All Topics / Finance / LOC for deposits question

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  • Profile photo of bjb007bjb007
    Participant
    @bjb007
    Join Date: 2003
    Post Count: 69

    Hi

    I'm just curious to know if we were to take a line of credit over our PPOR for say $250K with the sole purpose of using this LOC for deposits of 20% plus costs and then borrowing the balance of 80% against the investment property.

    When it comes to providing details for our serviceability of the new 80% investment loan, does the new lender look at the full LOC of $250K or only the percentage of that LOC that you have used ie: $40K.

    I'm just curious because I know they look at a credit card's limit as a full liability, even if it is always paid up to date on time.

    If they did look at the full LOC wouldn't this then hurt our ability to lend 80% on further investment properties?

    Just trying to work out the best way to go forward. Appreciate any advice given.

    Cheers

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    The approved limit is taken into consideration even if it is only partially drawn.

    Richard Taylor | Australia's leading private lender

    Profile photo of bjb007bjb007
    Participant
    @bjb007
    Join Date: 2003
    Post Count: 69

    Thanks for that…I was afraid that might be the case. Appreciate your response.

    Profile photo of CentralChoiceCentralChoice
    Participant
    @centralchoice
    Join Date: 2008
    Post Count: 64

    To add to Richard's comments, the idea I suppose is that there's nothing to stop you from pulling out all your funds in the LOC tomorrow, in which case you would have a hard debt of $250k which must be taken into account.

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