Hi Michael

You can substitute security, but it is hard to find something around the same price that will settle on the same day as your sale.

However, Some banks like the ANZ will give you up to 3 months to find another property – they will take keep the loan there waiting.

Terryw
Discover Home Loans
North Sydney
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100% offset can work very well if you ever move out of your home. Just pay the minimum off you home loan/interest only and plough all of your money into the offset. This will have the same effect as a LOC, but probably at a cheaper rate. Then if you move out, you just take the money out of you offset and plonk it into the new offset attached to your new home loan. The result is the interest on your old loan goes up and interest is saved on the new one = massive tax benefits.

This wouldn’t work with a LOC as the money would be coming from the loan account = borrowing, and since it si being used for non investment purposes, the extra interest would not be claimable.

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi Greg

I haven’t done this myself, only have theoretical knowledge!!

I suppose, the worst thing tha can go wrong is they stop paying your loan. In that case, you have a second mortgage so your fairly secure – if the values were as expected. You can take legal action to get your money back, and in the end could probably foreclose on them. But I don’t know what would happen if the kept paying the main loan, the first mortgage and not yours. Maybe you would have to get the first mortgage holder’s agreement to foreclose.

If the loan is for personal purposes and not business/investment, then the loan would be regulated by the UCCC (uniform consumer credit code) and you would have to abide by all the regulations such as issuing statements at certain interevals. If it is not regulated, then probably you don’t have to issue statements, but if it is interest only, it will be easy to do anyway. You better talk to a solicitor about all of this.

Terryw
Discover Home Loans
North Sydney
[email protected]

I think joh wants to buy a property and rent out the spare rooms to his mates (and have girls over!!).

Sounds like a great plan to me!

And I think the plan of buying a property is great too. It all depends on how strong your income etc is for getting the finance.

Terryw
Discover Home Loans
North Sydney
[email protected]

I had a client in a similar situation. This seems to be common in the IT industry and some banks will treat you just like an employee. BUT if your contract is ending soon, they won’t like that.

Terryw
Discover Home Loans
North Sydney
[email protected]

BTW, I think Jo meant, http://www.ato.gov.au

Terryw
Discover Home Loans
North Sydney
[email protected]

ANZ is one of the best and cheapest LOCs available, so they are not trying to rip you off with an inferior product with high interest rates.

the danger with LOCs are some people have these on investment properties and then put all of their salary in, and take it out again. The ATO considers it to be a repayment when the money goes in and a reborrowing when it comes out. So the itnerest on the component withdrawn will nto be deductible.

Other people also have problems because – having all that money available for use means they spend it, waste it on consumer items etc. So their loan never gets paid off. Some of my friends are like this. So these sorts of people would be better off on a normal loan.

Terryw
Discover Home Loans
North Sydney
[email protected]

I seen an accountant about this myself when I had 6 properties and he said I could be classed as a trader with this many properties.

Westan makes a good point in that if you are selling in less than 12 months, then it makes not difference. If you are holding longer and are doing it as a ‘profession’, then you could be classed as a tradder anytime after 2 properties. You have to justify why you shouldn’t be – if audited.

I also know people doing this and claiming the PPOR CGT exemption on every property. ie buy one, live in it and do it up and sell it, and do the same thing again. The ATO could argue that they are in the business of doing this and claim tax on all their sales.

Terryw
Discover Home Loans
North Sydney
[email protected]

1. You do not get any discount for other assets held under 12 months anyway.

2. They are paying you in installments and do not get to ‘own’ the property until they pay the whole lot. But they have the right to occupy the property in the meantime.

Terryw
Discover Home Loans
North Sydney
[email protected]

It depends on the state your property.

In Vic, you must enter into a written agreement with the nominee before you sign the contract of sale. If not, then double stamp duty will be payable. In other states it may only apply for related parties such as spouse and a person nominating their own trust or company.

Check with your solicitor.

Terryw
Discover Home Loans
North Sydney
[email protected]