Forum Replies Created
Hi Brad
Personally i would try and get the Pesonal loan sorted first and then worry about the deposit for the 2nd IP.
Whilst you are constructing access equity is going to be difficult until the property is complete so you want to be careful how you structure the whole deal.
The cheapest personal loan rate may not be the complete solution especially with Credit scoring etc.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Brad
I am assuming the land has little equity in it as if so i would try and pay the Personal loan down at home loan rates.
Split the loan making the land and construction loan interest only and have the P/L portion as a P & I Loan linked to a 100% offset account.Go hell for leather in paying down this part of the loan.
If you dont have sufficient equity then certainly look and see if you cant restructure the personal loans to a lot lower interest rate.
Course normal assumptions in regards to Credit etc stand as using Liberty sometimes waves Red Flags.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
How old are they?
Might be a Capital allowance consideration depending on the age.
Also brick may require less maintainance.
All depends on the actual numbers and what you are wanting to do with the property long term.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
As Jamie has mentioned the old "liar loan" as they were called have been and gone but in saying this as long as the loan can be justifyably serviced there is no reason why it cant go full doc.
Certain lenders do consider border income and many lenders accept casual income so it all boils down the actual numbers.
Simple rule of thumb is if you cant afford the repayments dont take the loan in the first place as it is so easy to get into trouble or overcommit.
Further details are impossible to provide without more hard data.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Andrew
Coming from the UK i already had a property there and was seeking to buy in Europe somewhere we could use as a holiday home when we are there as well as a good long term investment as a hedge against the AUS.
Prices in the UK / Europe are so ridiculously cheap at the moment but the tide will turn and having an income in both GB Pounds and Euros suits me when i go abroad.
Other attraction was the 100% gearing in France.
Been a few years since i have been financing the US market but we never got anywhere near 100% for a FN.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
No that is incorrect as the Title defines who claims the Tax deduction and not who borrowers the money.
I hate to say it doesnt sound like your Broker has any idea on loan structure as Jamie initially mentioned it is a bot of a mess.
There is a couple of ways you could maximise your deductions and simplify your structure.
Must admit i am a loss why you would want to have a Bank hold your PPOR as security when they dont need to.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Totally agree with Jamie i fail to see why you would want to cross any of the securities.
Seems adequate equity and serviceability in each deal to be standalone.
Why not shoot Jamie a quick line and get him to structure it for you. Will cost you nothing and you will get it done properly.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Do a quick search on previous posts and you will see the comments others have made about the Company.
Just read them sitting down and with your hands in your pockets.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yes guess their daily slot on Channel 7 in the morning has been put on hold.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Many small businesses use such products to support their business lending and in answer to your questions:
1) Yes it is possible with some lenders. Others do not permit the funds to be used for business purposes or wish to charge a higher rate of interest. Check with you lender whether they allow such purpose.
2) The interest charged on the funds used for business / investment purposes will be Tax deductible.
3) As long as you only use the account for the business i cant see it getting too messy. Some lenders allow for multiple sub accounts which means you could allocate the individual accounts for specific purposes i.e A/c # 1 = Business expense, A/c # 2 = IP expenses.
4) Retain all of you loan statement relating to the business account and you should be fine.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Andrew
Oh dont get me wrong there are issues in investing in parts of the UK (Not sure i would be the first one to buy in parts of Oldham or Barnsley) but in the main from my experience the UK has a very similar property system to here in Australia.
In every large City there are areas to avoid and the UK is no different.
Sure not every Tenant is perfect and theft and damage can occur but again you can insure against such as you can here.
Mortgage Lenders and mortgage insurers have areas they just will not lend in exactly as here in Australia.
The big difference i see is that whilst the UK economy has struggled like a lot of Europe prices are coming off a very low base and lenders are actually lending. Many owners have negative equity and accept the fact that they will be living in the same property for years to come or have seen good growth in the past and price their properties accordingly.
Unlike many parts of the US all loans are Recourse Loans so if you decide to up and walk you need to expect that the Bank will come looking for you.
France is a different market totally. The Country itself has more tourists per year than any other Country in the world.
The property i purchased was a Leaseback property so guaranteed indexed linked rent for the next 9 years and being a Foreign National got full refund of my VAT (Our equivalent of GST) off the purchase price. Property gearing was 100% of the net GST amount at a fixed rate of 4.25% so cash flow positive from Day 1.
In my opinion investors need to conduct their DD wherever they purchase and that includes from Darlington to Darmouth or from Auchenflower to Ascot Park.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Matt
Sorry have to disagree.
AUS / GBP pair is as strong as it has been for years.
Prices in the UK are as cheap as the USA without the need to spend $$$ on renovation.
Property management is a Profession like Australia.
You can finance a deal in the UK with a interest rate circa 4-5%
Conveyance process is the same as most States in Australia.
No Stamp Duty upto 125K pounds.
Solid built homes.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Ben there is no difference in the LMI (other than crossing securities can work out more expensive in regards to the premium) if you cross your loans or structure them correctly.
Without the exact numbers it is difficult to set out to you the actual calculation for you but there is no difference as i say.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ben
Look i hate to say but your Broker should have explained this all to you.
To achieve the same end result without crossing the loans all your Broker would have done would be:
1) Set up standalone loan of 80% of the new IP purchase price secured against the IP solely.
2) Set up a separate sub loan (Do NOT touch the redraw) for 20% of the IP purchase price and sufficient to cover your acqusition costs secured against your PPOR.Both loans separate and secured solely on the individual property itself.
End result NO LMI and only an amount of 20% + acqusition costs secured against your PPOR.
End of Year 1 Revalue IP and draw upto 80% of the increased valuation.
Pay down the equivalent amount secured against your PPOR by way of the equity loan.Repeat steps for next dozen IP's.
Now of course you may have a problem…… but as i mentioned in my opening response post.
Only reason your Broker would not have done it this way is
1) Laziness and convenience for him / her.
2) Lack of knowledge or understanding of the problems it would cause down the track.Yours in Finance
Richard Taylor | Australia's leading private lender
Terry be suprised how many lenders are also adopting the same attitude to Trusts as BW.
Same old story if you dont understand or indeed if it only forms a small portion of your business and you dont want to understand then easier to same NO.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Exactly Jamie and evern more you can do it with Anz on an uncrossed basis.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
If you read the API magazine you would see how i made my money and how i can now offer my services for free.
Not even going to attempt to discuss Bank / market valuations on a Contract price. Sure RPM will have covered it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ben
Not Cross collateralising your loans would have had no bearing in the fact when it came to paying LMI for the purchase of the IP or indeed would not have limited your access to the equity you had available in the PPOR through the redraw.
The figures are exactly the flexibility going forward is the difference.
YES you should be getting a lower rate than you are on and YES your broker should have negotiated this for you.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ozkar
Your comment about market value and bank value is wrong and ill informed and clearly demonstates you lack of understanding when it comes to finance structures.
If i was a First Home Buyer buying a house at $300,000 and wanting to borrow $285,000 and the Bank only valued the property at $270,000 i would not be able to proceed. In fact if the valued the property at $290,000 i would not be able to proceed.
Now to answer your question:
Richard can I ask, if I came to you (I see you are a broker) do you have a panel of builders and developers I could talk to? do you have independent licensed financial advisors I could run things past? Relationships with accountants who specialise in investment related tax matters? Property managers who can manage my investment? or do you just search the hundreds of existing loan products on the market and get me a lower interest rate.
The simple answer is YES to all of these. The big difference is i DO NOT CHARGE a fee for such a service.
And then your final comment about RPM helping you reduce your home loan from 20 years to just over 6 is absolute rubbish.
There are many legitimate ways to reduce your loan term and these can include negotiating a lower interest rate, regularity of repayment, income variations etc etc.Of course the big one as Terry mentioned is capitalised interest but as you state RPM do not promote this.
I assume you are going for the employee of the month award.
Good to note you have never answered any other post before this one.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
To further add to Michael's closing comment
"It is not so much of an issue when you dont know that the loan is crossed more when you dont know the consequences of crossing it in the first place irrespective of whether you know or not".
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
