Hi all,
Can anyone recommend or has any anecdotal evidence of a bank/lender that offers LOC with split option that allows for more than one account ?I do agree with Margaret Lomas' rants about LOC rather than taking out a standard mortgage with offset of interest option..this in order to be able to access any gained equity easier.
I basically need to shed some light on what differences there might be between the LOC's…
thankful 4 any advise
Matt
Many lenders offer such a product so it just about comparing apples with apples.
Hard to give recommendations when you havent all the facts and figures.
Richard Taylor | Australia's leading private lender
Hi Matt,I've recently applied for a split loan with LoanAuustralia (http://www.loanaustralia.com.au/).
One side of the split is their "Flexi Plus" variable loan for my personal funds and the other side of the split is their "Line Of Credit" for my investments.
A word of warning: They've been a little slow and I've needed to "drive" them a bit (phone calls, emails). But I feel that it's worthwhile for the product they're offering and the low rates.
I was lucky, they recently increased their advertised rates more than 0.25%. However, because I applied before the increase, my variable interest-only rates will only jump to 7.24% for the Flexi Plus and 7.39% for the Line of Credit. There are no fees.
Regards – Ben
"I do agree with Margaret Lomas' rants about LOC rather than taking out a standard mortgage with offset of interest option..this in order to be able to access any gained equity easier."
LOC's have uses, but typically you are better off with standard loans as they are less expensive. It is no more difficult to top up a standard interest only loan than to extend the limit on a LOC. For a PPOR a loan with offset is far superior to an LOC, not only because it is less expensive, but also because using the offset does not alter the balance of the loan therefore avoiding any issues with the mixing the deductable and non deductable debt.
I have a portfolio loan that can be split into multiple accounts with St George. I was paying account fees for each account until I recently visited my loan manager and he offered me an annual fee payment that covers the accounts and is cheaper.
I have an LOC so I can isolate my share trading loan from my investment property loan for tax purposes.
An LOC is like an elastic band you can have a pre-approved borrowing limit that you can borrow up to and have a much smaller amount actually borrowed. Then in the future you can borrow more as long as you do not exceed the limit.You have to be careful to factor in what the interest cost is on the money borrowed and set up a transfer of money into the LOC to cover the interest or to also pay off the LOC if desired. Also you do not what to mix personal use with investment use in the same LOC account as mentioned in the last post.
I have the same loan as Terry.
Portfloio L.O.C with St.G. Interest rate is 7.47%. Not as cheap as a standard loan, but very flexible as Terry says, and as it's a tax deductible interest, the difference between this loan and the standard loans is not that much at the end of the day. I like it.
He's right; you can add as many sub-accounts as you like, and you pay either a monthly fee for each one ($14) or you can pay a once per year up front fee which is less.
Some people elect to simply bundle all their investment debt into one sub-account, but you need to have good records (or software) to split it up come tax time. Or, have a different sub-account for each investment (share portfolio, property, business etc).
We have one account for the day-to-day use where all income (earned and rental) goes in. All expenses are paid out of this.
The interest on the investment loan is also paid out of this account via automatic transfer every month.We also have one sub-account for the investment debt and use software that can spilt the interest between the various properties for tax time.
Two sub-accounts; two statements. Easy.
This account structure is important as you don't want to mix up the investment debt (which is tax deductible), with the day-to-day account which is not tax deductible.
Hey Marc, from where can one get their hands on this software?
im in the waiting for a loanaustralia investment loan (house is getting built) and also have a split loan with One Direct who i highly recommend, they have been great. we have our main home loan split 3 ways all interest only, one for renovations etc, one for the main loan and one for investment deposits and repayments.
we are happy with it all
ffc1883_1996 wrote:Hey Marc, from where can one get their hands on this software?We are Destiny Finance clients and use theirs. It's amazing.
I think the Somersoft one is pretty good too, but I don't know if it has loan split capabilities?
Go Pies.Hi,
A lot of lenders today offer LOC facilities with numerous splits. Each lender is different and so is the number of splits that they offer.
If you would like some more information feel free to email me and I will be happy to try and help.
Sharlene
[email protected]Great advise all, Cheers!
Basically i'm looking to buy an IP with 20% cash down. 1-2 bedroom unit for 200 k.
As soon as that purchase is completed I want to be able to use the equity towards a deposit on IP number two within the next 6 months or so (probably another 1 bed room unit..)I havent got exisiting equity to draw from and dont want to take out a loan to finance a PPOR since i reside in Perth
and missed out on the boom. so I'll keep renting and keeping my 1st homerbuyers grant for later.
Instead i ll enjoy the flexibility of an investor and invest in an area that i think might have growth potential.cheers
MattL.A Aussie wrote:I have the same loan as Terry.We have one account for the day-to-day use where all income (earned and rental) goes in. All expenses are paid out of this.
The interest on the investment loan is also paid out of this account via automatic transfer every month.Marc,
thanks for the writeup, this might be the solution i'm looking for.
just wanting to clarify..with this structure, does all the income coming into the day-to-day account, offset the interest of the investement loan aswell or ..? ( In the Lomas' books she mentions that , "you should have all your income going into the loan to offset the interest, then only withdraw your expenses")cheers
MattI dont know if this is a good way to go or not, but we have 3 a/cs which sounds more confusing than it really is.
1. is a LOC for our PPOR. We have the rental income paid into this a/c as well as our salaries & live on a cc.
2. is a split from our PPOR LOC- this is where the repayment for the split & the no.3 a/c loan comes from
3. is an IO with the amount owing as the purchase price (less deposit & costs) of the IPThis way the rental income reduces the interest payable on our PPOR & chips away (along with any savings we make each month) on the balance of our LOC.The plan is for this to continue until we are ready for the next IP then we access equity of IP 1 & off we go again.
At this time we have no desire to reduce the balance of the IP as we intend holding & using the equity but are not in a rush to do this & are happy to wait awhile & see how fast the equity grows.Cheers
StellaHi Matt,
If you use a LOC for this you will be sorry later, you will want to purchase a PPOR or use your money for some other non deductable purchase in future and it is far more tax effective to place as much cash as possible into these purchases. If you use a loan with a 100% offset then any additional funds placed into the offset account reduced the interest charge, but does not alter the loan amount, hence you can use that cash for anything without affecting the tax deductability of the IP loan. If you use a LOC and draw any money out for non deductable purposes you will be mixing deductable and non deductable debt, this will cause you problems in the future. It also seems you need to have a close look at how much cash you should put into the first IP, given that you want to purchase another soon after, depending on how much you intend to borrow against each, how much cash you have ijn excess of the 20% deposit and closing costs on the first IP and how quickly you can save for the second IP, you may be better off using higher LVR on the first one and paying some mortgage insurance.
Stella, you would be better off with an IO loan with Offset for your first account. Apart from anything else, its cheaper, but will also give you more more flexability in future.
Both of you seek advice from your accountants on these structures and not just take my, or anyone elses advice on how to set up your loans. It's an important thing that most investors neglect.
Regards
AlistairHi Alistair
Sorry – didnt mention – all loans are IO to maximise our cashflow.
Will look into whether the split counts as being offset – I dont think it is though. The funds just sit there waiting to have the repayments come out & but it makes sense for it to offset against the LOC.Thanks – I will check with the broker who set us up.
Stella
so I'll keep renting and keeping my 1st homerbuyers grant for later. 
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