Dave,

these days just a willingness to pay the fees usually. Although there may be a min initial loan size of $150k to qualify, after that the discount depends on your overall borrowings, with the more you borrow the greater the discount.

Terryw
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N
Hi Dave, no difference in rates, in fact cheaper rates if anything. I think many professional packs allow free valuations as part of the deal (annual fee involved).

Terryw
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It would be better if you owned an asset outright, but by taking an IO loan the lower repayments over the years may enable you to buy many more assets multiplying you returns.

I would say the advantages of IO are:
1) lower repayments which allow you to invest in extra property/shares etc

2) if on Investments, lower repayments allowing you to divert extra money to paying down non deductible debt.

Terryw
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If you have a PPOR loan, then you should have an offset account attached to that as the interest is not deductible. Pay this down first.

Once you have paid off your PPOR debt, then you should consider a 100% offset account against an investmnet. But as you say you will not be ‘earning’ much as tax must be considered, somaybe just use the offset to get wages deposited etc, and then reinvest in a higher returning area.

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Banks generally lend only on the contract price or the valuation, whichever is lower. So in this case they would only lend x% of $80,000. Once it is settled, then the client could apply for an increase, but many lenders want 3 months time lapse before allowing this.

In some circumstances it may be possible to get the loan based on valuation, but this is rare. Once exception is if there is a 12+ month settlment.

Terryw
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You’re accountant seems uneducated. The point of a trust is not to prevent the bank from getting your property, but other’s. The property will be used as security for the loan anyway, so the bank can definitely get at your property if you were to default. Did he mention all the tax advantages of a trust?

I tend to agree with the solicitor. HDTs were all the rage a few years ago. Many got one just because it was the in thing, not understanding them. I have seen a few clients who had been using them incorrectly – for years even, unaware. HDT can be very good in theory, but there are many problems such as the high running costs, complexity, the fact that most accountants don’t understand them. And there are many accountants that are doing things wrong which could come back and bite the client.

eg. the units, when these are redeemed by the trust, it probably should be paying market rates for them. So there are problems on how do you value the units. Some accountants apparently advocate that the units can just be redeemed for the purchase price. I think the ATO will be not too happy with this approach, and I hear that they have set up a little team looking at HDTs.

Generally it is the accountant that should be setting up the trusts. They are able to purchase ready made deeds and just help you with deciding who will be the unit holder, trustee, appointor etc

Terryw
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Sounds like a good idea. If you feel you have bitten off more than you can chew, take time out to re-assess the situation. You can also make another offer on this one later (if still available).

Terryw
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Oz, this is just a forum with brokers and others giving general ideas of what would be possible. If an actual application was submitted then further checks would be made and serviceability looked into.

Terryw
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Depending on which lender your loans are with, you might be able to get some done without charge – by a bank valuer.

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I agree more and more everyday!!. When you look at all the costs of property, from the start up costs of stamp duty, to land tax, and then look at the returns of some of these funds, including ING property funds – some have returned 70% pa last year, it makes you wonder why invest in property?

Terryw
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