rebecca2Member@rebecca2Join Date: 2003Post Count: 54
I’m fairly new to all of this. Last week I was introduced to the use of LOC “Line of Credit” for invesment purposes in a new way to me. This is the way I understood it and I was wondering how many people out their were actually using this method.
If you have an amount of equity that is available to you, you can use it to pay back your investment loans. This way you would not have to service them with wages (your 33c in the dollar wages).
I’m not good at explinations without drawing pictures but here goes.
You have 250,000 in spare equity. You take out a line of credit for a bit less than this and use this money to pay any short fall you may have in loan repayments in any investment properties. You pay approx around 7% interest for this line of credit. So this leaves your wages earnings in tact to give you more servicability when talking to banks about getting more properties.
Can anyone tell me more about this method and or tell me who I can talk to in Melbourne to help me do my due dilgence. (How do you spell due diligence He He, I know what it means though)[dead2]
“You have to leave your mouth open for a very long time before a roast chicken flys into it.” Early Proveb.Mobile MortgageMember@mobile-mortgageJoin Date: 2003Post Count: 913
This method will not increase your serviceability; In fact as far as the lending institutions are concerned the repayments on the LOC will be accessed as a liability.
There may also be issues with the ATO if you intend to claim the interest on the LOC.
PLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.Mortgage HunterParticipant@mortgage-hunterJoin Date: 2003Post Count: 3,781
Who was promoting this idea Rebecca?
It might be OK in a strongly rising market – I would be loathe to suggest it otherwise.
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Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.rebecca2Member@rebecca2Join Date: 2003Post Count: 54
I have sent you a private message.
“You have to leave your mouth open for a very long time before a roast chicken flys into it.” Early Proveb.TerrywParticipant@terrywJoin Date: 2001Post Count: 16,110
I agree with Steven, this will not help your serviceability and will actually hinder it! There may also be adverse tax implications.
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[email protected]elika7264Member@elika7264Join Date: 2003Post Count: 160
could you expand on the following.There may also be adverse tax implications.
HelenTerrywParticipant@terrywJoin Date: 2001Post Count: 16,110
I am no tax expert, but think there may be problems with borrowing money to make loan payments. If not structured correctly the interest on this borrowed money may be not claimable.
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