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Nothing is impossible. You just need the right support and information to achieve some of your harder goals. Just make those goals realistic and achieveable or you will be quickly disheartened if you never reach them. As you get better at what you want to do, set harder goals.
Robert Bou-Hamdan
Mortgage AdviserThanks red… will do.
Robert Bou-Hamdan
Mortgage AdviserGood work!!!
Good luck with it all.
Robert Bou-Hamdan
Mortgage AdviserAnother good thing to look for is no restrictions on extra repayments. If you know you will have extra funds to put into your loan, it might be better to pay a little bit more in the interest rate to have the benefit of being able to reduce the loan amount as much as you want without penalty.
Having said that, many lenders will let you put in up to an extra $10,000 a year which is more than enough in most cases.
Robert Bou-Hamdan
Mortgage AdviserI think we were talking about capitalising interest on an investment property. This is not legal. Do you have an example of when it is legal because that would be valuable information?
Robert Bou-Hamdan
Mortgage AdviserYour credit history can be obtained from Baycorp Advantage. Here is the link:
You can obtain your file for free but it will take up to ten days. If you want it within 24 hours, it will cost you $23.00.
I would bet that what you receive is almost identical to what you were given when you asked for a copy from the person who did your loan application.
You have not told us your age, income or any other history so it is hard to tell you why you are having credit problems. I would guess that it is because you do not earn enough income to service the loans or credit you are applying for.
The more you apply for credit and get refused means it will be harder next time to get approved. Each refusal works against you when applying for further credit. There is no real way to improve your credit history unless there are problems with it already that need cleaning up.
If you are changing jobs a lot or moving house a lot will cause you some difficulty. Talk to a professional who can look at your personal situation and they may be able to determine why you are having problems. If you can service the debt, have a stable residential and work history and have no adverse credit history, there is no reason why you should be getting refused. A good professional will go to bat for you with the lenders.
Robert Bou-Hamdan
Mortgage AdviserFirstly, I would suggest using a broker but it seems you prefer doing it yourself.
Regarding your question, the repayments will only reduce if the loan is set up as interest only. If the loan is set up as principal and interest, the loan term will reduce but the repayments will only change if interest rates change.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Terryw:But in one of your examples, you had the clients drawing down a loan at settlement and then putting the money in the offset account. The net interest bill will be initially nil, as they are balance. But if money is taken out for say a deposit on an investment proeprty, this is where things could go wrong.
The interest on the loan would start being payable, as the offset account has reduced, but this interest may not be claimable. The reason is, the money was not borrowed, it was taken from a savings account. By putting it into the savings account, the direct link between borrowing and investing is not there.
The money was borrowed for investment purposes. It does not need to be used immediately. Once an interest expense begins to accrue, it is immediately deductible. The money is merely being parked in the transaction account. There is no issue with deductibility in my example.
The ATO has recently disallowed the claiming of interest in a similar case. They appealed to the AAT, and lost from memory.I think you will find this case relates to something totally different if it exists. Please let me know the case name if you find it. I will search the AAT for deductible interest cases to try and find it myself in the mean time.
A better option would be for them to draw down the loan fully, and immediately put the money back onto the loan (making sure it had redraw. This way they could still draw money out, which would be borrowings, and the interest could be deducted (if used for business/investment).There is no need to do this.
Many banks charge a small fee for redraws, but this would be minor when compared to the interest being saved in this loans compared to a higher rate LOC.Many banks also have free redraw.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by Terryw:Rob
Capitalising interest can help you pay off a home loan faster! Despite what you may think, if done properly interest is claimable.
Of course it will help you pay off a home loan faster but it will also take you much longer to pay off your investment loan and also reduce the return on your investment as more interest capitalises. This is an exponentially growing non-deductible expense that destroys any benefit obtained from paying your home off sooner.
It doesn’t matter what I think but is more what I know which is supported by the Court and the ATO. Capitalising interest can not be deducted LEGALLY regardless how you do it!!!
There may also be times when people have no choice but to skip a payment, so it can come in handy.This would be one of the only times they come in useful but I would not plan my borrowings around not being able to afford the repayments.
And what about this scenario:
A person has a home loan with an offset and a LOC securred against the home loan. They want to pay rates of $1000. They could get the money from their offset account, but the interest would go up on their home loan. If they took the money from the LOC, they could claim the interest on this portion and their home loan would still have the lower interest from keeping their money in their offset account.Before I address this scenario, can you please tell my why you think paying rates from a Line Of Credit would make them deductible if they relate to the family home?
If you are referring to rates on an investment property, then why could they not pay the rates from the loan on their investment property? If they have no room to move on the investment property because the LVR is too high, then your scenario may be appropriate but I would have a split loan with redraw instead of the LOC in place for these sort of expenses. This assumes a non-deductible debt still exists against the family home.
Robert Bou-Hamdan
Mortgage AdviserI think you will find that people cannot borrow that much without a job and only $20,000 cash unless they lie on their application or get help from someone else.
I would guess your friend is getting help from family or somewhere else to do what he is doing.
Robert Bou-Hamdan
Mortgage AdviserTerry, I don’t understand your fixation on using a Line Of Credit. It is not needed.
Rod, you might find it difficult finding someone who will pay for your property and leave you with an unencumbered property while their house has a mortgage over it and they can lose their house if you do not pay.
To simplify it, you are not using their equity. They are using their equity and just lend you the money. You make the arrangements between yourselves to repay the debt.
The usual way to do this is to only borrow 20% of the property value you want to buy plus any costs you may need to cover. The remaining 80%, you would apply for yourself and secure it against the house you are buying. This would mean that your second property would have to wait unless you could do the same thing again.
Make an appointment with a mortgage adviser and they will go through all this with you in detail. Don’t get hung up in the Line Of Credit thing. They are rarely needed.
Robert Bou-Hamdan
Mortgage AdviserIf you are looking for a return on your savings, I would use one of the online accounts because they pay higher interest and there are no fees.
Robert Bou-Hamdan
Mortgage AdviserRegarding the Australian market, mortgage brokers must provide a borrower with a comparison rate as required under the Uniform Consumer Credit Code for any home loan (excludes investment loans). The comparison rate takes into account all upfront, ongoing and closing fees and charges. It does not include pay-per-use fees like redraw or ATM fees.
An Australian broker also makes no money from fees and charges. They receive an upfront and trailing commission set from settlement of the loan. Regarding home loans, this must also be outlined in the Finance Broking Agreement in NSW and VIC. Borrowers in Australia are very protected from the dodgy USA practices so you should feel pretty safe.
Robert Bou-Hamdan
Mortgage AdviserIf you are breaking even with income, you will not qualify for a loan to buy a cash flow positive IP regardless of how cash flow positive it is. What happens if the tenant moves out?
I would considering using the 20k to reduce my expenses.
Seek professional help. It is not as easy as people lead you to believe in this forum.
Robert Bou-Hamdan
Mortgage AdviserAny Bird Doggers here specialising in WA properties? Please contact me as I have something I want to unload in Geraldton but there is a no advertising policy on this forum. I hope this message is not construed as an advertisement but feel free to delete it if it is.
Robert Bou-Hamdan
Mortgage AdviserI think Investment Detective is one of the better tools available in the market. The creator also posts here so support is readily available!
Robert Bou-Hamdan
Mortgage AdviserYou would never make a profit on the rent if you set the loan up as interest only and increase it for further investments as required.
Robert Bou-Hamdan
Mortgage AdviserI do not understand why anyone would capitalise interest. It serves absolutely no benefit unless you can not afford to pay your loan. Can you please explain why you like capitalising interest?
Regarding the ANZ LOC, this is the only LOC I am aware of that offers a comparable rate to a standard loan. Having said that, they do not generally offer the higher discounts on their LOC.
I like the unlimited free redraw accounts to use as an all-in-one interest only facility on investment loans. It provides some flexibility later when all non-deductible debt is gone without the need to refinance or make other changes.
Robert Bou-Hamdan
Mortgage AdviserIs anyone looking at or has any knowledge of aqua-culture? I would be also interested in hearing depreciation possibilities in this area.
Robert Bou-Hamdan
Mortgage AdviserMaybe posting the question in the Accounting section might get you a more certain response.
Sorry I am not an expert in this area.
Robert Bou-Hamdan
Mortgage Adviser
