If you are only interested in buying one or two properties, and have a clean record, good employment etc then getting the cheapest rate may be the best option.

But if you are planning on buying a few more properties, then avoiding the securitised lenders will help later on.

And nobody gets the standard rates anymore. Most, if not all, of hte major banks offer professional packages with discounts of around 0.70% for loans over $250,000. This will bring the rate down to 7.37% which is still higher than the cheaper no frills lenders, but you can get some more features and flexibility which may help you end up borrowing more in the long run.

Depends on what you are after I guess.

Terryw
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Thomas,

they have to allow for costs as well – rates, insurances, management fees etc. These are usually around 20% of the rents all up.

And I don’t think lenders actually lend assuming their will be capital growth. They only base the servicability on current incomes. Future LVRs and Rents are not taken into account.

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David

Not really. You would be paying IO on the LOC so you could easily apportion the interest between different properties. eg. if you take $20,000 5 times for 5 different properties then each is attributed 20% of the interest at tax time.

In the end if you don’t mix personal stuff in there you will be able to claim the lot, so getting it wrong between the properties will make no overall difference.

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Hi Cruisader

The banks fees for release of security is about $300.

So if you have a LOC setup, you could use that for deposits, but if you have already been using the LOC for other non-business purposes, then it would be better to have a separate one.

Once you start using the LOC for business, stop having your wages etc placed in there. Just pay the interest each month. If you want somewhere to park wages, rents and spare cash you need to set up a 100% offset account, otherwise it will be a nightmare at tax time.

Terryw
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Yes going guarantor will show on your credit file.

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Hi Thomas

Lenders generally only take into account 70-80% of the rental income, so having a postive cashflow property may not increase your serviceability, but decrease it, depending on how much the rent is.

Whether it is a good investment is a different matter.

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Trusts can be a difficult concept to get y our head around.

A trust is an ‘arrangement’ where someone owns something on behalf of others. A discretionary trust is where the trustee owns an asset for a large class of members called beneficiaries. These beneficiaries usually include various family members.

When the trust makes a profit the trustee then can distribute the income to any of these beneficiaries. This can be done at the trustee’s discretion. Usually the trustee distributes to the lowest income earners to reduce tax.

A trust gets finance with the Trustee applying for the loan. The loan will need to be guaranteed by the trustee or hte directors of the trustee company and sometimes named beneficiaries.

If you guarantee a loan, then it is the same as having the debt. If the trust doesn’t pay the lender can come after you. So this affects borrowing capacity the same way as if you had the loan yourself.

To transfer ownership of your properties from yourself to yourself as trustee means stamp duty and possibly CGT as the beneficial ownership is changing from yourself to all the beneficiaries of your trust. Don’t think there is anyway around this.

Terryw
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Mike at http://www.guardianpartners.com.au

Terryw
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thats correct. your security for the second property should be the second property alone. Don’t use the first property to secure it or = cross coll.

If you use a LOC secured on the first property to raise the deposit it will not be crossed as the title deed for this property is not used to secure the 2nd.

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Yeah, I agree that it sounds alright. Suncorp are not bad, but I haven’t used them for a while. IO with offset sounds like a good idea. Also good on you for negotiating the lower exit fees. Usual discharge fees are around $300.

Terryw
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