Hello everyone,
It’s my first time here so pardon me if I commit any faux pas’. I would really appreciate some feedback on a deal offered by a self funded broker. I think I ‘smell a rat’ but who knows, I may just be naive..My sister arranged a conference call between myself, her and her broker (she’s interstate) and her broker outlined the following structure for an investment property:
1) Refinance her with a LoDoc loan at 8.45%
(her current loan is $150,000 and she has about $100000 equity.
2) Set up two separate loans, 1 – a line of credit, the other an IO loan (up to 30years duration).
3) She to buy an IP, up to around $280000 (using partly, her equity), the rent of the IP pays her mortgage and she doesn’t make any payments on her IP, until she has paid off her home mortgage.
4) She claims a tax deduction on the IP yearly.
5) Then when she’s paid off her home mortgage, she buys another IP, sets up the same type of IP loan again (for another $3745 fee), then pays off the 1st IP, never paying anything on the 2nd IP and so on and so on until she has 5-10 properties.Now I may be naive, but somehow this doesn’t seem to add up to me…It seems to me that the compounded interest on the IP would become unwieldly over time, what do you think? [confused2]
I know there has been tax office rulings over the last couple of years regarding capitialising interest on IP Loans, but I’m not completely up with it.
I am a broker and have never and would never let my clients go in to loans such as this as I believe you should at least make interest payments on you IP’s.
There is also better Lo Doc Rates out there up to 2% cheaper thatn the rate she has been told.
$3,745- fee to set up is very expensive. These things can be set up wth only the lenders fees and you don’t have to pay the broker anything.
Financial Wellbeing Coach
W: http://www.pfsfinance.com.au
E:[email protected]
E:[email protected]Development Finance Specialist
Thanks for your reply, I didn’t think it sounded too good!
Hi Piaj,
The ATO don’t take to kindly to capitalizing interest on split/investment loans, the recent hearts case comes to mind.
The low doc rate quoted is way way to high, and there is no need to pay a fee when dealing with a reputable mortgage broker.I would strongly suggest that your friend contact the MIAA (Mortgage Industry Association of Australia) with regards to this matter, Cheers.
Regards
Steven
Mortgage Broker
Mobile Mortgage Market[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
Ph:1800 820 500
VICTORIAPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Thanks I’ll do it myself!!
Actually the other thing I didn’t like about him was that when I checked up on his company name with ASIC, it said the company was being ‘externally controlled’, but he said it was just a ‘paper trail’ as he changed his company name and address!wow, it gets better…one would now be thinking the smell of rat has become an over powering stench.
with so many great brokers out there, you don’t need this trash!
well done for seeing thru the rot.
cheers
brahms
[email protected]
BrisbaneScamsters!
– High upfront fees
– Very high interest rate (unless she has credit problems)
– And she won’t be able to claim the capitalised interest, so the whole thing would be pointless, and costly.Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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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