Hi Mike

The others have answered your question on cross collateralisation. I now think it is not such a bad thing, but best to avoid if possible.

I have seen a lot of clients come to me after buying bits of various properties with partners. The trouble with this is the lender assesses you on the whole debt, but only allows you to take into account the income on the percentage you own. This can hurt!

What I had in mind mainly however, is people getting low doc loans. Most lenders had a maximum exposure level per person. This used to be rather low, but now is around $2.5mil. So getting loans jointly meant you reached the limit quickly.

So where possible, where income allows it, get the loan in single names. eg. a couple with one person working, one person staying at home. Why have the loan in joint names if the second person has no income? Keep them free for a possible low doc/no doc down the track.

it also makes no sense from an asset protection point of view.

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The postcode won’t be a problem with the majority of lenders as mortgage insurer PMI will lend up to 100% there (for full doc up to $400,000) and even 80% LVR there for a low doc loan up to $500,000

see
http://www.pmigroup.com.au/LocationWizard.asp

If you have enough equity, you should be able to capitalise interest

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You have to make a choice on how you feel the market for rates is going to go.

I myself never fix anymore. I was stuck once when I fixed, and then sold a property. Rates had moved, and I had a huge exit fee as a result.

variable is more flexible – what if you want to increase your loan in a years time and your lender won’t lend. You may want to move to a different lender. If you have fixed, then it may be costly to exit.

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There is nothing much to it. Just keep all loans separate (not cross col) and gradually increase the loans as the values rise. Use the increase for the deposit on the next one.

Also, probably best to get loans in one name only. ie not with a partner. This will allow you to go further eventually.

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Depending on the location, you could possibly get a No Doc loan up to 80% LVR – no need to prove income or serviceability at all.

This would give you $280,000 if the ppty values at $350,000. That would be another $50K for you to use to consolidate other loans etc.

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Yes, that is certainly a problem. You possibly could have gotten finanace, but at rates of aroun 10%+. better off in the wife’s name only.

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Hi Carlin

I am not an accountant, but htink GCT would apply on the basis of area rented out. ie what percentage is it of the whole property that you rent out. This would be the % of CGT you pay.

But if you have only rented it out for a few years, not the whole time you were there, then you would have to reduce the CG accordingly.

I don’t think the CGT liablity ever disappears.

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Hi again.

Thanks Rdwing, I missed that.

If you actually lived in the house before renting it out, then there is possibly no CGT payable – if you haven’t claimed another house as your main residence at the same time.

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Mike is an accountant:

http://www.guardianpartners.com.au/

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