I am just starting to look at properties and am wondering if a line of credit is a good way to finance. Will this overcome some of the costs associated with mortgage establishment. Have reasonable assets but lousy cash flow as I have my own business.
LOCs generally have higher interest rates. Costs are also generally a bit higher, or same as normal loans.
If you have lousy cshflow, then maybe a No Doc loan is for you. It is possible to get a LOC with a No Doc or a standard loan – sometimes these canbe used like LOCs if they have free unlimited redraw (eg. Macquarie Mortgages)
Terryw
Discover Home Loans
Parramatta
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Storming
Just bear in mind that the normal way to structure an IP loan would be to borrow 80% against the security of the property and maybe bridge the 20% difference plus costs from your LOC secured against your PPOR or other security.
You may still incur mortgage establishment costs such as mortgage stamp duty. loan fees if any on the 80% portion.
Whilst you may have poor cash flow your resulting Net Profit maybe sufficient to service a loan.
If set up under a Professional plan some of your costs will be exempt.
Why not get a broker to run his eye over your position so that you now how to go forward. Bad advice early in the peace will incur greater cost down the track.
Richard Taylor
Residential & Commercial Finance Broker
**Lodoc Commercial loans from 7.39%**
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Ph: 07 3720 1888
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Hi Storming,
A line of credit will give you flexibility, but, as Terry says the rates are generally a bit higher than for a regular loan. Another possibility for accessing your equity is taking out an investment loan with a 100% offset account and leaving your surplus funds in the offset account. I suggest you speak to a good broker about your possibilities.
Kind Regards,
Cameron Perry
Director
Perry Financial Strategies
Level 13, 30 Collins St
Melbourne VIC 3000
Ph (03) 9662 1999
Fax (03) 9662 2044
http://www.perryfinance.comVery good advice from Cameron,
When correctly structured a 100% offset linked to any loan will work in the same manner as an LOC… and in many situations offer a greater benefit over a LOC.
Line Of Credits are my pet hate, they are over rated and all too often poorly managed, expensive and in most cases not required. Cheers.
Regards
Steven
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks for the prompt advice guys. Clarifies some issues in my mind.
Will bear your comments in mind when having initial discussions with bank next week.
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