Hi there,
I went to a seminar on the weekend with presenters Barry Pickering and Bill Zheng of Inverstorsdirect.
My question concerns the mortgage product Bill Zheng was introducing.
This mortgage product allows you to pay only a portion of the interest you’re supposed to pay each year, and allows the interest component you haven’t paid to be accumulated over and above the original loan amount.
http://www.cashflowmortgage.com.au/cash_flow.html
Any comments, opinions, advice with respect to advantages/disadvantages relating to the above mortgage would be extemely helpful.
Bottomline, I think with the mortgage, is that a -ve cf IP will be artifically a +ve CF for the first 3 years. After 3 years Cap Gain hopefully will kick in and with rent raises, the IP may become a real +ve CF. Or am I mistaken?
I’m in the process of applying for pre-approval for 400k Line of credit and am planning to finance two IPs at 200k, 80 LVR with Ratebusters. Have my own 2brm apartment LVR50.. yeah left it a bit late to start IPs.
I’m a newby to IP and am in the process of educating myself thru books – Steve’s books, Margaret Lomas and Patrick A Bright etc
Any other tips/advice with regards to my situation would also be gladly received.
Cheers
[blink]It looks a little suss to me. Not only are you hoping, praying & pleading for capital appreciation, you could find yourself in serious debt should / when interest rates rise& or the capital growth is not what was initially expected. I would be interested in some of the more experienced investors’ opinion on this type of product.
David
Thanks David,
Much apprieciated for your informed opinion.
I look forward to any other advice but I get the feeling you have hit the nail on the head.
Cheers
AbbruzziI think you could do this yourself by just letting the interest capitalise or by setting up another LOC and using that to pay the interest, or part of it – maybe the shortfall.
Terryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Those presenters are pretty well respected speakers and investors. I wouldn’t be too concerned about them scamming you.
Their product is simply a tool. If it works for you then use it. If it doesn’t then don’t. But make sure you completely understand what you want from an investment before you start.
All the best
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
We have been looking at the same mortgage. We’ve even gone as far as putting in an application and getting ‘indicative approval’. We have 3 investment properties and are struggling to meet the shortfall on the repayments. The ‘Cash Flow Mortgage’ seemed the way for us, until we saw the exorbitant fees involved. Not only is the interest rate one of the highest around, there is a ‘risk fee’ of 1.5%, and an establishment fee (which can be deferred) of 3.5%. The other thing that concerns us is by eating into our future equity, we are going to make it difficult to purchase properties in the future.
So…….we are now looking at other options, like lenders that will go to 90% LVR. Can anyone recommend a lender that does go to 90%LVR? We are currently with RAMS and RESI and neither of those do.Cheers,
Novo
Novo
nearly all lenders lend up to 90 or 95%.
The risk fee you were asked to pay would be similar to LMI which most banks would charge you if you borrow over 80% LVR, so this is not too bad. The exit fees are fairly higher though.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
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