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  • Profile photo of InvestmentPupilInvestmentPupil
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    October 25, 2010 - 4:52 am

    LOC – Line of Credit.

    It’s when you take out an overdraft facility up to an approved amount based on the available Equity in your Property (minus the amount owing).

    For example, if you property is worth 300K and you owe 200K, and you take out a LOC. You have up to 80K to use ((300K-200k)*80%). That 80K is just like a credit card but secured against your property. if you default on payment, they take your property and sell it.

    Profile photo of InvestmentPupilInvestmentPupil
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    October 25, 2010 - 4:47 am

    Ben – I believe so, otherwise they won’t be called a Bank and but instead a Pot-of-Gold-Free-4-All :)

    AM2778 – Not sure why you’re not having your repayments coming direct from your offset instead? (if you’re paying off your LOC loan with your LOC, you’re capitalizing interest are you not?). I think ATO does not like that…(could be wrong)

    Profile photo of InvestmentPupilInvestmentPupil
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    October 25, 2010 - 3:12 am

    btw –

    reducing the interest payable = more goes into the Principal = sooner you’ll build more equity = opportunity to leverage and buy more :)

    (assuming you’re on a PI loan)

    Profile photo of InvestmentPupilInvestmentPupil
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    October 25, 2010 - 3:09 am

    Hi Ben,

    I believe “Quazi” means an Offset Account where only a portion of the balance is used to reduce the balance of the loan (as opposed to the whole lot – 100% offset).

    Cheers

    Profile photo of InvestmentPupilInvestmentPupil
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    October 25, 2010 - 3:06 am

    G’Day V,

    350pw in rentals is pretty good for a “small property” :)

    Money put in your Offset Account will be deducted from the balance of your PPOR home loan and reduce interest payable. If it’s 100% offset, then the interest payable will be based on: (Current Loan Balance – Balance in Offset) x Interest Rate. The interest is typically calculated daily so the sooner you have that spare cash in the offset, the better. What you propose is good idea.

    As far as Tax Implications are concerned, there won’t be any since you’re paying off a non-deductible debt.

    Cheers

    Profile photo of InvestmentPupilInvestmentPupil
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    October 15, 2010 - 9:46 am

    Thanks Richard/Ryan…still a long way to go.

    Good to know its not illegal.

    The variable part it 100% offset already so not paying any interest at all. Switching that part to IO will have no affect lol.

    Thought about breaking the fixed loan but that will incur high penalty fees so ive decided to wait it out.

    Richard – with IO equity loan, that will mean i’ll be applying for a fixed amount lump sum loan? If so, i’d rather get LOC as you can do IO repayments as well plus its more flexible as you can extend it as equity grows with having to take out another.

    Also while im at it, are property mags n bank fees deductable? I may have missed those last year…

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