Hi Everyone,
I read somewhere that If you have a high enough Credit limit on Credit Card you can use this for a deposit for your first investment. A way to get started sort of thing if cash flow is tight….. not sure if this is really a risky way to start.
Is this true what are peoples expression on this and has anyone successfully started there journey by doing this?
Its true, but you would need a very high limit and this would severly affect your borrowing capacity.
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
I bought my first property in 1988 with an advance of $2,500 off my Bankcard. I paid $47,250 for the place. I then bought another unit in the block for $50,000 3 mths later again using my bankcard for the deposit. I sold both properties for $90,000 each 12 mths later. I had $80,000 cash sitting in my bank account at age 21. I am now retired with 12 Investment properties. Everyone told me i was nuts. If you have the ability to repay the C/C asap then why not!!!!
i did a similar thing with mine, i needed 7k and i got a cash advance at interest rate of around 20%, i then applied and got a new credit card with another bank and did a 6month 0% balance transfer.
If you need to and are confident you can pay it off then i dont see why it should be a problem, there are plenty of ways with credit cards not to have to pay anything or actually even pay less than a mortgage.
thinking about it now i am wondering why i dont take out 20k put it on my mortgage for 12month and get a low interest transfer
Terry,
How about AMEX Platinum with unlimitted credit limit?
GOM
Do they allow cash advancees?
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
I have never withdrawn cash before
But for big transaction above certain limit… you need to get them to approve it
prior to transaction.….and if you can avoid using the 'cash advance' side, and get those flyer points…………True though – if you have cashflow, doing a 'churn' to a low interest or interest free balance transfer is the way to go after. Just dont use the card afterwards for anything else until it is paid off. Cheers
Yeah, I'm all for the idea of using credit cards for your deposit – although I haven't done it yet.
As Terry mentioned, it will SEVERELY effect your borrowing capacity – because of higher interest rates and shorter terms, 20 grand on your credit card is going to decrease your borrowing capacity by a LOT more than 20 grand – closer to 100 grand I'm guessing?
The other issue is, that if you have enough cash flow to pay off the credit card afterwards, then why didn't you have the cashflow to save a deposit in the first place? If you don't have the cash flow to pay it out, then you'd need to have a very close look at your numbers before jumping in. I'd probably only use a credit card for a short term chunk deal where I could pay the credit card back with the profits within a few months.
I've been dealing with a few sellers lately who just jumped into property at any cost, with little idea of what they were doing, just because they heard you could make money from it. I'm talking 13-14% loans for an investment property! WTF?? Again though, it is all about your numbers – massive interest rates are fine for short term deals, although most rates like that also have massive exit charges, etc etc. DO NOT get yourself into a position where you are banking on capital growth to be able to feed your children at the moment (unless they're overweight!).
I am interested in the balance transfer idea, although I wouldn't bank on it. It's very easy to get one of those cards for a smaller limit of $5000 or so, but if you're looking for $20K plus it's a whole different story I believe.
Anyway, I'm ranting again… so in summary, the credit card idea is fine, but do your numbers, know what it is costing you, and preferably don't end up paying 21% pa for 20% of the property for more than a few months.
Good luck with it.
Andrew
dcn08 wrote:I read somewhere that If you have a high enough Credit limit on Credit Card you can use this for a deposit for your first investment. A way to get started sort of thing if cash flow is tight…Hi dcn08
Although Terry or Richard may be able to comment on this, my understanding is that there arn't any lenders at present who will give you a loan without some % of 'genuine savings'.
Although what you suggest may have been a valid option a few years back, the banks currently will not see a 'credit card cash advance' as genuine savings and thus, won't recognise it as the deposit.
If you were seriously stuck for cash, my advice would be to get the property across the line with a 97% LVR loan, and then use the credit card for either the LMI, Solicitor Fee's etc or for the 5K 'paint and carpet' type upgrade. Once complete, transfer the balance to a 6 months interest free card with another bank…
Cheers everyone for your creativity thinking and ideas.
Hi Matt
You would be suprised.
For the right applicant 95% lvr is availble with no genuine savings (in fact the saving can be borrowed) at standard interest rates.
Richard Taylor | Australia's leading private lender
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