Forum Replies Created
Fire, don’t worry about the $4. It is only a rounding error. It is $20,000 a year.
200,000 x 10% = 20,000 per annum
20,000 / 12 = 1666.66 per monthThe discussion would even confuse me so far. I hope the following helps. There are three types of repayments. These are P&I, IO and now PO.
P&I – principle and interest
IO – interest only
PO – principal onlyA P&I loan is the standard type loan for those who are not advised better. The minimum monthly loan repayment will ensure your loan is paid to zero over the term of the loan – usually 30 years.
An IO is used by those who have no need to pay off the principle. Investors often use these when they have another debt that is not deductible like their home (PPOR). They are also used when an investor is seeking tax deductions. I personally like all my clients to have their loans as interest only for many reasons I won’t go into here. The downside with these is that if only the minimum payment is made, the loan will never reduce.
PO loans are new and complicated. Basically, all your repayments are principal payments and reduce your loan. There is never any interest payments.
An example:
Loan Amount = $200,000
Interest Rate = 6.5%
Loan Term = 30 YearsMonthly Payments
- P&I Payment = $1,264.14
- IO Payment = $1,083.33
- PO Payment = $555.55
I hope this clears this up.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Jhopper, I think that is called fraud.
In destined’s case though it is a little different. You are still eligible for the FHOG.
Your dad’s full income can be used but I would structure the deal differently (if your dad has equity in his home) so the new loan and the new property will only be in your name (if he trusts you).
How much equity (property value and amount owing) is in your dad’s property?
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
You can get 80% LVR and possibly more if you have other property and cross-collateralise. It sounds like a hotel conversion to me.
Find a good mortgage adviser to help you through.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
I think it is great how you structured that. I would look at the cost of all the finance first especially the cost from the vendor. Otherwise, 230% sounds good to me!
Remember, you need to sell to collect…
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
No problem. Good luck with the hunt.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Hey Ed,
It is not often I hear someone complain about the NAB personal banking service. WOW!
Anyway, you could also speak to a mortgage adviser before finding a property. It does not cost you anything to organise a pre-approval to your limit. It will also give you an indication of what price range you can look for.
Regrding your existing property, there is no need to wait for that one as it can be done straight away and the extra funds will be sitting there costing you nothing until you need them and use them.
A tip – DO NOT CROSS-COLLATERALISE (secure the loans with the properties together). Do the loan seperately with the same lender.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
You must be from WA. Try sarching for Conveyancers or Solicitors. They don’t use Settlement Agents in Queensland.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Finding a property is not my area of expertise. You should get a lot of response on here from that question.
It is hard to say yes over the phone without submitting an application. They also need to do a credit check. I don’t know what your other liabilities are like, but this might also be an issue. With an 80k income, you should have no problems borrowing 250k unless your expenses are high elsewhere (like rent, car repayments, lifestyle, etc)
Regarding NAB, there are cheaper products available. The only great thing about NAB that I find is the fact they have personal bankers giving good service. If you don’t need someone to hold your hand, I would suggest looking around.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
http://www.mortgagepackaging.com.au/index_files/reverse_mortgage.htm
If that is not enough, let me know. I will send you a brochure from one of the providers which clearly explains it.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Also, you can keep pumping all your income into the non-deductible portion of the loan (the offset account) until you need so you will be reducing your non-deductible debt fairly quickly. Using a credit card may also help.
Check this out and let me know what you think:
http://www.mortgagepackaging.com.au/index_files/professional_pack.htmYour new loan would be stand alone to the structure outlined in the link. Of course, the investment portion would be fully deductible if used for investment purposes.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Terry, I think the huge thing that came out of Hart’s case was that the issue did not stop with capitalising the interest. It extended to loans that were structured to push more of the expense onto the investment property. There is no problem having a huge interest rate on an investment property but why would anyone do that if they could take a standard rate?
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
There is alwas the reverse mortgage option when you hit age 60 and are retired. The way superannuation performs, I would rather pay off some properties and use the equity later if I did not have enough cash flow.
REVERSE MORTGAGES, REVERSE MORTGAGES, REVERSE MORTGAGES
[cigar]
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Hi pwatkins,
The US is totally different to Australia. We do not use the term foreclosure for one.
A Line Of Credit is simply a loan type. I still do not see any benefit in using the more expensive Line Of Credit when you can achieve the same thing with a cheaper interest only loan and an offset account or an all-in-one loan. When the interest only period ends, you either extend it or go elsewhere.
Anyway, you basically get approved up to a limit and can buy any suitable security. In your case, it would be foreclosed properties.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
In your example, changing it to commercial would mean that you could rent it for more money. This would mean higher annual rent which would increase the purchase price. A reduced rental return would most likely occur as well when considered in reference to the new purchase price.
I think of it like this:
If I had two properties side by side which were identical but one was renting for 100 p.w. and the other for 200 p.w., I would pay twice as much for the one renting for 200 p.w. if I thought they were a good buy in the first place. People like myself work on numbers. I have no intention of renovating or developing for example. A renovator might prefer the property that rents for 100 p.w. and pay half as much and fix it up so it also rents for 200 p.w.. They would make more money but they had to work harder for it.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Hi Georgisj,
Servicing (how much you can borrow) varies greatly from lender to lender. You might find you can borrow what you need if you go to the lender who has the best servicing. Some lenders will use 100% of expected or existing rental income instead of 70-80% on top of your income from work which helps a lot.
There is no need to place a deposit of magnitude these days as the interest rate will be the same up to 97% LVR (How much you borrow against the property value). The difference is the mortgage insurance payable when you borrow more than 80% LVR.
To avoid this, a large deposit will be needed. You have to consider that getting an unsecured personal loan for a deposit will be at a much higher interest rate and it may be cheaper to just pay the mortgage insurance. In many cases, the mortgage insurance can be capitalised (added to the loan amount) without being considered in servicing the loan. When capitalised, the cost can be spread over 30 years.
Regardig credit checks, they all do them when they receive an application. They look at all your credit history including adverse listings and other applications. You would be surprised what appears on there. They usually query recent hits. Regarding stating the loan in your assets and liabilities, if you can service all the debt, there is no reason not to state it.
When borrowing high LVR’s the mortgage insurers may ask for some genuine savings depending on if this is your first property or not. There are ways around this and many other issues to address. Talk to a good mortgage adviser and they should be able to guide you through easily.
Make sure you can service with a lender before taking on a personal loan or you might knock yourself right out of the market.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
They were common in previous years but many lenders backed out of them when the Hart’s kept going to Court. It went on for a few years through lower Courts. They won the first few cases but the Commissioner of Taxation was persistent and took it to the High Court and won on appeal.
There is nowhere else to go so these forced “combo-deals” are no longer of any use and if you try to deduct the interest, it will be considered tax evasion. The funny thing is that those who still sell these products as tax schemes can be sued and will lose when the borrowers get done in years to come. Ignorance is still no defence.
There are new products being designed to try and take advantage of different loopholes though. I guess we need to just wait and see.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
I heard an interesting comment today from a friend of mine who is also a mortgage adviser. I mentioned that I was interested in doing something to cater to mortgage brokers and he thought the idea was great. He then said:
“During the gold rush, people came from miles around to find gold. The only ones who got rich were the ones selling the picks and shovels. You are going to sell picks and shovels.”
I thought these words were fantastic.
Straniero, if you can work out a profitable way to sell ‘picks and shovels’, GO FOR IT! Just because others are doing it does not mean it can not be done better. There is nearly always someone better.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
Thanks Steve. Likewise.
To expand a bit, ‘Hart’s Case’, which was a ruling by the High Court on 27 May 2004, stated that schemes entered into for the dominant purpose of obtaining a tax benefit were not permitted. They also stated that if the loans were taken seperately with different terms, it would not pose a problem. The decision can be read at:
http://www.austlii.edu.au/au/cases/cth/HCA/2004/26.html
To simplify it using the “Best Investment Package” example, if a borrower took a loan for 4.49% on their PPOR and then went and got a loan for 8.24% on their IP, then that would be fine.
On the other hand, if they were to take a loan for 4.49% on their PPOR and were REQUIRED to also take a loan for 8.29% on an IP, then this would be a breach of the tax legislation (and now contrary to the Common Law since the High Court decision).
What it came down to was whether these rates were available as seperate loans. It is pretty clear that you could get a loan with an 8.29% rate anywhere but a borrower would be crazy to go and take up such a loan when they could easily get less than 6.50%. Finding a loan with a 4.49% rate by itself with no other requirements is impossible. This is below the cash rate and would result in a loss for the lender.
In other words, this structure was no longer available to borrowers since ‘Hart’s Case’ where the interest on the more expensive loan was fully deductible unless the loans could be taken up seperately.
I hope this makes it clearer for everyone.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
I am wondering what happens if the tenant does not pay for the property within the 7 years and title passes – how do you get your money?
If you access the equity above the tenant’s purchase price, how will they be able to finance the purchase if there is not enough equity in it for them?
Regarding tax deductibility of interest, it is always deductble if the money borrowed is used for investment purposes.
Legitimacy of this type of deal is a debate that could go on forever!
Get a good solicitor to look at it.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
I am pretty sure you are spot on with the CGT.
Regarding the mortgage insurance, it is rare to get a refund from them but it is possible in some instances. It is a discretionary thing with the mortgage insurers and will probably depend a lot on whether the new purchaser pays mortgage insurance when you sell it to them. I would not be putting money on a refund.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auComments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
