principle pay down?

Why would you go into a interest and principle where you are required to pay down $1400 every month. Atleast with interest only you get an option.

Am I missing a point here guys?If you go intersest and principle do you get a better interest rate or does it mean if you are paying 1400 a month effectively you are paying down more principle?

If not, why would anyone go for a principle and interest when they coulod go interest only and just make the repayments when they want?

This has confused me at times.

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January 21, 2011 - 3:17 am

JacM wrote:

On the other hand, you could say that if someone had a year's rent in advance, they are probably in a position to consider buying their own place instead?  Just double check they're not into dodgy things such as using residential properties as drug labs or something

 I initially thought of this. Once he pays the rent upfront the risk of him not paying rent is pretty much mitigated. However, he could trash the place and do illegal activities. I went to the cops and asked If I could do  a criminal check but they said you normally don’t do that for leases and that he would have to agree. So in effect, whetter he pays 12 months upfront or not the risk of illegal activates exists. In fact, it exists for all tenants and agents don’t really check for this. I have verified from his solicitor that he has sold his property so there is some reasoning for the upfront cash he has available. If he didn’t have proof he just sold his house it would be suss that he is willing to pay cash upfront I guess. But then, even so, this risk still exists for monthly payments and any tenant an agent finds. 

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January 21, 2011 - 2:45 am

I live in Victoria.

My prospective tenant is a retiree who recently defaulted on his mortgage. The property sold for $1m and after the bank takes their cut and all fees are paid he will be left with $200,000 in his pocket.He wants to pay the whole rental upfront as this will let him know how much to budget.Essentially, he will have this $250,000 and his pension.From a credit perspective, unless he gives me the 12montsh upfront I would not lease it to him. He seems like he will be a good tenant, but the fact that he has defaulted on a mortgage and has financial problems is a big no no. However, as he is willing to pay upfront it mitigates this whole credit risk and I am happy to give it to him. I think he understands this himself and this is why he suggested it.

Re  why wouldn’t he buy his own house? 1) I am guessing he would have problems getting finance due to the fact that he has defaulted. 2) 1 years rent upfront won’t even be .01% of the deposit for a home in the area he is looking to rent in. 3) he is in his 70’s and probably prefers to rent.Should I go forward and lease it to him if he pays the rent upfront and is willing to do so?
 
It essentially gets rid of the whole credit risk in a sense which was my only concern with this guy.However, I do not want to lease it to him and then 5 months into the lease VCAT demands I pay the whole lot back to him.

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January 20, 2011 - 12:50 pm

http://www.consumer.vic.gov.au/CA256EB5000644CE/page/Renting-Renting+infringement+notices?OpenDocument&1=910-Renting~&2=120-Renting+infringement+notices~&3=~

s.41

A landlord must not require a tenant to pay rent more that 2 weeks in advance if rent is payable each week

$299.00 (2.5 penalty units)

Says its a $299 fine, does that mean I will have to repay the whole amount?

Say I receive it then the tenant does something wrong does that mean I have to pay back the whole rent and get fined $299 or do I just pay the fine?

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January 20, 2011 - 12:46 pm

Callander wrote:

may vary from state to state. it will all depend on what is on the origional lease! i do all leases on at least fortnightly figures so that i can ask 4 weeks rent in advance. and it runs exactly as you have suggested. Section 40 (Residential Tenancy Act) VIC Limit on rent in advance. A landlord must not require a tenant to pay rent under an agreement more than 1 month in advance Section 41 a landlord must no require a tenant to pay rent under a tenancy agreement more that 2 weeks in advance in the period in respect of which rent is payable under that agreement is not more that 1 week. so provided you have a lease agreement that states that the rent is fortnightly or above you can ask for 4 weeks in advance.

I just found a tenant for my investment property who wants to pay 12 months rent in advance as he can not be bothered paying rent every month.

S41 says a landlord must not "require" as we are both agreeing to this, does that mean I can take 12 months rent in advance?

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January 20, 2011 - 12:39 pm

It says the landlord must not "require" does that mean if the tenant is willing to do so it doesnt matter?

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January 20, 2011 - 12:39 pm

http://www.austlii.edu.au/au/legis/nt/consol_act/rta207/s39.html

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January 20, 2011 - 12:31 pm

http://www.luxeproperty.com.au/docs/rentingcomplete.pdf

Page 8 of this document on the bottom right hand under Rent in Advance says

"If you pay rent weekly, your landlord cannot ask for more than 14 days’ rent at the beginning of a tenancy. In any othercase, provided the rent is $350 a week or less, the landlord cannot ask for more than one month’s rent in advance."

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November 22, 2010 - 11:42 am

Can you share your story? I would really like to know some potential real life issues that could arise

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November 18, 2010 - 2:32 am

^sorry I am a bit confused.

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November 18, 2010 - 12:01 am

It is in Melbourne Australia

A 4 unit block.

Pretty much a shared driveway and very small common front yard as all 4 units have their own enclosed front yards w hich is not common land.

They are essentially 4 homes on a lot.

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August 11, 2010 - 4:00 am

But can all those issues be alleviated if they simply discharge the mortgage?

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August 10, 2010 - 10:22 pm

^ Our concern is outside parties taking claim of my property if I was to be sued. We have complete faith and trust in each other my money is my parents money. However, dont want to register a mortgage if it has too many disadvantages as we dont really have to but can if we want its always an option. We can structure it to get best format really.

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August 10, 2010 - 4:44 am

how would the bank know I have this debt if the agreement is between myself and my parents?

How do banks even know what other banks you have debt with is there some sort of register? Or do they just look at the title and see if a bank is down as a mortgagor?

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August 10, 2010 - 12:19 am

I jsut had a think about this, if my parents mortgage the place will that affect the amount banks will lend to me?

At the moment I have 800k property in my name all paid off. My parents have the mortgage and the bank they borrowed the money from has recourse to their home not my home. So my ability to get extra finance is very good at the moment. Will mortgaging the place for added security have a negative of a  reducing my borrowing capacity? These are the negatives I am refering to I want to get my head around before I decide wheter I register a mortgage on the place.

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August 4, 2010 - 6:11 am

^sorry?

I am not using the mortgage to demonstrate that my parents have lent money to me. I am using it so that I dont lose my house and as it is essentially cash all in my name. The worst thing is as it was borrowed by my parents then onlent to me not only would I lose my house my parents would still have the 800k debt.

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August 4, 2010 - 5:40 am

yeh but if my parents go bust, they would be bankrupt anyway so technically the 800k they borrowed from the bank they wouldnt be able to repay so I would just make the repayments back to the bank instead of them as the bank would step in and take charge over the mortgage not the actual property? Is that correct? Or would the bank actually have right to my house eventhough I am on title and there is no connection between myself and them.

If the bank only take charge of the mortgage,I am in no different situation, I still have to make repayments and the property is in my name? Is that correct?

However, if I do not mortgage, say I cause damage, my house could be sold off and 800k paid in damages as there is no trace to my parents and they would also have to continue repay the 800k loan which they have onlent so essentially we lose 1.6m.

Is this correct?

So really there is no reason why we should not mortgage?

Or are there tax/stamp duty/other cost implications?

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August 4, 2010 - 5:22 am

yeh but if they get sued, the property is in my  name, they dont own it they are just have registered a mortgage. I am happy to repay someone else, the property will still be mine wont it? I just repay the creditor and my parents would be bankrupt so they wouldnt repay the 800k they loaned and onlent to me. If I dont register a mortgage the property could be sold and the debt will also exist.

Bit confused by that point.

So you are saying if NAB,Westpac were to go bankrupt all homes they have mortgaged would be sold and the owner would lose?