Has anybody had experience with these types of loans yet ?
Can you share the pros and cons with these sorts of loans ?http://www.cashflowmortgage.com.au/
Many thanks … Micha3l
I haven't had any experience with this loan but it relies on 10% annual growth of your property and the interest you do not pay is added to your loan balance for the first five years. This unpaid interest will have compound interest on it.
What is the compounding term is it monthly or weekly or daily
This has a big effect on what you will owe in 5 years time.
a fair up front transparent model on their web page would also include the loan balance calculated over the five years ! .Also what happens if the property doesn't grow but instead drops in value !
What happens if interest rates increase ! this will stuff up this scheme or is the interest rate fixed for the five years.
Micha, I looked pretty close at this loan but decided against it. I dont have anything against it either but just wasn't for me. Its 8.4% base rate and fairly high establishment costs and penalties to refinance. They also only lend in certain postcodes. One thing that they say is that the interest on interest is deductable but its not. I decided to use my LOC if I wanted to defer paying off interest also have a look here at what Margret Lomas has to say about it
Why not just borrow extra with a normal loan and use these funds to help make the repayments? Cheaper rate with the same result?
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
Very risky if property values do not continue up your loan will increase and maybe worth more than the value of the property, this can be devastating if for some reason you need to sell e.g. loss of job / marriage breakdown / disability etc.
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