Forum Replies Created
Hey Stu,
They don’t charge interest to the borrower because it is a ‘variable’ that does not fit their model. They do earn interest on other funds though. The cash flows are the important factor from borrowers. Charging interest also increases the risk in the model.
Surely someone can support an idea even when something is wrong with the implementation and management of the organisation offering it. If a large bank was to come out and offer this product in a few months, would most people be such sceptics? I know for a fact that one of the major four has a team working on replicating the model so there must be some potential. I must assume that all the majors are doing the same thing.
Regarding taking people’s money, I don’t think this was ever a problem even though there . They were going to give a lot more money than they ever took. The idea was like any lender settling a loan where fees etc would be paid at settlement once loan funds are forwarded. How could a borrower lose if this was the case?
My interpretation of what you have written comes down to a lack of confidence in the organisation but still awaiting information regarding the functionality of the actual product. This is a fair position considering they missed so many dates.
Robert Bou-Hamdan
Mortgage AdviserI am amazed that you guys can condone a practice whereby an agreement is made with a vendor to over-inflate the purchase price so that the purchaser can rort the lender and get finance at a higher level.
This is not about getting a rebate. This is deception and fraud. The purchase price is $108,000 and not $118,000 as seems is required to obtain a suitable loan.
I would be very surprised if Deacons gets involved with this knowing the circumstances. I would be further surprised if any solicitor or honest mortgage adviser / broker touches it.
‘Creativity’ does not equate to ‘fraud’!
Robert Bou-Hamdan
Mortgage AdviserWith most loans, there is no reason why you cannot fix your loans later if you feel worried about moving rates.
Robert Bou-Hamdan
Mortgage AdviserTerry, there is a huge difference between what you initially said and what you are saying now. Doing your scenario is not effect at the start of an investing life. It is only towards the end where it might come in useful but it would be assumed that positive gearing would well and truly have kicked in by then so there would be no need to draw on equity. That is, if you invested intelligently during your working life.
Regarding the cash bond, I would love to hear your explanation as to how serviceability is increased USING YOUR EXAMPLE ABOVE!
Robert Bou-Hamdan
Mortgage AdviserThe MAV does not give you the full discount if you take their intro unfortunately.
I often tell clients that an intro rate is only good if you are going to continually change your loan every year to take intro after intro. This is effective for those with high levels of borrowings but I prefer not doing it.
If it is a choice between an intro and a standard rate from the start, I would look at what is more important to me. Do I need the slightly cheaper rate now for one year and then a higher rate for the next 29 years or do I take a good rate for the whole 30 years.
I prefer the good rate for the full 30 years.
Robert Bou-Hamdan
Mortgage AdviserI would not use insider info. Why risk everything for a few dollars?
Robert Bou-Hamdan
Mortgage AdviserWhat you are doing is commonly known as FRAUD.
There are people going to jail for doing this as we speak.
Robert Bou-Hamdan
Mortgage AdviserSounds like we have a winner. I don’t have dealings with CCU so I never knew of this product. I will have to get accredited!
Thanks for the info.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Nat R:the uneducated and ill-informed chase products that are pure fantasy
Again with the insults…
As is clearly evident by my posts to all who read this forum, I am both educated and well-informed. So are many of the other posters who are not as quick as you to discard something which we do not as yet have access to all the information regarding its operation.
I don’t think any of us are “chasing” anything but willing to give the benefit of the doubt to something that is new to the market. Every time a new product comes out, people like you are a dime a dozen. They come out of the woodwork especially if they stand to lose financially from the success of the new product and belittle it.
Regarding the product being “pure fantasy”, I think you need your head read. Compounding returns and term mismatches alone make this offering profitable. The question is whether it could be profitable enough to attract the big dollars required to operate efficiently.
You really need to lighten up Nat!
Robert Bou-Hamdan
Mortgage AdviserTerry, I am certainly not warming to the idea. I still think it is ridiculous. For someone starting out, this is a recipe for disaster.
Regarding deductibility on the cash bonds which you say return 4% but cost 7% to hold, what is the point? After tax, you are still losing more than half of the gap in interest expenses. How on earth does this improve serviceability????
I also noticed you changed your structure to include building up a large portfolio WHILE WORKING. This, again, is totally different to buying properties from scratch at the rate of one a year and living off the equity. Living off the equity is not much different to getting a reverse mortgage when you are older. This is not a strategy to increase property holdings but to enjoy retirement.
Robert Bou-Hamdan
Mortgage AdviserI beg to differ Nat.
YOU SAID…
How can you possibly talk about “Duty of Care” and then reccomend a product that is under investigation by ASIC….do you value your Finacial Advisor status in any way??…or does it more reflect the fact that being a “registered”Finacial Advsior really does not mean much??Either way I can’t belive you have done this.
If you don’t feel threatened by it, why does it seem that you spend every waking moment watching the Derivex website for changes?
Robert Bou-Hamdan
Mortgage AdviserAlso in addition to my last post, it is interesting that those giving Derivex the benefit of the doubt have no problem providing their personal and business contact details while those so opposed to it hide behind their screens under protection of anonymity in case they are shown to be wrong.
If you are wrong, you can just dwindle away into nothing whereas those who do not hide will just apologise for their error and move on.
Nat, you always go on about credibility and knowledge yet you seem to possess neither. You are just a bitter person in my opinion.
Robert Bou-Hamdan
Mortgage AdviserNat, I don’t know why you only post negative comments attacking people’s opinions which differ from yours. Bryce is looking at a product that may or may not come out and comparing them. I consider this prudent.
Just because something is “under investigation” does not mean anything. For your information, ASIC’s enquiries were not regarding the product. It was about the organisation. I do not know if those enquiries have now extended to include the product but, either way, because it is being checked out does not automatically make it wrong. It is a new product and people are always going to be concerned or, as in your case, feel threatened by them.
Take a pill and chill.
By the way Nat, as I have previously posted, I have evidence that the MIAA complained to Fair Trading although I do not have evidence that they also complained to ASIC. It would be a fair assumption though.
Robert Bou-Hamdan
Mortgage AdviserA lot of research about whether an area will grow is common sense. I like to look at things like crime rates, the type of dwellings being constructed (ie, if lots of units, I stay away), what industries are located in the area, employment rates, how many private schools and public schools exist, housing commission levels, restaurants, nightclubs, attractions and, most importantly, how many major banks and supermarkets have locations in the area.
There are also many other factors I look at but I do not depend on any single report. Historical data is never an indication of future potential although it is often a good guide.
Just because an area has not been growing very fast or in the top 50 does not mean it will not grow quicker in the next period. It might be an attractive area because it has not grown too quickly and it is still affordable.
Did you read this…
Riverview and Dinmore
Riverview and Dinmore are 22km south-west of the centre of Brisbane and 17km east of the centre of Ipswich. The adjoining suburbs are located at the junction of two of Queensland’s most important rivers, the Brisbane and the Bremer.
Australian Bureau of Statistics 2001 Census figures show the Riverview and Dinmore renewal areas have a population of 4,332 with 1,070 families. Just over one quarter (26.4%) are aged under 15 and 22.3% were born overseas. The Indigenous population is 6.3% and 9% speak Samoan.
When Community Renewal entered Riverview and Dinmore in December 1998, an integrated Community Action Plan had already been developed for Riverview. Although, Dinmore was not specifically identified in the plan, the document covered issues of concern to the Dinmore community. The integrated 1995 plan was reviewed and updated in 1999 taking into consideration the objectives of Community Renewal.
The key themes in the plan include training and employment; safety and security; services and facilities; transport; reducing social fragmentation and conflict; community leadership and participation; facilities maintenance; and environmental protection.
Riverview and Dinmore had a total allocation of $5.6 million in Community Renewal funding to 30 June 2004.
Community Renewal activities were completed in Riverview and Dinmore in 2004.
________________________________There is also a huge meat processing plant there and it is close enough to Brisbane to see growth from city expansion but I do not think the current population would support strong rental returns.
Try some of the links at this site for more information…
http://www.mortgagepackaging.com.au/index_files/hot_links.htm
Robert Bou-Hamdan
Mortgage AdviserTerry, if you obtained a receipt for this expense, why would it differ to paying for a building inspection or independent valuation?
Robert Bou-Hamdan
Mortgage AdviserI don’t know who you are but it is interesting that you joined the forum today to post that. In any case, it is old news.
Have a nice day.
Robert Bou-Hamdan
Mortgage AdviserThe problem with teaming up with your son is that you will have to service the complete debt on properties you own with him if you want to buy more yourself later and he will have to service the complete debt on properties he owns with you if he wants to buy something himself later. This is on top of any liabilities you already own yourself.
Then there is the stamp duty issues if you want to change the title details. It can be done at no cost if inter-family with parents and child but can be extremely difficult.
There is also the problem of one of you ceasing to make payments (through choice or unforeseen circumstance). The other will be liable for the lot. I would ensure all had income protection insurance, life insurance and their mortgage insured as well as the property insured (required by the lender).
As long as you know the pitfalls, doing this will definately improve your ability to service debt and borrow more.
Robert Bou-Hamdan
Mortgage AdviserDerek,
What you are outlining is very different to what Terry described. Also, there was no mention of ATO private rulings or cash bonds. This changes a lot and is certainly not something for mum and dad investors to be able to do without paying large fees to someone like The Investor’s Club for the support they need to pull it off.
I would be interested in seeing the contents of the ATO private ruling to see what it actually covers. I doubt that capitalising interest would be deductible when non-deductible expenses are funded or a non-deductible loan is paid down.
As for going back ten years to check if this ‘system’ works, there is no point. The last ten years are no indication of the next ten years and as you outlined yourself, the 7 property ‘system’ is no longer used. I would guess because this no longer works or investors lost a lot of money or equity in the last two years.
Just about having other assets and income sources, this is important. To achieve the type of capital growth required (in most cases) would often see properties purchased with low yields. To be able to live off equity and continue borrowing would require consistent capital growth and fairly low LVRs.
Where do the deposits for additional purchases come from if an investor needs to borrow to fund their lifestyle, income and to pay interest expenses. This means they are going backwards (from a cashflow perspective) and borrowing further to fund the next property needs some pretty strong capital growth and a high LVR on the next property and the existing property used to fund the new purchase. What lender will continue lending to someone who is consistently going backwards and is totally reliant on rental income?
Jeff,
So what do you do when your returns drop off for a few years? How does your family eat and how do you fund your lifestyle or pay an interest expense you clearly cannot service without strong capital growth?
In your example, there is a huge difference between servicing $14,000 a year and $22,400 a year in tough times. An investor should not purchase additional properties just to speed up the rate of capital growth so they can tap into equity. This is a recipe for disaster. Equity can also go backwards and I am sure every investor knows someone who this has happened to in the current market. Serviceability is the most important factor. Without it, you should not borrow more until your position improves.
As for your comments on capitalising interest, it is common for developers to do this but we are not talking about developers. We are talking about your every day investor.
Also, in the situation where you tapped into equity ton fund lifestyle, I am certain this was a short term thing as a result of a huge change in your plan. This is also different to what we are discussing. You cannot tell me that it was part of your plan to regularly tap into the equity because you could not afford to live or repay interest.
Robert Bou-Hamdan
Mortgage AdviserMarvin, you are a champion!
Robert Bou-Hamdan
Mortgage AdviserSadaam Hussein had plenty of money. So did Osama Bin Laden. Pol Pot also had a stack of cash.
Robert Bou-Hamdan
Mortgage Adviser
