Have been offered access to a line of credit, are these advised?[buz2]
Are you disciplined enough to use a credit card??? But a very LARGE one???
A line of credit (LOC) works well for many, but if you have a problem putting money back in, you could get yourself “maxed out” and in deep water later on. The key here is DISCIPLINE.
Depends on what you are using the account for. Just for paying a house off where extra funds are not needed for renovating or anything along those lines then an Offset Loan would be a better investment.
If you suck with a credit card just imagine how much you would suck with up to 100 times the credit limit?
Agree..
Recommended ‘only’ for those who are disciplined and budget well, otherwise your digging your own grave, as expenses start to get away from you.
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI’m assuming that a line of credit is basically an account where you can access your equity without the fuss of having to officially do it by mortgage redraw. So basically, you have a card and can just go on a big equity spending spree?
What I am wondering is… if you have 100k LOC, and that 100k is your equity… so say you have a 400k mortgage (80%) and your 100k LOC (20%)… what happens if you buy a new car for 50k from your LOC? Doesn’t that make your LVR (say, specified in your loan at 80%) less than it should be? Do you have to justify what you spend your LOC on or does the bank control it at all?
I know that with redraw, my bank keeps an eye on it, and it’s a bit of a drama to do, but is a LOC just a card that you can go and withdraw all your equity? And then the bank takes all your property away? hehe.
kay henry
My understanding is that I have this money available should I require it for investments, hence I can act very quickly. Of course this service comes at a cost.
Kay
You can use your LOC for anything, that’s why they are so dangerous for some people.
If you use some of the LOC for buying a car etc, then the money you have available for deposits will decrease accordingly.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Originally posted by kay henry:I’m assuming that a line of credit is basically an account where you can access your equity without the fuss of having to officially do it by mortgage redraw. So basically, you have a card and can just go on a big equity spending spree?
Yes, we could go to the casino and blow it all, if we wanted that!
We were given 80% of the equity we had at the time of application- hence, we have that as our limit- 20% will stay put.
We pay interest only over what we have taken out, and these monthly interest payments are taken out of this LOC by the bank. It’s up to us if we want to pay the money back into the account, or let it build up.
What I am wondering is… if you have 100k LOC, and that 100k is your equity… so say you have a 400k mortgage (80%) and your 100k LOC (20%)… what happens if you buy a new car for 50k from your LOC? Doesn’t that make your LVR (say, specified in your loan at 80%) less than it should be? Do you have to justify what you spend your LOC on or does the bank control it at all?
Well with our LOC we don’t have to justify it, but I think if we’d apply for a loan again, lenders will take this LOC debt into account-looking at the interestpayments.
I know that with redraw, my bank keeps an eye on it, and it’s a bit of a drama to do, but is a LOC just a card that you can go and withdraw all your equity? And then the bank takes all your property away? hehe.
Yes you can use the card, cheques or internet banking to draw the money out of your LOC.
But you can only access 80% of your equity and as long as there is enough money in the account for the bank to take out their interest every month, there will be no problems or questions from the bank.
kay henry
Celivia
Thanks Celivia
)kay henry
Hi all,
Keeping investment and non-investment expenditure separate is critical. I’ll say that again critical.
Mix the two up and you create a nightmare as far as calculating how much interest is deductible or not.
If there are any ‘windfalls’ along the way these are apportioned over the whole debt rather than you being in position to say ‘that $10K from Aunty Flo’s will go towards the car debt’ – that is unless you create split accounts where the distribution is easily shown.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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