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Not sure who Michael is but i am sure he will answer you soon.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Not quiet right An offset account cannot help you pay of the loan sooner when it is an interest only loan unless of course it is a offset account with The Dragon.
A true 100% offset account will merely reduce your monthly interest being charged and NOT reduce the principal.
A good independant mortgage broker should be able to assist you in the restructure.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Or you could merely post the questions on the forum and get imput from everyone without feeling like you are being sold something.
I believe Terry has already more than adequately answered this question in the other thread.
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Yours in Finance
Richard Taylor | Australia's leading private lender
Tong i think you have my emailed list 10 reasons and since doing so 3 more have come to mind.
Bit suprised your mortgage broker didnt point out the pitfalls but then saying that maybe i am not.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Penti
Normally if you want to raise such a question would have been better to post it in the Finance Forum but anyway here goes.
Jamie has made some suggestions on how to set up the structure however without having actual numbers it is difficult to provide you with further information.
Course whilst you have the equity you may not have the serviceability so there are a few other factors to consider.
A good independant mortgage broker should be able to guide you thru the maize and provide you with some structured advice.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
We will assume for the purposes of the exercise that you have the $25K sitting in an offset account already.
Set up an equity loan (cheaper than a LOC) against IP 1 and use this to gear against for the deposit and acqusition costs and then set up a separate standalone IP loan on IP 3.
Only concern i would have is what you bought for $110K. Might be a small sq M unit and have had to have one of the other securities crossed as with it to get the gearing. Let us hope for your sake that is not the case.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
No worries Bayer he is a good guys to deal with.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
As Jamie has mentioned we write with slightly a biased view however in saying that most mortgage brokers dont charge fees for their services so certainly wouldnt be getting any unsuprising bill from me.
Now if you are after someone to source the property for you probably look to engage a Buyers Agent but remember choice one who declares his fees to you upfront so you know exactly what you are up for.
Let me know if you are interested in the Central Coast / Newcastle area and I can put you onto an excellent Buyers Agent who is a forum member and top bloke to boot.
Never had a finance issue with any deal of his we have financed for forum members.
Cheers
Yours in Finance.
Richard Taylor | Australia's leading private lender
Just out of curiousity which Bank funds the NRAS that you deal with.
Probably read the recent report about NRAS properties and how 90% of them where overpriced.
We have found most have been undervalued by between 10-15% which is equivalent to the commission the developers are paying the marketeers.
Good investment for who may ask ……………
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Yours in Finance
Richard Taylor | Australia's leading private lender
No thats is not case at all.
If you are paying 7% on your mortgage and you are in the 30% marginal Tax rate (you will be slightly over this on a couple of K) the funds in the offset account are effectively earning 10% as the offset is Tax free.
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Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Brendan
Firstly welcome to the forum and I hope you enjoy your time with us.
Couple of things you can do about the cash flow issue and that is look at a fixed rate of interest and also if you are buying in your personal name look to undertake a QS report on the property so you can lodge a PAYG Tax variation stright up.
Now on how you structure the loan remember you can look at an investment loan upto 95% lvr + LMI which means subject to your income and the likely rental income you can spread out your equity amongst a couple of properties.
You wouldn't cash in your shares on use your own money especially when you have equity in your PPOR. Set up a separate LOC or Equity loan sitting in behind your IO PPOR loan and use the borrowed funds for the deposit and acqusition costs. Then look to take out a separate IP loan against the security itself.
Interest on the 2 loans will be Tax deductible as the purpose of the funds is investment.
NAB probably wont give you the full 0.7% rate discount on the equity loan unless you push them.
Your mortgage broker should be able to suggest alternative lenders for the separate IP Loan.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Also remember whilst LMI it is deductible over 5 years or the term of the loan whichever is the lesser there are also lenders that dont charge LMI upto 85%, others that charge a fee instead and other that pay the LMI themselves on a 90% deal upto a given amount.
All of course subject to nice clean credit but could save you a few $$$$.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Tong
Drop me an email and I will email you a list of the reasons why you would C/c.
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Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry Bank i have to totally disagree
Anz DO offer the product as standard through Mortgage Origination under Portfolio.
Dont disagree with the fees but the product is offered with upto 12 splits.NAB Do offer the product through NAB Broker without the need to go to a Business Banker.
Westpac i will grant you there but SGB we are directly accredited with and never had an issue.
I have no problem in the total loan being in the name of Trust but that's not the point.
CBA are NOT the only major to offer such a structure under their Pro Package.
Terry you are soooooooo right. Come back as a Broker mate and give the legal game away.
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Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry Banker have to disagree there 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.
NAB do under Choice you get 0.7% discount upwards and can actually unofficially have a 100% fully transactional offset account in a Company name (Done 2 like this this week alone).
Anz do under their Portfolio product.
Westpac & The Dragon do under their Pro packs.
Admitedly they wont lend on HDT's under this basis but was under tjhe impression CBA wouldnt do HDT's either.
i could then list all of the lenders that dont charge any security fees and lend to HDT / UT / DFT's etc etc but given it is nearly 1am that will be for another day
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Yours in Finance
Richard Taylor | Australia's leading private lender
With the LOC, is that at a higher interest rate?
All depends on what the original variable rate is in the first place. I think new CBA customers will find that they are paying more than other borrowers on their variable rate loans so with CBA YES definately. With other lenders NO.
Would it cost to redraw up to the 80% LVR of the re-evaluation of the IP?
All depends on the lender concerned. Many loans at the moment do not have any application costs so if this was the case NO. Most lenders dont charge an application fee on a loan increase usually just a new valuation fee if required.
Again a investor for the long term isnt worried about a dollar here or there when it comes to a valuation fee.Does this structure offer more protection for my PPoR? I'm assuming it will because Id only have $70,500 + costs tied to it, Exactly one of the many reasons. Just ask your mortgage broker to give you 10 reasons why you shouldnt cross collateralise your loans.
With this structure, is the interest charged on the LOC tax deductible?
Yes it the purpose of the funds that is important. Purpose = investment use = deductible debtWhy wouldn't you simply pay off the LOC first then start dumping extra money into the offeset account?
Because every time you redraw it is treated as a new loan and if the purpose of the funds is not for investment the interest is not deductible. The loan then becomes contaminated.Again dont want to appear like broken record but your mortgage broker should be telling all of this information.
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Yours in Finance
Richard Taylor | Australia's leading private lender
I am not being funny if your MB has not suggested this he is not acting in your best interest or has no idea how to structure an investment loan.maybe he hasnt ever purchased an IP either.
Yes you have the concept of the suggested structure.
All you would do as the Ip increases in value is redraw upto 80% of the increased valuation and then pay down the LOC.
Eventually the entire debt would be on the IP although the LOC could be used for the next property purchase.
For most clients we structure it that the LOC is sufficient for say 2 x 20% deposit plus costs just saves going back again and again to increase the LOC amount.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Sorry mate i couldnt disagree with you more.
My personal portfolio is worth over $18.5M with a a total loan of less than $2.4M.
I would never offer my PPOR (which is actually in the wifes name anyway) as security for another property.
Why wouldnt you take an 80% lend on the IP as mentioned earlier with a 100% offset A/c and if necessary an LOC on your place to fund the 20% plus costs.
Why do you want to expose your PPOR to more debt than necessary.
I am sure CBA have told you it is the way to go and sure if you decide they are right go that route but i can tell you i would never do that. If you buy in Trust you are going to have to gift or loan the funds to your DFT why again would you have your PPOR as security. Sorry but it is beyond me.
To conclude i still fail to see why even if you wanted to give the security of your PPOR why you would take the Wealth Package and pay $350 / annum.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
What are you getting for your annual $350 and why would you Not want an every day transactional offset account on part of the loan.
You can't set up a decent portolio by crossing all of your loans and the easiest way to avoid this is use different lenders.
One lender to fund the deposits and acqusition costs on your PPOR (which you would normally link to an offset) and then a separate lender to fund the IP loan.
Each IP loan could certainly be with the same lender.
I spend so many hours a day restructuring clients loans especially CBA clients where the Bank have tucked up the client and then told them not a lot more they can do. (Had 2 deals in to for high net worth clients who were completely cross collateralised and now the CBA have told them they cant lend them any more money despite with 6 properties only being at a 55% lvr).
Just ask the CBA Bank manager how many properties he has and that will give you an idea of how successful he has been.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Mario i am not saying it is easy and things have changed considerably since i set up my portfolio.
If you have the API magasine read the article i did in the August edition.
Email me if you dont buy API and I can send it to you.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
